Cross-channel fraud – a problem for Asia Pacific, too

Fraud is a hot topic on this blog. I was particularly intrigued by what my colleague Mike Urban had to say on the emerging threat of cross-channel fraud. In our work with banks in Singapore and around Asia Pacific, we see that bank fraud continues to escalate, posing a costly threat to businesses, consumers and society as a whole. FICO estimates that total losses in the Asia Pacific, excluding Japan, are near US$360 million a year, and rising.

As Mike wrote, a new, but fast-emerging, threat is cross-channel fraud, such as when fraudsters use stolen account information to order a debit card. It concerns me that only 26 percent of financial institutions have teams assigned to detect cross-channel fraud, according to FICO’s research.

While this research didn’t include Asian banks, I have observed that cross-channel fraud is a concern here as well. In fact, it sparked an idea for a recent Singapore Business Times executive column.

The problem stems from how institutions manage fraud - by payment channel rather than by individual customer, who usually has more than one account, card or loan. This makes banks - and more significantly, consumers - vulnerable. While the regional policies and cultural norms are different – for example, the situations Mike lists are less likely to happen in Singapore due to more stringent check clearing rules – the threat is the same. Here, for example, we have seen fraudsters steal someone's bank information, transfer funds to pay off that person’s own credit card, then immediately max out the credit card, never to repay.

To mitigate this risk, first, we need a shift within the financial institutions in Asia Pacific. Fraud must be tracked at the customer level. If done right, cross-channel fraud becomes less threatening. Second, we need technology. FICO's fraud systems protect more than two billion card accounts worldwide; they have saved US card issuers alone more than US$10 billion since 1992. And we've already introduced this technology to banks in Asia.

But, it will take more than that to combat this threat. More significantly, we need to work with local governments and financial institutions to continually educate consumers on the fast-changing fraud threats so they can take steps to properly protect themselves. Fraud, relatively speaking, is a newer threat in Asia. Consumers in some countries – such as China, where credit still is a new phenomenon, albeit one that has grown significantly over the past few years – are less aware of types of fraud, why they might be vulnerable, and how they can help protect their money. Simple actions - publicizing fraud attacks, encouraging consumers to sign up for account alerts, educating them on how to see if the ATM is safe - can empower consumers and help to reduce fraud.