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Online fraud leaves APAC consumers wary of digitalization

According to the Digital Trust Index, part of the Fraud Management Insights 2017 report recently authored by Experian and ICT market research and advisory firm IDC, the severity of fraud in Asia Pacific is highly evident. 

One in five people have encountered fraud directly, while one in three people or their loved ones have been affected. 

The high levels of fraud, which the study anticipates will only increase as adoption of digital services increases, is having a negative effect on consumer trust.

Covering ten markets across APAC, the report surveyed 3,200 consumers and over 80 organisations from the Financial Services, Telecommunications (Telcos) and Retail sectors (collectively referred to as Service Providers), each with revenues of at least US$10 million. 

Countries surveyed include Australia, China, Hong Kong, India, Indonesia, Japan, New Zealand, Singapore, Thailand and Vietnam.

The Digital Trust Index was developed to provide a meaningful way to measure trust between customers and organisations, across regions and sectors. 

The index reviews a selection of criteria across industries and countries to determine the level of trust consumers have for digital services.

It also offers a snapshot of consumer behaviour and expectations. 

A higher score indicates that consumers are satisfied with their digital transaction experience, while a lower score indicates a failure in trust.

The index is based on four key variables including the levels of digital adoption, industry preferences and fraud rates, and the effectiveness of companies' fraud management capabilities.

The study found that on average, trust in digital services is relatively low across the region. The region on a whole only scored 3.2 out of 10.0, with Telcos holding the lowest score of 2.1 and Financial Services having the highest at 4.9.

Interestingly, while the companies surveyed indicated they are confident in their ability to combat fraud and provide a superior customer experience when fraud does occur, this did not translate to consumer perceptions. 

Countries like Singapore and Hong Kong, which would be expected to have a high trust score due to their advanced fraud management systems, lag due to a low tolerance for fraud and perceptions that companies are not managing the post-fraud experience well. 

This low tolerance to fraud is mirrored in many advanced economies, while there is a greater acceptance of it in countries where fraud incidents are the most prevalent. 

Retail, particularly e-commerce, tend to do better in this aspect, due to their focus on the post-fraud customer experience and their ability to quickly address issues arising from fraud.

To increase customer trust in digital services, the Digital Trust Index identifies three key gaps that service providers must address to strengthen trust between themselves and their customers.

  • The rise in digital transactions

For businesses, getting to grips with the increase in scale requires leveraging smart investments in infrastructure to process these transactions, while ensuring optimal standards of security, availability and reliability of their digital services. 

This infrastructure includes tools to manage expanding volumes.

  • Race for convenience

It is critical that service providers in APAC improve their ability to deploy seamless fraud management and detection, supported by customer behaviour analytics in the background to identify fraud in a non-disruptive way. 

Striking the balance between keeping customers safe from fraud while minimising the friction of online transactions will be of great importance as digitalisation accelerates across the region.

  • Constantly evolving fraud

The variety of fraud that service providers grapple with is hard to keep track of, much less respond to effectively. 

With new types of fraud emerging and evolving at a rapid pace, service providers in APAC must look towards future-proofing their fraud detection capabilities to handle fraud types they have yet to even see.

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