After two years of battering, the banking and financial services industry will use data to preempt and protect itself in APAC.

After two years of the COVID-19 pandemic and the rise of opportunistic cybercrime in that time, banks and financial institutions in the Asia Pacific region (APAC) are getting a clearer picture of what the fraud landscape could look like.

According to a recent study commissioned by GBG, identity crime and money laundering will continue to threaten the banking and financial services industry.

The sector will be impacted by new types of crime in four ways:

  1. Financial fraud will grow in high- and low-tech realms
    As more banks and financial institutions release new digital products and services such as crypto exchanges and Buy Now Pay Later offerings, Financial Crime 4.0 will continue to grow and proliferate.

    With more financial services moving onto digital platforms, fraudsters are organizing themselves into complex global fraud rings, sharing intelligence on the hyper-connected ecosystem and seamlessly coordinating identity crimes, money laundering, and cyber-engineered campaigns.

    Concurrently, financial criminals are also expected to double down on their use of human farms. Leveraging human capital in countries with low labor costs, low-tech cybercriminals will use high-psychology tactics to augment automated phishing bots, making it harder for financial crime management solutions and consumers to discern between legitimate and malicious messages.

    This will be further exacerbated by improved social engineering skills, as demonstrated by fraudsters pretending to be financial advisors when Australia updated their superannuation rules.
  2. Expanding and enriching data sources for AI and ML to keep up with the cybercrooks
    Banks and financial institutions have been exploring new data sources for their fraud and compliance solutions, including device intelligence from mobile phones and tablets; social media identity matching and relationship networking; and telco data such as real-time call information. This expanded range of data sources enables banks and FIs to strengthen their defenses against fraudsters who are launching attacks from a multitude of digital channels, including websites, calls, texts, emails, and mobile applications.

    Besides tapping on a greater range of data from within, banks and FIs will also consider working with third-party data through vendors. This will equip their ML and AI models with better predictive power to prevent and protect them from new and emerging forms of fraud and financial crime.
  3. Outsourcing of fraud management functions will increase
    In 2022, the firm is expecting a slide in interest in the industry to retain full ownership and in-house systems to fight fraud. Data indicates that institutions are now more inclined than before, to prefer to either buy a financial crime management solution or utilize managed services from a solution provider to fight origination fraud in the future.

    External fraud management vendors could double as consultative partners to provide regular system reviews, specialized skills and constant monitoring. Additionally, compared to the resources need to set up and maintain in-house solutions, outsourcing to the right vendor can be more efficient.
  4. Increase in public cloud adoption
    Institutions currently using on-premises solutions managed by in-house IT teams are expected to switch to cloud-based solutions by 2022. The shift to the Cloud is a major step for banks and FIs as they tap on the infrastructure to react rapidly to changes in the environment across their entire network.

    Cloud features such as containerization provides the sector with the ability to scale resources according to real-time demand. Furthermore, being on the cloud also enables them to strengthen their data security, plan disaster contingencies, and maintain uniform deployment of updates and new features in multiple locations across the world. Other features such as real-time memory streaming can help financial firms process and analyze transactions at speed, while privacy-enhancing technologies facilitate the secure exchange of PII data.

With the four trends above pushing the industry past the initial phase of digital transformation, banks and financial institutions will be adopting new infrastructures, leveraging solutions, and ingesting more sources of data to provide greater protection and a more seamless customer experience.