As Asia Pacific gears to overtake North America as the world’s largest e-commerce market, heads of fraud from across the region said that Card Not Present (CNP) fraud was witnessing a rapid rise in the region.
CNP is a purchase made by a consumer without using a physical credit or debit card. In e-commerce transactions and payments, only card numbers are usually required.
In a survey conducted at the Asia Pacific Fraud Forum in Singapore hosted by Fico, analytics and decision management software firm, a total of 94 per cent of attendees reported a rise in CNP fraud.
Research firm eMarketer estimates that B2C e-commerce sales in Asia Pacific this year will reach $525.2 billion, versus $482.6 billion in North America. The sales value in both Asia Pacific rose from $383.9 billion in 2013 while North America recorded its last year sales at $431 billion.
Fico estimates that card fraud now costs Asia Pacific financial institutions USD 360 million- USD 420 million each year, and losses are growing at an annual rate of 20-25 per cent.
Dan McConaghy, President for Fico in Asia Pacific, who hosted the forum, said consumers have accepted and become more familiar of non-traditional banking platforms, substituting cash for mobile and online transactions.
“As this shift occurs, we see criminals using social engineering, application fraud, data breaches and more to obtain card details. In order to maintain a positive customer experience, banks need to enhance such physical measures as chip and PIN cards, secured ATMs and one-time-passwords with solutions like predictive analytics. There’s an increasing need for a way to act in real-time across multiple channels,” McConaghy said.
Fico’s predictive analytics use statistical models to analyze streaming live data sets and detect fast moving patterns of fraud. A total of 15,000 calculations are completed in milliseconds once a credit or debit card is swiped to detect if any fraud has occurred.
Recent studies revealed that the poor handling of fraud is a key reason for losing customers’ trust. A 2013 study by MasterCard found that 40-45 per cent of Asia Pacific consumers would change card providers after experiencing fraud.
“Banks understand that consumers have so many choices these days that a badly handled fraud case can cause customers to stop using its services entirely and move to another bank,” said McConaghy. “You don’t get a second chance these days. Reputations are built on the ability to provide trusted and convenient services while protecting a cardholder’s fund and data.”