Asian banks to adopt customer-centric approach to tackle fraud

by Sohini Bagchi    Oct 03, 2013

bankfraud

Enterprise fraud incidents in Asia Pacific have grown significantly in the last one year. At a recent conference on enterprise fraud management, FICO, an analytics and research firm has alerted key decision makers of leading Asian banks to implement customer-centric solutions and programs that address the specific fraud landscape in the region. The firm has estimated that fraud in Asia Pacific costs in excess of US$350 million each year and is growing at an annual rate of 20-25%.

Enterprise-wide approach

FICO urged bank CIOs and other CXOs to adopt the latest operational and analytic techniques to reduce fraud instances across emerging threat vectors, such as, demand deposit accounts, mobile channels, application fraud and merchant fraud, as the region shifts to a post-EMV chip landscape.

According to FICO, closing loopholes for criminals while delivering services that minimize customer inconvenience remains a key concern for banks. The firm mentions mobile and online fraud, specifically card not present (CNP) transactions, continue to present the biggest challenge, especially in markets that have secured traditional card transactions with EMV chips and pins.

“Asian consumers place a high value on convenience and are among the fastest adopters of new channels such as mobile and online banking. At the same time they seek confidence from banks that these channels are effectively protected, so rapid deployment of channel-specific defenses is especially critical in Asia,” says Dan McConaghy, president for FICO in Asia Pacific. 

He asserts that to fight multiple and increasingly innovative fraud threats, banks need to avoid deploying a single, monolithic system and instead use a combination of existing and new analytics-based systems. According to McConaghy, the best way for banks to minimize disrupting their customers’ lives is by taking an enterprise-wide approach to fraud management.

This enterprise-wide approach must be designed to protect each channel, while linking them to provide centralized insight and control, and continuity in customer experience. This new approach emphasizes strengthening the weakest links in a bank’s entire fraud protection system while building toward enterprise protection in a structured, incremental manner. This way, he believes that banks can earn their customers’ trust with swift fraud detection and positive customer contact, while also minimizing losses.

Awareness and training

Research firm Berg Insight predicts that the number of mobile financial services users will grow to 894 million globally by 2015, with a majority of that growth occurring in Asia. In such a scenario, an increased level of awareness and training apart from strategic use of technology becomes paramount.

“Fraud risk and customer service is a very important balancing act for our bank, especially as customers are taking to online and mobile banking in greater numbers,” says Emmanuel Narciso, head of transaction banking for BDO Unibank, the Philippines’ largest bank, said in a statement. He believes that banks should rigorously train its employees on advanced security practices to tackle all types of frauds.

Experts opine, to tackle frauds at a basic level, training and awareness programs should also be extended to customers to get the best results. R. K. Chhattani, Deputy General Manager – IT, UCO Bank, a leading PSB in India, states that by and large, customers have limited knowledge and awareness of online and mobile security. In many cases although the awareness is there, they do not know how to prevent simple attacks. “Banks with the help of its partners should not only implement adequate security and analytics technology to safeguard but also educate their customers through various awareness programs,” he says. In other words, customer awareness program should be a part of every bank’s security strategy.

FICO also mentions that innovative streaming analytics can help banks understand individual changes in customer behavior and spending to deliver more accurate fraud incidents on the basis of which they can increase the level of awareness and protection.