The Asia Financial Institution Study, “Combatting Escalating Fraud in a Digital World”, has been released. According to the TABInsights study commissioned by GBG, Asia’s top financial institutions (FIs) continue to be challenged by the expanding threat landscape in the past few years as well as the tightening of regulatory and enforcement measures.
The study found more rigorous supervision and penalties have resulted in increased monetary losses in the form of regulatory fines, the highest-ranking component of fraud loss for 41 per cent of FIs—a change from the previous survey in 2020 wherein direct fraud losses were ranked highest.
The survey found that Asian FIs complete a higher number of transactions through mobile and online channels with the highest digital channel adoption seen in Indonesia (71 per cent), closely followed by Malaysia (70 per cent).
Respondents said they expect the average daily digital transaction volume to surge by 70 per cent in 2025 compared to 2022.
As more FIs expand their digital offerings in response to consumer behaviour shifts towards mobile and digital, managing the cost of increasing compliance has emerged as a key concern for 70 per cent of FIs, while the ability to scale fraud detection measures to growing digital transaction volumes (39 per cent) and identity verification (33 per cent) rank as the top challenges.
Dev Dhiman, Managing Director, APAC, GBG said: “Open banking, interconnected devices and ecosystems, and increased digital adoption, in general, has elevated the risk of digital fraud and cyber-attacks, and expanded the perimeter of attack FIs face today. New technologies are being exploited every day by innovative perpetrators who continue to challenge FIs to escalate their technology risk management strategy and capabilities to comply with the increased scrutiny by regulators and customers alike.”
Stronger ML adoption in Asia but gaps in data standardisation remain a key challenge
The study revealed strong machine learning (ML) adoption in Indonesia (71 per cent) and Thailand (69 per cent), while third-party data is used more actively in China (77 per cent), Vietnam (73 per cent) and the Philippines (68 per cent) alongside robotic analytics in Singapore (63 per cent) and Malaysia (62 per cent) to address false positives, indicating a maturing ML landscape among Asian FIs.
While the region saw increased adoption of ML-based algorithm tools with automated smart models to address fraud prevention in the sector—with 47 per cent of FIs actively using ML tools and 37 per cent beginning to use them—one of the biggest challenges for these organisations undergoing digitalisation is the increased complexities in addressing data standardisation and governance to scale fraud detection.
Some 38 per cent of FIs indicated that inadequate data standardisation is their most critical gap, alongside 32 per cent who are challenged by fragmented data because of piecemeal systems and software.
In Thailand and China, fragmented data emerged as the top challenge for FIs. In Malaysia, after inadequate data standardisation, lack of good link analysis was also highlighted by 23 per cent as the top challenge. Meanwhile, 59 per cent of FIs said they increasingly rely on third-party data, alongside 58 per cent that use ML to address false positives.
The evolving risk dynamics in the industry are forcing institutions towards stronger data integration and technology tools to future-proof their fraud risk capabilities and ability to gather effective data insights. Increasingly, institutions seek to integrate a spectrum of transactions, devices and big data to strengthen fraud detection capabilities.
Data from interconnected devices are being used by 78 per cent of FIs, while 76 per cent use transaction data and 64 per cent public data. In fact, 42 per cent of FIs indicated their need to prioritise and invest in one platform to interexchange application data and transaction data in 2022. Within the next year, 47 per cent of FIs plan to add internal unstructured data and geographic data to deepen their fraud detection.
Addressing risk management holistically requires cultural change
Despite many safeguards, fraudsters have remained one step ahead in employing modern technology to commit fraud and exploit loopholes.
Respondents in the study recognise the need for a comprehensive enterprise-wide strategy for fraud control that includes data, technology, people, and procedures. A significant 48 per cent of FIs continually upskill and upgrade their human resource capabilities while 19 per cent actively hire new staff to meet the evolving requirements.
Additionally, increasing the application of scalable and intelligent technologies, such as AI and ML, enable advanced predictive and behaviour analytics for stronger real-time fraud management and effective anti-scam procedures.
By harnessing new technologies and ecosystem partnerships to build capabilities for stronger identification, verification, and real-time threat detection, FIs can prevent increasingly innovative and technically advanced attacks.
“The increased need to deepen threat detection, analysis and timely prevention capability requires a more strategic and structured approach that takes into account proactive multi-pronged data and technology initiatives, alongside robust identity verification and authentication tools,” Bernardi Susastyo, General Manager, Asia, GBG said. “In 2023, FIs would do well to address risk management holistically to ensure the initiatives they adopt integrate data across their organisations and the ecosystem, so that even as they improve their fraud prevention and risk management capabilities, they are not compromising customer experiences.”
