Consumers are increasingly moving away from traditional payments to digital transactions, which has led to more innovative fraud attempts. As a result, companies are spending a considerable amount of money on security.
A LexisNexis® Risk Solutions study found APAC organizations cost an average of USD3.99 for every USD1 lost to fraud in 2021, which is USD0.49 higher from 2019. Digital banks and alternative lenders' cost of fraud almost doubled the average of USD6.33. The study surveyed 387 risk and fraud executives of retail, e-commerce, financial services, and new industries such as digital banks in Malaysia, the Philippines, Singapore, and Thailand.
The study also highlighted how the Buy Now, Pay Later (BNPL) market is rapidly growing globally and how fraudsters are taking advantage of this growth. Researchers estimated that BNPL providers contribute 10% of payment loss.
Identity verification issues are one of the most common reasons for fraud losses, and e-commerce businesses must balance a seamless consumer experience with implementing security measures.
“Organizations are fighting a tough battle against fraudsters in the new normal. Fraud is sophisticated and evolving exceedingly fast. We are seeing a high volume of fraud attempts following a continued shift towards digital channels spurred by the pandemic,” said Thanh Tai, director of fraud and identity strategy, LexisNexis Risk Solutions.
“This means businesses must integrate a fraud detection and prevention approach with both physical and digital identity attributes to enhance customer experience, stay competitive and avoid losses,” he added.
Better Cyber Fraud Management
Businesses must integrate cybersecurity and optimize artificial intelligence and machine learning algorithms for identifying fraud. The study provides some key recommendations:
Identity proofing is an effective step in detecting and mitigating fraud. Customer self-provided data should be verified and authenticated on all platforms.
A multi-layered approach requires customers to accomplish different identity verifications, and companies can incorporate data solutions to kick fraudsters out. For example, biometrics and email or phone risk assessment can authenticate the physical and digital person.
Companies must also manage risks across all endpoints through machine learning integration in the systems and resources.
It is essential to determine the customer's point of entry, including device risk assessment and locating login anomalies. These include device and active identity authentication by challenge, quiz, answering secret questions, and using OTP/2 factor.
Finally, there should be periodic checks of customer transactions to detect unusual trends.