Fraud losses on rise with digital payments

Yasmine Raso

Senior Journalist, Financial Newswire

16 January 2023

The rise of digital wallets, mobile apps and contactless payment services such as Buy Now Pay Later (BNPL) has created more opportunity for fraudsters and increased the amount of payment losses.

According to LexisNexis Risk Solutions’ 2022 True Cost of Fraud APAC Study, BNPL services in particular accounted for over 10 per cent of payment method losses across the region despite recording a disproportionately lower average volume of transactions.

The report found that while credit transactions still top the list of payment methods for the single most fraud losses, mobile and digital wallets account for nearly one-fifth of fraud losses.

It also credited the COVID-19 pandemic with driving the rise in contactless payment method usage and highlighted the importance of stronger authentication processes and strategies to battle the increased fraud risks associated with card and information breaches.

The study also said impersonation scams related to authorised push payment fraud have been trending in Australia, which can be a more sophisticated scam that is harder to identify.

“Organisations that rely on conventional methods to detect scams will find it challenging to keep up with the complex and fluid global landscape,” Thanh Tai Vo, Director of Fraud and Identity at LexisNexis Risk Solutions, said.

“Transitioning from physical identity to digital identity requires a multi-layered defence, with digital intelligence and behavioural analysis as key elements, has become the trend to make smart, informed decisions for fraud prevention.

“Adaptive authentication will also be vital in helping businesses to thrive and stay competitive with lower friction and higher security in today’s mobile age.”

The volume of attacks on mobile channels climbed by 94 per cent year-on-year worldwide, rising from 260 million to 505 million compared to the same period last year.

LexisNexis Risk Solutions’ report also identified identity verification as a common challenge facing users, encouraging payments companies to adopt better real-time data analysis and transaction tracking tools.

“Identity verification, including digital identity attributes, is particularly challenging for the account-related parts of the customer journey, such as new account opening and account login,” the study said.

“However, assessing the transaction risk is also a challenge, particularly at the point of sale. This includes determining the origination of the transaction and the ability to assess risks from foreign entities.

“Identity theft, synthetic identities and the risk of account takeovers have accentuated the need for digital intelligence and identity authentication technology.”