Photo - Jeff Price, Managing Director of South East Asia for Experian.
According to a new report from information services provider Experian, online banking fraud is the top cybersecurity concern in Malaysia with companies handling rising fraud prevention costs.
Speaking of Experian Asia Pacific's flagship report, The Economics of Fraud: Mitigating Risk Amidst Fast Growth and Innovation, Experian's Southeast Asia managing director, Jeff Price, said Malaysia's digital crime case data [Source: Digital Forensics Department, Malaysian Ministry of Science, Technology, and Innovation, 2007, Cebr (Centre for Economics Business and Research) analysis] showed that financial fraud is well in front of any other digital crime category in Malaysia.
The report said 59 percent of APAC businesses expect that digitisation will drive an increase in fraud over the next five years leading to rising fraud prevention costs, said Price. Malaysian firms also responded that "fraud occupied more and more of their time - which tallied with the evidence presented in terms of the increase in financial fraud They are more likely to report increases than other Asia Pacific economies. This may relate to a reluctance to outsource to suppliers."
In addition, Malaysian firms were more reluctant than their counterparts in other economies to outsource this responsibility. "It is likely that this causes fraud prevention costs to rise - the increasing technological sophistication of fraud means that costs may rise more rapidly if firms are reluctant to rely on specialist providers," he said.
"Online banking fraud preoccupies Malaysian firms, in line with the large increase in internet subscriptions. Malaysian firms are notable for their tendency to bring fraud prevention in-house, in contrast with other Asia Pacific economies. Fraud prevention costs are rising rapidly, probably reflecting both factors," noted the report.
As already mentioned, report noted that 59 percent of firms in Asia Pacific were anticipating incidences of fraud to increase in the next five years, with more than half of respondents (51 percent) spending more time and investment on fraud prevention strategies. The report takes a closer look into business implications of the growing fraud landscape in Asia Pacific and how these challenges are vastly difference from one country to the next.
Price said businesses today conducted a large portion of their business online to modernise their business processes and meet the needs of today's digital consumer. Yet, fraud remains a large unknown and threat for businesses as they look to the digitalization as an engine of growth. The report identified top line fraud challenges specific to South East Asia include:
The study noted that "the prevalence of fraud in Asia Pacific was an unfortunate by-product of growth. Businesses that are comfortable addressing isolated fraud activity must now relook at their fraud strategy to encompass a more expansive solution to ensure that they can address the growing, and increasingly surmountable problem across the Asia Pacific fraud landscape."
Top line fraud challenges specific to Southeast Asia include:
- China (3.9) and Indonesia (4.6) are the most preoccupied with fraud as compared to mature markets like Australia and New Zealand, which rank 3 and 3.1 respectively
- Singaporean companies as the most likely to pass on fraud prevention costs to customers
- Malaysian companies as the least reliant on external fraud prevention suppliers, a likely cause of their increased internal costs in fraud prevention measures
- Indonesian companies' fraud prevention measures have a slight advantage against their South East Asian counterparts when it comes to the impact to a customer's on-boarding process
Digitisation brings further security challenges
Price said the report's deep dive into the fraud landscape that businesses in Asia Pacific face include:
- On a scale of 1-5 with 5 as the most concerned, across Asia Pacific, China (3.9) and Indonesia (4.6) are the most preoccupied with fraud as compared to mature markets like Australia and New Zealand, which rank 3 and 3.1 respectively.
- Telecommunications and financial services firms are the most concerned about fraud. Retailers are lagging - considering the growth and prevalence of electronic commerce for consumers, particularly in China; this suggests an area for improvement.
- According to the firms from financial services, fast-growth markets like Indonesia is at risk of credit application fraud (86 percent), while China (70 percent) and Malaysia (65 percent) are at risk of fraud that occurs due to online banking.
"Fortunately, many leading companies have fraud prevention measures in place, but these will need to be hyper-dynamic, constantly seeking to balance risk mitigation with minimising customer impact and intrusiveness,"said Price. With the accelerating adoption of electronic and mobile commerce, fast-growth markets are now facing a greater number and greater variety of risks of attacks from fraudsters. The direct financial costs to companies across almost all industry segments are significant and the reputational exposure is even more immense."
"The good news is that customers are not as affected by firms' security measures. However, as fraudsters become more sophisticated, the onus is now on businesses to re-evaluate, reinvent and innovate their fraud prevention measures to stay ahead of fraud threats," he said. "If achieved, the result would be the better capture of fraudulent activity whilst maintaining the level of trust between consumers and businesses."
Commissioned by Experian, the study was conducted with 164 senior fraud management executives across 6 markets from September 2015 to January 2016. Markets in the survey include Australia, New Zealand, China, Singapore, Indonesia, and Malaysia. The findings were further analysed by the Centre for Economics Business and Research (CEBR) to evaluate the correlation between the macroeconomic trends as well as the eCommerce and mCommerce trends when it came to fraud transactions in the Asia Pacific region.
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