- Online fraud and identity theft impacts as digital retailing grows;
- China consumers have more tolerance for online fraud with 46.6% averagely acceptable of sharing personal data with other business entities.
- Super-ID is emerging to manage fraud.
Beijing, China, November 15, 2017 — According to the new Digital Trust Index, part of the Fraud Management Insights 2017 report recently authored by Experian and leading 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. In China, online fraud and identity theft are listed as top fraud types as digital and retails grow with consumers of high tolerance to fraud incidents.
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$10m. Countries surveyed include Australia, Mainland 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 Digital Trust 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, with a higher score indicating 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 enough, 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. Regions such as 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 addressing issues arising from fraud.
| Rank | Country | Digital Trust Index Score* |
|---|---|---|
| 1 | New Zealand | 4.2 |
| 2 | Japan | 4.1 |
| 3 | Australia | 3.8 |
| 4 | India | 3.3 |
| 5 | Mainland China | 2.8 |
| 6 | Vietnam | 2.5 |
| 7 | Hong Kong | 2.5 |
| 8 | Thailand | 2.3 |
| 9 | Singapore | 2.3 |
| 10 | Indonesia | 1.8 |
* Based on the average of all DTI scores across the three sectors: Financial Services, Telcos and Retail. The figures are rounded off to the nearest decimal
“China is a mid-streamer in Digital Trust across the region. However, it’s top in terms of trust level driven by digital commerce growth and online retailers’ focus on mitigating fraud disputes. Despite a high frequency of fraud incidents, consumers are generally more tolerant and willing to accept the occasional fraud involving minor monetary losses and when given assurance of nonrecurrence,” said Huang Jian, Managing Director of Experian Greater China, “compared with AP average of 27.5% are accepting of sharing personal data of existing accounts with other business entities, mainland China accounts for 46.6% averagely, which may cause higher expose of data privacy and risk of fraud in mainland China.”
As regional governments generally lay down plans to increase digitisation and enhance their economic outlooks through adopting new digital services, it is imperative that organisations invest to ensure trust in their digital offerings. Low Digital Trust Index indicates that there is a divide between how businesses think they manage fraudulent digital transactions and the actual customer experience when fraud does occur.
To increase customer trust in digital services, the Digital Trust Index identifies three key gaps that service providers must address to strengthen trust between them and their customers.
Gap 1: The Rise in Digital Transactions
The sheer growth in the volume of digital transactions continues to astound business and economies across the region. In China, the percentage of Chinese consumer spend made online is estimated to climb up to 30% in 2021. Along with the digital transaction growth, potential risk of fraud is seen greatest in online payments.
So for businesses, getting to grips with the increase in scale requires leveraging smart investments in infrastructure to process these transactions, including tools to manage these volumes while ensuring optimal standards of security, availability, and reliability of their digital services. As an evolving trend, companies and enterprises must utilise automation to combat the expected increase in fraud that comes with rising digital transactions. In China, businesses in financial services have moderate confidence in their capabilities and are now scaling up in automated detection, while those in Telco have high confidence in their abilities to respond to fraud.
Gap 2: Constantly Evolving Fraud
The variety of fraud types is hard to keep track of, much less respond to effectively. Different industries are threatened by diversified types of fraud. For China, online fraud, carrier billing and identity theft are top 1 fraud types separately in financial services, telco and retail industries. With new types of fraud evolving and emerging 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.
This necessitates breaking down data silos within organisations and also better utilising analytics. With the growth of data and the variety of channels or touch points, data silos make it difficult for organisations to gain a single view of the ecosystem and their customers. Breaking down data silos and utilising analytics will enable service providers to understand their customer behaviours better while also improving customer verification accuracy and speed – leading to improved fraud detection and enhanced consumer trust.
Gap 3: Race for Convenience
There is a trade-off between seamless customer experience and fraud management. The service providers who can balance this first will emerge the winners of their categories in time to come.
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.
Future-Proofing Service Providers Against Fraud
Online fraud and identity theft are major concerns for service providers in the region. Companies are turning to new technologies to help protect themselves and their customers, but often not in an integrated way. The solution is the ‘Super ID (identity)’, the next-generation digital identity which is multi-factored and dynamic, bringing together Artificial Intelligence, biometrics and alternative data in an integrated way to effectively manage fraud.
Businesses should consider augmenting their fraud detection and prevention capabilities with additional customer intelligence via a Super ID system that would help correctly identify customers in a digital transaction, allowing for greater security without additional friction to the customer experience.
“In next steps of development, digitalisation is set to usher us into a new era of convenience when more efforts needed to build greater customer trust in the digital world and organizations should put trust into practice,” as Jian pointed out, “The next-generation fraud prevention is made possible today by technological advances in big data and analytics. Experian, as a world’s leading global information services company, is committed to leveraging the latest data and analytical tools to help enterprises prevent fraud and automate decision making.”