Fraud is an increasingly serious challenge for financial institutions in Asia Pacific (APAC), and the problem is exacerbated by the rapid adoption of digital transactions and online banking.
To address these risks, financial institutions in the region are introducing new security measures and adopting cutting-edge technology, new research from NICE Actimize reveals.
The study gathered insights from 114 fraud risk professionals across nine markets in APAC in late 2023. Found Payment systems and online banking have emerged as a key concern for fraud risk professionals across APAC, with 66% of respondents citing them as the most common type of threat observed in the past 12 months. .
This highlights how the region’s growing digital consumer base and the proliferation of high-speed payment systems are leading to a surge in cyber-related fraud, with financial institutions struggling to keep up with the evolving threat landscape. The report states that this indicates that financial institutions are being left vulnerable, leaving financial institutions vulnerable. Attacks are becoming more and more sophisticated.
The frequency of these fraud incidents is also a major concern, with almost half (49%) of respondents saying their organization encounters payment or digital banking fraud at least once a month. This includes 8.5% of respondents who said they encounter such behavior “almost every day.”
When asked about trends in digital banking fraud attacks, nearly two-thirds (64%) of respondents said they had seen an increase over the past 12 months.
Rapid adoption of digital banking accelerates fraud
Over the past few years, APAC has experienced a digital banking revolution driven by technological advances, supporting regulations, and evolving consumer expectations.
40+ digital banks has launched across Asia to date, making the region one of the most developed and advanced digital banking ecosystems in the world.
By 2022, 11 of the 20 most profitable digital challenger banks worldwide will It was This suggests that digital challenger banks in APAC are relatively more successful than digital challenger banks in Europe and America. Analysts and industry observers attribute this success to regional characteristics such as a large unbanked population, a strong mobile culture and a rapidly growing middle class.
However, the rapid pace of digital transformation has also created new risk challenges, and several high-profile fraud cases have highlighted these risks.
In 2016, criminals used Fraudulent orders on the SWIFT payment system to steal US$81 million from the Central Bank of Bangladesh account at the Federal Reserve Bank of New York.
The funds were transferred to a Manila-based RCBC account and then disappeared into the Philippine casino industry. A year later, Kathmandu-based NIC Asia Bank suffered a major heist when hackers traveled to countries including the UK, China, Japan, Singapore and the US while the bank was closed for the annual public holiday. They succeeded in fraudulently transferring approximately 4.4 million US dollars. , According to to Reuters.
Main fraud prevention measures implemented by financial institutions in APAC
To combat the escalating threat of fraud, APAC financial institutions are relying on a variety of strategies. NICE Actimize research found that increased surveillance for suspicious transactions (76.6%) was the most commonly adopted measure. This is followed by advanced authentication methods (70.2%), customer education efforts (68.1%), and implementing real-time fraud detection systems (53.2%).
Respondents also said they had adjusted transaction limits to reduce the impact of fraud (53%), strengthened the security of their banking apps (40%), and conducted a security audit of their mobile banking infrastructure (32%). ), said it has partnered with a network operator. or device manufacturers tighten security (26%).
The study also found that APAC financial institutions are increasingly embracing information sharing. More than a quarter (25.5%) said their anti-fraud and AML teams currently collaborate “very closely,” and almost a third (30%) said such collaboration “frequently.” I answered that this is being done.
This shift towards increased cooperation is consistent with regulatory efforts across various jurisdictions in APAC to promote information sharing as a means of combating fraud.
In June 2023, Hong Kong Financial Intelligence Assessment Sharing Tool (FINEST)an electronic platform that allows retail banks to share information when there are signs of criminal activity.
Similarly, the Singapore regulator launched a digital platform in April 2024 called universe. The digital initiative aims to strengthen defenses against money laundering, terrorist financing and the proliferation of weapons of mass destruction, and will allow large commercial banks to share financial crime risk information with each other, subject to certain criteria. .
APAC financial institutions embrace technology
The study also found that technology plays a vital role in fraud prevention. The largest percentage of respondents (57.4%) said their organizations have invested in advanced analytics or machine learning (ML) tools that enable real-time fraud detection. Approximately 55.3% of respondents reported investing in online and mobile banking security, and 48.9% reported adopting biometric security solutions.
Despite these investments, the study found that the use of artificial intelligence (AI) and ML in fraud prevention across APAC’s financial services industry is still in its infancy.
Only 27.7% of respondents said these technologies were fully integrated into their organization, and 46.8% reported that they were only used in “certain scenarios” or for certain types of fraud . Additionally, 12.8% of respondents said their organization is “currently testing” AI/ML and has not yet integrated the technology into daily operations. Adoption of these tools is expected to increase over time.
Featured image credit: Edited from freepic
