Australian financial institutions are lagging behind their regional rivals in spending on fraud prevention and are slow to adopt emerging technologies.
According to a new study commissioned by ID verification company GBG and conducted by the Asian Banker, featuring 324 respondents from financial institutions across six countries in the Asia-Pacific region, found that these institutions in Australia are spending far below the average of these countries on fraud prevention technology.
The countries included in the study are Australia, Thailand, China, Indonesia, Malaysia and Vietnam.
The average spend by financial institutions on fraud prevention technology for 2020-21 is set to be $114.1 million, the study found, while for those companies in Australia it will only be $104.3 million.
This is far below the top-ranking countries in the study, with financial institutions in Thailand to spend $130.7 million on average, Chinese firms to spend $125.2 million and Indonesian companies to spend $121.8 million.
The ongoing COVID-19 pandemic means financial institutions need to be even more proactive in protecting from fraud and embracing new technologies, GBG regional general manager of Australia Carol Chris said.
“The ongoing shift to online and mobile banking and transactions, particularly among superannuation, financial planning and education enterprises, has been accelerated by the pandemic,” Chris said.
“The unpredictability of the current market and how it is evolving is driving a need among Australian financial institutions to increase readiness to be agile in how they future-proof themselves with fraud technology.”
In a significant concern for local companies, the report also found that nearly 60 per cent of respondents said that their company’s cybersecurity, fraud control and compliance functions are completely independent functions and no insights are shared between them.
This is despite it being repeatedly found that the unification of data across these areas can help prevent fraud attacks.
This is much higher than the other countries studied, which had an average of 43 per cent.
The study found that financial institutions in Australia are slow to adopt next-generation technologies, with only 21 per cent implementing fraud alerts and just 15 per cent using voice-activated fund transfers.
With the increasing level of risk, it’s important that new technologies are used to fight back, Chris said.
“The groundswell in online service delivery and use, combined with the ability to make instant payments over the NPP and the rise in fintechs, makes the opportunities for fraudsters and financial criminals more abundant and hazardous than ever, pushing financial institutions to ensure they have truly pre-emptive and end-to-end fraud management technology platforms in place for 2020 and onwards,” she said.
A third of financial institutions studied said that millennials and Gen Z-ers will be key target segments for new digital offerings in the coming year.
The companies will also be prioritising their spending on compliance technology to build customer trust and adequately deal with regulations. This is a significant issue for financial institutions this year, with more than a third saying that compliance management is a key challenge, while 42 per cent said that managing the costs from this is a big challenge to implementing new technologies.
Financial institutions are dealing with two central issues when approaching fraud prevention: growing threats and growing expectations from their customers, GBG APAC Chief Technology Officer Chee Leong Chin said.
“The proliferation of personally identifiable information is making consumers increasingly vulnerable and susceptible to fraud and identity crimes,” Leong Chin said.
“Meanwhile, customer expectations around instant access to an increased variety of digital financial services and digital safety assurance in transacting online are also skyrocketing.”