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Financial Services Should Work Together to Reduce Fraud

Over the last couple of months, Malaysia has seen an increased number of users adopting digital financial services. This includes an increased usage in e-wallet services as well as more online banking transactions. While the COVID-19 pandemic does have a role to play in the increased digital adoption, users themselves are now preferring to do most of their transactions online.
 
Increased online transactions and digital services have also led to an increased number of fraud cases in digital channels. The “Future-proofing Fraud Prevention in Digital Channels: Malaysia FI Study” by GBG, the global tech specialist in fraud and compliance management, identity verification and location data intelligence, analyses the impact of fraud on Financial Institutions (FIs) across six countries and the technologies they are planning to invest in to mitigate today's fraud threats and scale to address emerging fraud patterns.
 
According to the report, 58% of Financial Institutions (FI) in Malaysia that are impacted by fraud have one thing in common, the absence of an end to end fraud management system. Also, 66% of Malaysian FIs believe that an end to and fraud management platform differentiates their digital product offering. And this is where GBG fits in.
 
June Lee, APAC Managing Director of GBG pointed out that 9 out of 10 major banks in Malaysia are already leveraging GBG’s fraud detection services. GBG has been working with various banks in the country, developing the right framework for them in dealing with fraud. They also work closely with all the regulators in Malaysia, to ensure all the services and technology used by banks meet all compliance set, including RMiT.
 
The ability for Malaysian FIs to manage fraud in the entire digital customer journey is, however not yet on par with the progressive pace of digitalisation. Almost half of the respondents indicated that fraud detection during the onboarding phase is a challenge.
 
At the same time, digital banking and cashless services have gone mainstream and are pegged to overtake the average APAC rate of adoption this year, in particular e-banking, e-statements and e-wallet services.  From the research, all fraud typologies from social engineering, first-party fraud, cyber-attacks and anti-money laundering are projected to increase in 2020-21.
 
“Malaysia has done well compared to other ASEAN nations. We have a fraud bureau and also RMiT to ensure technology is used responsibly. The fraud bureau allows banks to share information on bad fraudsters with all the other banks. It would be great if Fintech players would work together in the ecosystem”, said June.
 
She added that all financial players are competing in the same field but the Fintech players have more data. They need to be encouraged to share fraudster information. Right now, only banks are doing so. She hoped that Fintech and payment vendors will also share this information as it will benefit both the economy and consumers. After all, the fraudsters are also sharing information among themselves.
 
With that said, the report clearly shows Malaysia is going in the right direction. However, there is still more that can be done in technology to improve fraud detection.
 
Now, when it comes to fraud detection technology, GBG has a number of fraud detection solutions for FIs. While machine-learning-based solutions are often the fastest when it comes to fraud detection, there is always the problem of false positives. June explained that currently, they have set a benchmark for the banks whereby around 70% to 80% of the rules will be applicable to all FIs while the balance will be catered specifically based on a bank’s request, as different banks have different sets of rules.
 
GBG has also introduced an ML model that can automatically learn to provide additional scores based on the data it has to provide a better understanding of results. For example, if there is a false positive, the ML solution will do another layer of check on other variables like an email, for example, to see if the particular account is a fraudulent or not.

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