Fraud Management & Cybercrime , Fraud Risk Management , Geo Focus: Asia
FIs, E-Commerce Firms Suffer 4.59 Times Actual Fraud Losses
Scams and First-Party Fraud Increase in Asia-Pacific Region
Financial institutions and online retail companies in the Asia-Pacific region face increased verification checks due to the growing adoption of digital services. Overall losses related to fraud are 4.59 times higher than the actual losses to fraudsters, according to a report by LexisNexis based on a survey of 382 decision-makers at e-commerce and financial institutions across the APAC region.
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While synthetic identity fraud and first-party fraud dominate the financial industry, e-commerce firms struggle with friendly fraud or chargeback fraud. This type of fraud involves customers falsely claiming refunds or chargebacks on legitimate purchases, putting additional pressure on businesses to enhance identity verification measures and transaction monitoring. The situation mirrors trends in the U.S., where merchants reported 30% greater losses from chargebacks in 2023 compared to 2022.
The LexisNexis survey also showcases the evolution of criminal tactics. In APAC, the stage of the customer journey with the highest fraud losses is new account creation, which challenges both financial institutions and retailers. Criminals exploit the growing popularity of digital banking and commerce by using stolen or synthetic identities to open fraudulent accounts (see: How Banks Can Address First-Party Lending Fraud)
"It is self-evident that new forms of fraud increase the risk of financial losses for consumers and businesses," said Cameron Church, director of fraud and identity for APAC at LexisNexis Risk Solutions. "The issues facing businesses become even more challenging due to the fraud multiplier effect, where the losses experienced by organizations continue to increase and far exceed the lost face value in any transaction. Preventing fraud requires a multilayered approach throughout the customer journey."
Rise in Scams
Scams have risen steadily in the past couple of years across the globe, and APAC is no exception. Criminals are diversifying their efforts and increasing their chances of illicit gain. Japan experienced a 55% increase in scams in a yea, and fraud rose 63% in India. Scams continue to be a major contributor to fraud losses, despite efforts to educate customers. Roughly six in 10 financial institutions in APAC reported an increase in scams over the last year.
In contrast, scams declined in Australia. The 15th annual Targeting Scams report shows that in 2023, Australians lost $2.74 billion to scams, down from $3.15 billion in 2022 - a 13% decrease. The Australian government has been urging banks, telcos and social media companies to take on the liability for scams by reimbursing customers, and it is expected to enact a law to this effect soon.
In the U.S. too, scams stand out as a top fraud vector for banks at the point of distribution of funds, and they rank highly for other groups at new account creation.
Fraud Types by Country
The report highlights the diverse types of fraud affecting different countries in the region. For example, India and Indonesia are experiencing a significant rise in identity theft, which poses serious threats to individuals and businesses alike. Meanwhile, Australia is facing an increase in payment fraud, particularly in online transactions, and a significant increase, 75%, in chargeback fraud. Given the high adoption in digital wallets, Indonesian businesses reported high growth in digital wallet and mobile transaction fraud.
