Billions Lost to Fraud Despite Efforts, APAC Fintechs Grapple with Rising Threats

Posted by Peter Tolan 11 months Ago

 

Despite relentless efforts from businesses and tech providers, fraudsters continue to siphon off billions annually.

According to the “2024 State of Fraud” whitepaper by Telesign, a customer identity and engagement solutions provider, U.S. fraud victims suffered nearly US$8.8 billion in losses in 2022, with global projections potentially reaching US$95.9 billion by 2027.

This issue is particularly severe for fintech firms in the Asia-Pacific (APAC) region, where the sector is rapidly expanding.

The Evolving Fraud Landscape

  • APAC has seen a significant rise in corporate data breaches, heavily impacting fintech companies.
  • According to IBM Security’s report, APAC had the highest average cost of a data breach globally, averaging US$3.24 million in 2021.
  • This highlights the critical need for robust fraud protection measures among APAC fintechs, given the substantial financial consequences of data breaches in the region.
  • Additionally, generative AI tools pose a new challenge to APAC fintechs, enabling fraudsters to create sophisticated phishing schemes and synthetic identities.
  • This technology allows fraudsters to exploit vulnerabilities in fintech platforms, making advanced fraud prevention strategies essential.
  • The APAC region is also a leader in adopting innovative payment methods like Buy Now, Pay Later (BNPL).
  • According to a report by McKinsey, APAC accounted for nearly 40% of the global BNPL transaction volume in 2020.
  • However, this rapid adoption attracts fraudsters, leading to a significant increase in BNPL fraud in the region.

Synthetic Identity Fraud Among Common Fraud Tactics

  • APAC fintechs face the growing threat of synthetic identity fraud, where fraudsters create fake personas using real individuals’ Personally Identifiable Information (PII).
  • This emerging fraud type poses significant challenges to fintech firms’ identity verification processes in APAC.
  • Account Takeover (ATO) and promotion abuse are also common fraud tactics affecting APAC fintechs.
  • ATO incidents can result in substantial financial losses and reputational damage for fintech companies in the region.

Impact on Both Consumers and Fintech Brands

  • Fraud not only harms consumers’ financial and mental well-being but also erodes trust in APAC fintech brands.
  • Fintech companies must prioritize fraud prevention to maintain customer loyalty and brand integrity in the fiercely competitive APAC market.

Balancing Security and User Experience

  • APAC fintechs struggle to balance robust security measures with a seamless user experience.
  • A report by PwC highlighted that 67% of APAC consumers prioritize security when using digital services, indicating the importance of effective fraud prevention strategies without compromising user convenience.

Source: fintechnews.sg