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Preventing fraud the smarter way

Nurdianah Md Nur | Oct. 2, 2014
Analytics can be used to compare a customer's historical activity to his current activity and determine if the activity is suspicious, said Adam Davies of FICO.

Adam Davies of FICO
Adam Davies, FICO's global head of fraud consulting

As consumers are increasingly transacting online and adopting non-traditional forms of payment, fraud prevention is set to be a top priority for retailers and financial institutions. bankITasia talked to Adam Davies, FICO's global head of fraud consulting, to learn more about the current fraud trends in Asia, the risks that new payment methods are introducing to the payment ecosystem and how analytics can help reduce those risks.

bankITasia: What are the current fraud trends in Asia Pacific? Are these trends only applicable to this region?
Adam Davies:
FICO has been seeing a rapid increase in e-commerce or card not present (CNP) fraud. This is where criminals steal customers' data and card information and then use it for deceitful online transactions. In fact, at our recently held Asia Pacific Fraud Forum held in Singapore, 94 percent of the participants revealed that they have seen cases of CNP fraud rising in the past year. While the perpetrators of these crimes are not necessarily located in Asia, the region is becoming an attractive target for criminals because of the meteoric growth of e-commerce, fuelled by a growing middle class and their take up of credit cards. In fact, according to a recent report, Asia Pacific is expected in 2014 to move past North America as the world's biggest region for e-commerce with transactions estimated at US$525 billion. 

Fraud is migratory too. So another reason it has moved online is that a lot of countries have implemented stronger security at the point of sale. However, some countries are still in transition. Card skimming is still prevalent in Indonesia and the Philippines because they have not universally moved to the chip and pin system.

With skimming fraud, criminals install card readers on ATMs or point of sale machines to obtain card details, while cameras capture keystrokes entered by customers to capture the associate PIN. This allows fraudsters to duplicate cards and steal money from unsuspecting victims.

At the moment, FICO estimates that ATM fraud is growing over 50 percent faster in the Philippines than the past three years. About PHP220 million (US$4,911,817) was lost to ATM fraud in 2013.

These trends are prevalent all over the world because organised crime is behind these operations. They are looking for the most effective way to steal and are constantly testing for the weakest links in the chain to exploit.  It is big money for criminals, so they are very heavily invested, which makes it very difficult to stop fraud entirely.  Europe for instance lost over US$1.9 billion to card fraud in 2013.


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