Each fraudulent transaction costs close to US $4 for each $1 Lost to Fraud
SINGAPORE, July 7, 2022 /PRNewswire/ — LexisNexis® Risk Solutions has released the latest Asia Pacific edition of the LexisNexis® True Cost of Fraud™ study, which surveyed 387 risk and fraud managers in Malaysia, Philippines, Singapore and Thailand. The study analyzed fraud trends in the retail, e-commerce, financial services and lending industries and sheds light on key pain points related to new digital payment methods and transaction channels.
The study found that the cost of fraud has increased by 10% to 16% in APAC compared to pre-pandemic levels in 2019. The LexisNexis Fraud Multiplier™ determined that for each US $1 fraud losses cost the organization on average $3.99compared to $3.50 in 2019. The cost of fraud per transaction was higher than average, costing digital banks and alternative lenders dearly $6.33. Other new payment channels, such as buy-it-now, pay-later (BNPL) and digital wallets, are costing businesses money $4.75 for every dollar lost to fraud.
Fraudsters have developed tactics alongside changes in consumer behavior caused by the pandemic. A recent Cybercrime Report showed that consumers have made a significant shift to mobile transactions, which now account for 75% of all transaction traffic worldwide. While in-person transactions remain the most popular point-of-sale channel, fraud occurs more in online channels than in mobile channels. Within the mobile channel, 34% of fraud occurs through mobile web browsers.
Key Findings from the True Cost of Fraud Study – APAC Edition:
- Fraudsters target alternative finance providers – According to the study, competition in the BNPL market is accelerating globally, led by local and local players in all markets. BNPL providers saw a 65% increase in new account creations, which aligns with strong growth in online and mobile remote transactions. However, BNPL providers also account for more than a tenth of payment losses, which is disproportionately higher than the average transaction volume through other payment channels.
- Identity Verification Challenges – The biggest contributor to fraud losses for businesses remains the inability to identify synthetic identities and to verify and authenticate identities using attributes such as phone numbers, email addresses, behavioral analysis and devices. E-commerce merchants in particular find identity verification challenging as it requires balancing between providing a seamless customer experience and implementing strong authentication and security measures.
- Adoption of a Fraud Management Framework – Almost all digital banks and alternative finance providers, including BNPL and digital wallets, have yet to fully integrate cybersecurity and operations into fraud prevention processes. The results also show that organizations are not widely using artificial intelligence (AI) and machine learning (ML) models for fraud detection, which weakens mitigation efforts. Percentage of organizations using various capabilities to combat fraud:
- Rules-based approaches – 52%
- Crowdsourced – 36%
- Social Media Intelligence – 33%
- Cyber Security Alerts – 25%
- AI/ML models – 21%
“Organizations are fighting an uphill battle against fraudsters in the new normal,” said Thanh Tai, Director of Fraud and Identity Strategy, LexisNexis Risk Solutions. “Fraud is sophisticated and moves extremely quickly. We are seeing a high volume of attempted fraud following a continued pandemic-spurred shift to digital channels. This means businesses need to integrate a fraud detection and prevention approach with physical and digital identity attributes to improve customer experience, stay competitive and avoid losses.”
The True Cost of Fraud APAC study surveyed 387 risk and fraud managers in retail, e-commerce and financial/lending services across Malaysia, Philippines, Singapore and Thailand. Data collection took place in February/March 2022 and survey questions refer to the past 12 months.
Download a copy of Study on the real cost of fraud – APAC edition or register to attend LexisNexis Risk Solutions Webinar on the true cost of fraud APAC on Tuesday, July 19, 11 a.m. SGT for more information.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to deliver insights that help businesses and government entities reduce risk and improve decisions for the benefit of people everywhere. We provide data and technology solutions for a wide range of industries, including insurance, financial services, healthcare and government. Based in the Atlanta metro area, Georgia, we have offices around the world and are part of RELX, a global provider of information-based analysis and decision-making tools for professionals and enterprises. For more information, please visit www.risk.lexisnexis.com and www.relx.com.
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