The increase in number of frauds has become a significant issue, with the latest report by LexisNexis Risk Solutions indicating that every Rupee lost to fraud costs firms Rs 4.
The LexisNexis True Cost of Fraud Study – Asia Pacific, based on a survey conducted by Forrester Consulting reveals that 54% of Indian organisations experienced a surge in fraud cases over the past year.
Typically, the cost associated with fraud includes financial losses, labour expenses, legal costs, recovery fees and expenses related to replacement or redistribution of lost or stolen merchandise. In the case of India, the average expenses incurred due to fraudulent activities reach Rs 4.00 for every Rupee lost – more than thrice the amount of the actual loss.
The survey also indicates a shift in the mode of fraudulent activities, with digital channels accounting for 51% of overall fraud losses across the Asia Pacific (APAC) – surpassing physical fraud for the first time. The rapid adoption of digital payment platforms has inadvertently made systems more susceptible to fraudulent attacks. Cyber attackers are increasingly exploiting the anonymity of digital transactions to conduct untraceable acts of fraud.
"It is self-evident that new forms of fraud increase the risk of financial losses for consumers and businesses,” said Cameron Church, director, fraud and identity, APAC at LexisNexis Risk Solutions. "The issues facing businesses become even more challenging due to the fraud multiplier effect, where the losses experienced by organisations continue to increase and far exceed the lost face value in any transaction. Preventing fraud requires a multi-layered approach throughout the customer journey."
Another concerning trend highlighted by the report is new account creation, which criminals are exploiting to conduct fraudulent activities. With a boom in digital banking and commerce, criminals are using stolen identities to open fraudulent accounts, leading to a rise in financial and data breaches.
The impact of fraud on businesses goes beyond financial losses. It also affects consumer perception and engagement – 77% of Indian consumers claim that experiences of fraud have affected their satisfaction levels and 78% notice its impact on customer conversion.
In light of the rising threat posed by fraud and cybersecurity risks, the study suggests that organisations should adopt forward-thinking fraud management and authentication solutions such as AI, machine learning, and biometric and behavioural authentication techniques.
Overall, as fraud becomes increasingly rampant and sophisticated, it's crucial for businesses to continually innovate and update their security systems and fraud detection methods to safeguard against potential threats. As the old adage goes, prevention is indeed better than cure.
This critical survey serves as an insight into both the escalated threat from fraudulent activities and the efforts that must be directed towards enhancing security measures and reinforcing customer confidence in digital transactions.