What Japan can do about its online fraud problem, according to this security expert

A photo of Atsuyoshi Shimazu

This article is part of Tech in Asia’s partnership with Disrupting Japan where we publish the revised transcripts from the show’s podcast interviews with Japanese entrepreneurs. This is heavily revised from the original transcripts. For the full interview, go here.

I’ve been involved professionally in IT in Japan—both in enterprises and startups—for more than 20 years. Corporate Japan has always had a strange relationship with computer security. On one hand, companies are very sensitive to security concerns, and they pay top dollar for hardware and software systems and evaluations. But on the other, day-to-day security practices are often neglected.

I sat down with Atsuyoshi Shimazu, founder and CEO of Caulis, which offers a distributed online fraud prevention service called Fraud Alert. Atsuyoshi explains Japan’s problem with online fraud, what businesses and consumers should do, and the current challenges to the country’s cybersecurity.

You founded Caulis in December 2015. But before that, you worked for a captcha company. Why did you leave?

I have two reasons. First, captcha only focuses on protection against bots but not human log-ins. Second, hackers can bypass a captcha, and we wanted to focus on detection, not authentication. We also wanted to spread the security command to the IoT industry.

How serious is Japan’s problem with online fraud?

It is a very serious situation in Japan. The government did a survey in June 2015 and found that one-third of publicly listed companies were suffering damages due to fraud.

Online banking in Japan has seen around US$120 million worth of damages due to credit card fraud, and it is increasing every year. It started in 2013 when web browsers like Firefox, Google Chrome, and Internet Explorer enabled a language translation function. It then became easy for so many hackers to identify a Japanese bank, an ecommerce site, credit card information, and so on. Before, the language barrier made it difficult for hackers.

Right now, damages from offline credit card fraud are bigger than online—maybe 60 percent. But I think online will overcome offline in 2020.

Japan’s economy is about 30 percent as big as the US’, but it only has about 1.5 percent of credit card fraud. Why?

Many Japanese use cash. Only about 20 percent to 30 percent of the population uses credit card. The remaining 70 percent pays with cash.

Are Japanese companies particularly susceptible to ransomware attacks?

I think so. Some of the banks here have introduced many solutions for ransomware protection, but companies in other industries cannot afford to introduce so many solutions because of their budget.