The 2023 LexisNexis True Cost of Fraud Study – Asia Pacific finds that fraud costs APAC-based businesses nearly quadruple the face value lost in fraudulent transactions.
In Australia, 66% of companies reported an increase in fraud in the 12 months prior to the survey, while organizations incur an average cost of AUD$3.68 ($2.96 for retailers and $4.21 for financial institutions) for every Australian dollar lost to fraud. These costs encompass financial losses due to fraud, internal labor expenses, external costs, legal costs and recovery fees, and expenses associated with replacing or redistributing lost or stolen merchandise.
Across APAC, digital channels account for 51% of overall fraud losses, surpassing physical fraud for the first time. Consequently, cybercriminals exploit the anonymity of digital, cross-border transactions to execute fast and untraceable fraud. The rise of scams and the use of technology, such as artificial intelligence (AI), expands cybercriminals’ ability to exploit both consumers and businesses.
The study also reflects the evolution of criminal tactics. In APAC, the stage of the customer journey with the highest fraud losses is new account creation, presenting the greatest challenge for both financial institutions (46%) and retailers (44%). Criminals are exploiting the growing popularity of digital banking and digital commerce by using stolen or synthetic identities to open fraudulent accounts.
“New forms of fraud clearly increase the risk of financial losses for consumers and businesses, including both the direct and consequential expenses, such as staff time to investigate incidents,” said Konstantin Poptodorov, director of market planning, Australia and New Zealand at LexisNexis Risk Solutions. “The issues facing businesses become even more challenging due to the fraud multiplier effect, where the losses experienced by organizations continue to increase and far exceed the lost face value in any transaction. Preventing fraud requires a multi-layered approach throughout the customer journey.”
Fraud significantly affects how customers perceive and interact with businesses. Three out of four Australian respondents report that fraud has influenced customer satisfaction compared to 73% across APAC. Almost 80% (79%) notice its impact on customer conversion, higher than the 75% recorded in APAC.
Criminals constantly innovate. This dynamic nature of criminal behavior means that fraud and its associated costs are not static threats that businesses can simply diminish. For instance, new payment methods provide fraudsters with opportunities to exploit vulnerabilities in the retail sector. Financial institutions are seeing increasing trends in identity theft, scams and digital wallet fraud.
Given the rising threat of fraud and cybersecurity risks, organizations should embrace forward-thinking fraud management and authentication solutions. This involves leveraging the capabilities of cutting-edge technologies such as AI, machine learning, and biometric and behavior-based authentication methods.
