Australian businesses gambling with customer trust

By Jon Malone, Head of Fraud & Identity at Experian

When it comes to customer retention and brand identity, trust is everything. But as the adoption of digital services continues to expand, fraud levels are anticipated to increase across the Asia-Pacific region. The far reaching impacts of incidents on customers, the bottom line and ultimately company reputation could be unprecedented.

Why then, despite rising threats, does there remain an attitude of acceptance of fraud as just another cost of doing business, with limited investment into mitigating technologies? 

According to Experian’s Fraud Management Insights 2017 report, some APAC countries are faring better than others when it comes to maintaining customer trust. Covering ten markets across Asia Pacific, the report surveyed 3,200 consumers and over 80 organisations from the financial services, telecommunications and retail sectors.

A very clear picture of fraud in APAC emerged, with New Zealand citing the region’s highest trust levels and Japan following closely behind – while Indonesia, Thailand and Hong Kong appear a little bleaker, with trust levels well below the APAC average. Closer to home, 1 in 5 Australians have directly encountered fraud in the past 12 months. And without action, this will almost certainly increase.

The good news first

Interviewing the nation’s large financial institutions highlighted Australia as a market leader in Asia-Pacific, boasting the region’s most superior capabilities in fraud management - particularly in relation to the speed of fraud response, detection of possible incidences, and the contextualisation of any infringements.

In fact, Australian banks were the first to make investments into fraud management in this region, and investment clearly pays off - Australian consumers are the most satisfied (70%) of all regions with the post-fraud service of banks and insurance companies, which is particularly telling given Australian consumers are highly fraud intolerant. Most consumers agree that even occasional fraud incidents were not acceptable (85%) – higher than the APAC average (83%) – and almost half (49%) would consider switching a service if affected.

Fraud is on the rise

But it’s not all rosy. Card not present (CNP) fraud is proving persistent, with Australian banks reporting an increase of incidences in the past two years.

Online fraud, especially involving false identity in mobile payments and transactions, was also reported to be the fastest growing category, increasingly making the mobile channel into a point of especial vulnerability.

The race for convenience

As organisations compete to provide better and more seamless customer experiences through new digital offerings and solutions, there is an inherent trade-off between enabling a seamless customer experience and fraud mitigation. The service providers who can balance this best will emerge victorious in time to come.

But the sheer growth in the volume of digital transactions continues to challenge businesses and economies across the region. Getting to grips with recent increases in scale requires leveraging smart investments in infrastructure to process these transactions. This includes tools to manage transaction volumes whilst still ensuring optimal standards of security, availability, and reliability of their digital services.

It is critical that service providers in APAC improve their ability to deploy seamless fraud management and detection to identify fraud in a non-disruptive way. Striking the balance between keeping customers safe from fraud while minimising the friction of online transactions will be of great importance as digitisation accelerates across the region.

Arming against fraud

While relatively simple solutions like automation remain integral, local enterprises can’t win the fraud battle alone. The growth of data and the variety of channels/touchpoints in which data resides are adding extra layers of complexity to the problem, with data silos keeping organisations from viewing their customers holistically.

And the variety of fraud that service providers grapple with is proving even harder to keep track of, much less respond to effectively. With new incidences evolving and emerging at a rapid pace, service providers in APAC must future-proof their fraud detection capabilities to quickly handle currently unanticipated fraud types as they appear.

This necessitates building a fraud architecture that provides for multi-modal fraud prevention incorporating best of breed which includes biometrics, analytics, machine learning and new technologies as they become available. These need to be able to be connected via API and orchestrated in a software layer rather than through systems integration to allow for prevention at the speed of fraud.

The currency of trust

Ultimately, while digitalisation continues to usher us into a new era of convenience, more must be done to build greater customer trust in the digital world. Online fraud and identity theft are major concerns for service providers in the region, and companies are turning to new technologies to help protect themselves and their customers, but often not in an integrated way.

Looking ahead, businesses that will thrive in digital markets are those that can manage and cultivate strong and trusting relationships with increasingly discerning customers. Arming themselves with integrated anti-fraud measures will make the customer journey easy and the inroads to fraud hard.

This calls for next-generation fraud management infrastructure in the form of big data and analytics (e.g. anomaly detection and relationship pattern analysis). Information management companies such as Experian use the latest data and analytical tools to help enterprises prevent fraud and automate decision making.

In addition, multi-factored and dynamic next-generation digital identities bring together Artificial Intelligence, biometrics and alternative data in an integrated way to effectively manage fraud.

And not a moment too soon. As Albert Einstein once said, “whoever is careless with the truth in small matters cannot be trusted with important matters.” If enterprises are overlooking these integral ways to avoid fraud, it is more than likely that they will overlook larger, more pivotal matters when they crop up.  And the intolerant Australian consumer base won’t be sticking around to watch it unfold. 

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Tags data protectionAPIbiometricscyber securityExperianfraud prevention

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