Here’s how businesses can stay one step ahead of fraud

Fraud is on the rise in Southeast Asia. In recent months, 790 customers of Singapore’s Oversea-Chinese Banking Corporation were hit by an SMS phishing scam, resulting in the loss of over S$13.7 million (US$10.2 million).

This incident is just one example of how fraud has evolved in recent years. And fraudsters aren’t just targeting customers – businesses are wrestling with the problem as well. According to Staying Ahead Of The Fight Against Fraud In Southeast Asia, a study commissioned by GrabDefence and conducted by Forrester Consulting, seven out of 10 surveyed businesses said they had experienced fraud in the last twelve months.

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However, the truth is that these developments aren’t all that surprising. Fraud has been around for as long as there’s been money to be made, and fraudsters have always sought opportunities to make illegal gains.

“It’s the nature of fraud, that it will never go away,” says Brian Kim, the head of business development and strategy at GrabDefence, Grab’s B2B enterprise fraud solution business.

Drawing from GrabDefence’s experience of managing fraud for both Grab and third-party customers, Kim notes that fraudsters are constantly evolving, seeking out new ways to defraud businesses – and Southeast Asia has presented plenty of opportunities for fraud.

State of fraud in Southeast Asia

Kim points to the growth of digital services in Southeast Asia as a major driver of fraud in the region. The arrival of new services has led to new opportunities for fraudsters to take advantage of.

For example, new methods of payment such as digital wallets may give fraudsters new avenues to take advantage of, while new services – like ride hailing – have created new ways for bad actors to defraud businesses.

Southeast Asia’s competitive tech scene makes matters worse. Both new startups and incumbent organizations are trying to bring customers to their digital services, making signing up and transacting on their platforms as easy as possible. However, that creates problems as well.

“You cannot afford to introduce friction into the customer experience when there’s such heavy competition for customer acquisition, but in doing so, you leave a lot of doors open for fraudsters,” says Kim.

Brian Kim, the head of business development and strategy at GrabDefence / Photo credit: GrabDefence

And, of course, Covid-19 has exacerbated the situation as it resulted in a surge in internet users in Southeast Asia.

“With Covid-19, many people are coming online for the first time,” Kim explains. “These are people who may have never used a digital platform in their lives, and are unaware of the threats that exist on online platforms, making them more susceptible to fraud.”

The many faces of fraud

The three most common forms of fraud that businesses face in Southeast Asia are those related to online digital wallets, promotion abuse, and fake reviews and ratings, according to the GrabDefence and Forrester report.

From Kim’s perspective, these types of fraud are the most common due to the competition among businesses in Southeast Asia.

As firms work to acquire customers, they’re rolling out a variety of schemes to incentivize consumers to come on board, and looking to make the customer experience as smooth as possible, offering discount codes, sign-up bonuses, and a variety of different payment options. While this is good news for consumers overall, it inevitably creates plenty of opportunities for fraudsters to take advantage of.

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Fraud is also costly for businesses. Over 75% of the organizations surveyed in the report said each type of fraud had a moderate or significant financial impact on their organizations, and firms that experienced promotion abuse reported a loss of 31% on average in their annual marketing spend as a result.

However, the total cost of fraud is significantly higher. Besides the financial cost, businesses also have to grapple with other issues such as heightened compliance requirements, damage to brand and reputation, and the impact on customer satisfaction and trust.

“All of these go hand-in-hand – you’ll have unhappy customers ringing up your hotline, people will be distrustful of any emails you send or promotions you’re running,” says Kim. “You may need to rework your internal processes constantly, and your costs will definitely go up.”

The challenges with fraud management

It’s no surprise that fraud management is a top priority for many companies. Of the organizations surveyed in the report, 82% plan to either set up enterprise fraud management (EFM) solutions or upgrade their existing solutions.

However, neither is easy to do. Businesses have highlighted the impact of implementing EFM solutions on customer experience as one of the top challenges they face – something Kim has also observed with GrabDefence’s customers.

“Risk management often comes with increased friction for users, and businesses often struggle to maintain a balance between the two,” he says. “As you tighten your fraud prevention policy, you’re going to get less fraud. But at the same time, your cost is going to increase because your customer experience will deteriorate, and you might see more false positives.”

After all, if a customer has to jump through many hoops and know-your-customer processes to create an account, or go through multiple forms of verification to make a simple purchase, they might just take their business elsewhere, leading to a loss for the company.

Aside from balancing customer experience and fraud management, another key difficulty is adapting to the evolving methods of fraud.

“Fraud is a continuous cat and mouse game,” Kim says. “Whenever you put a new fraud prevention measure in place, fraudsters find the loophole very quickly – they know how to leverage technology to bypass all these measures. Understanding this and future-proofing yourself, is another challenging element.”

Keeping the fraudsters at bay

To that end, how can businesses ensure they’re putting the right fraud management solutions in place? Kim’s advice is to work with a provider that truly understands the problem at hand and can work with your company to provide a solution that balances customer experience and fraud prevention.

“It’s not so much about stopping fraud per se, but about making sure you introduce the minimal level of friction into the system and striking that balance,” he says. “It’s important to make sure you work with a service provider that has that experience and know-how about how to identify and create this balance.”

Additionally, firms need to have the right mindset to tackle fraud.

“It’s not a one-off thing,” Kim says. “You don’t just say we’ve found the balance, we’ve implemented this, and that’s it. It’s something that continuously evolves, and the optimal level will change as new fraud types emerge.”

As such, it’s important for companies to make sure their fraud solution partners can adapt to these changes and work to develop new solutions as needed. Ideally, these partners should leverage technologies such as AI and machine learning to stay ahead of the game and mitigate fraud before it happens.

“What [businesses] need to do is to continually evolve and adapt to understand what’s happening and tackle the problems that arise,” he concludes.

Built for the digital economy, GrabDefence helps businesses combat fraud while ensuring a frictionless experience for their users.

Learn more about the state of fraud in Southeast Asia and how to balance fraud prevention and customer experience by downloading the report Staying Ahead Of The Fight Against Fraud In Southeast Asia, produced by GrabDefence and Forrester, here.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.