14 February 2023
GBG, the global technology specialist in fraud and compliance management, identity verification and location data intelligence, today unveiled its top five predictions for 2023 as financial institutions (FIs) in Asia Pacific continue to navigate the challenges of global economic uncertainty.
Dev Dhiman, Managing Director, APAC, GBG said: “In 2023, we anticipate demand for greater transparency and identity security to move the business agenda forward in financial institutions. The world’s greatest innovations have emerged in times of major economic and political turmoil, and digital investments will remain the core foundation of true transformation in safeguarding financial institutions from modern digital risks and cyber threats.”
As all eyes turn to what this year may bring, here are five key predictions for how FIs are expected to be impacted in the evolving fraud landscape:
Expect tighter regulation to bolster fraud mitigation
The financial sector today is experiencing spikes in fraudulent online transactions as cybercriminals now have more attack surface to exploit as businesses continue to digitalise in the post-pandemic era. At least 51 per cent of organisations worldwide have encountered fraud in the past two years. Whilst the Asia Pacific region’s growing number of online users and digital payment channels have given rise to a more complex fraud analysis environment.
Scaling fraud detection to growing digital transaction volumes (39 per cent) and identity verification (38 per cent) were among the top challenges faced by Asia Pacific FIs, according to a TABInsights study commissioned by GBG. As FIs seek to expand their digital offerings, regulators are expected to further tighten fraud prevention and compliance policies. The findings show the most critical gap in fraud risk investigation lie in inadequate data standardisation and governance (38 per cent), and fragmented data with piecemeal systems and software (32 per cent), pushing institutions to increasingly explore regulatory technology solutions.
Government regulatory bodies are imposing hefty fines on FIs who fail to meet data protection regulations and anti-money laundering (AML) compliance requirements. GBG’s survey findings show stringent supervision and penalties on FIs have resulted in increased monetary losses in the form of regulatory fines, the highest-ranking component of fraud loss at 41 per cent, compared to direct fraud losses (28 per cent) experienced by FIs.
Digital risk and cybersecurity are starting to converge amid rapid digitalisation
Rapid digitalisation over the course of the pandemic sparked an uptick in self-service and online services. The focus has now shifted to central banks taking a proactive approach in policymaking and risk management strategy towards cybersecurity to combat digital fraud. The study revealed that FIs in the past year have expected money laundering (69 per cent) and malware (64 per cent) to continually grow amid the escalating threat dynamics. This underlines the urgent need for institutions to address accelerating fraud risks and adopt stronger fraud prevention capabilities.
Singapore saw a loss of S$346.5m to social engineering scams in the first half of 2022 alone, a significant portion compared to the S$453m stolen by scammers in the entire year of 2021. The evolving risk dynamics forcing FIs to drive the adoption of advanced fraud analysis, including device fingerprinting, user behaviour analytics, and account identification verification, highlights the digital trust imperative that will shape the consumer trend landscape.
In 2022, organisations across Australia and New Zealand (ANZ) faced an unprecedented record number of malicious, large scale data breaches. As a result of these cyber-attacks, FIs are ramping up security measures and prioritising identity verification as the impact of identity theft continues to grow in this region. In fact, FIs in ANZ are prioritising solutions that offer a single view of their customer’s journey from identity verification through to fraud monitoring capabilities on one, seamless platform. Whilst confidently knowing they are keeping their customers’ data safe, improving their efficiencies and reducing manual operations.
FIs will ramp up AI adoption in response to AI/ML tools exploitation to evade fraud detection
Artificial intelligence (AI) is fuelling the development of a more dynamic world, but fraudsters are also misusing these same technologies for ill gain as deepfakes, AI-supported hacking and password guessing, and impersonation techniques take rise. FIs are increasingly adopting machine learning (ML) capabilities to train models in recognising the data correlation to a known fraud scenario, with 47 per cent of FIs having already adopted ML tools, while 37 per cent are now beginning to use them.
Advance technologies have made fraud more accessible to cybercriminals and validating the authenticity of communication is key to keeping up with sophisticated fraud techniques. Findings show strong ML adoption in Indonesia (71 per cent) and Thailand (69 per cent) and an uptick in the adoption of robotic analytics in Vietnam (67 per cent), Singapore (63 per cent) and Malaysia (62 per cent) to address fraud prevention and increase false positives detection.
As the volume of fraud continues to rise to new heights in 2023, near-real time decisioning through predictive analysis and a holistic view of end-to-end financial crime prevention are crucial components of FIs’ digital initiatives as they navigate an increasingly complex fraud landscape.
Cloud adoption becomes a focus to be better equipped for the onslaught of sophisticated fraud typologies
The survey indicates growing cloud adoption amongst FIs—69 per cent say they prefer their fraud management solutions to be hosted by solution providers rather than on-premise (31 per cent)—as their cloud strategy is split almost equitably between hybrid, private and public cloud.
Legacy architecture, silos of structured and unstructured data, and data governance, have accelerated the shift towards more agile, scalable and flexible cloud-based infrastructure as FIs upgrade legacy systems and invest in end-to-end financial crime prevention solutions. For Singapore’s mature banks, their technology investments will be geared towards real-time transaction monitoring, alternative data analysis, and machine learning capabilities to combat fraud.
A robust identity verification and authentication solution is essential for fraud prevention and risk management. FIs are paying attention and beginning to leverage modern cloud technologies and taking a more structured, strategic approach with proactive multi-pronged data and technology initiatives in a race to future-proof themselves.
Expect major changes to cryptocurrency markets as fraudster exploit vulnerabilities
Emerging blockchain technology (48 per cent) that forms the underlying foundation of decentralised finance (DeFi) and the growth of cryptocurrencies (31 per cent) have emerged as top concerns among FIs. Phishing, routing attacks and account takeovers are posing potential threats on blockchain networks. The risk perimeter is expanding with the uptick in new technologies such as cloud, open banking, blockchain and cryptocurrencies. Cryptocurrencies are among the leading payment methods on the darknet, and regulators are watching closely to curb the use of cryptocurrencies in money laundering and criminal activities.
Unfortunately, organisations across all sectors are at risk from cyberattacks and the rising sophistication of data breaches has highlighted the need for all to urgently take action to improve their data security practices. Whilst cyberattacks are not new, they are increasing in frequency and in nature, which is changing the paradigm of data security. With financial crime risk higher than ever, FIs need to move beyond a traditional reactive approach and adopt stronger measures, such as robust identity verification and authentication tools, and real-time threat detection to proactively combat fraud.