Security

How Artificial Intelligence is Powering Asia’s Fraudtech Fight Against Financial Crime

Advances in technological fields including artificial intelligence (AI) and biometrics are providing new ways for financial institutions and startups to combat the surge in fraud and financial crime resulting from the rise of digital banking and fintech.

With governments across Asia Pacific (APAC) pushing for greater adoption of digital technologies to boost financial inclusion, financial-related crimes and fraud attempts have proliferated across the region.

The rapidly evolving fraud landscape

The shift of banking to digital channels has not only transformed the way people access banking and manage their finances; it has also led to a revolution in banking fraud and financial crime, turning it into a fast-growing global industry.

Global losses due to card fraud alone cost almost US$27.85 billion in 2018 and could reach US$44 billion by 2025, according to the Nilson Report.

In APAC, the introduction of real-time payments in particular has led to a significant increase in payment fraud, with four in five APAC banks witnessing a rise in losses, according to results from a Fico survey released in January 2020. Almost a quarter (22%) predict that fraud will rise significantly in the next 12 months.

Regulatory changes, notably those aimed at facilitating the adoption of open banking, are also expected to create additional opportunities for digital banking fraud at a time when banks are already locked in an escalating arms race against digital fraudsters with access to ever more sophisticated tools.

AI in fraudtech

In the evolving fraud landscape, organizations and businesses have been rapidly embracing AI, machine learning (ML) and biometrics, recognizing their potential to combat fraud and prevent financial crimes.

A global survey released in June 2019 by the Association of Certified Fraud Examiners (ACFE) found that while only 13% of organizations used AI and ML to detect and deter fraud, 25% were planning to adopt such technologies in the next year or two. Similarly, only 26% used biometrics as part of their anti-fraud programs, but 16% were looking to deploy the technology by 2021.

Showcasing that organizations and businesses are well aware of the new, emerging risks arising from digitalization, more than half of organizations (55%) surveyed said they were planning to increase their anti-fraud tech budgets over the next two years.

Investment trends are also reflective of industry participants’ confidence in the potential of AI to fight financial crime. According to the Emerj AI Opportunity Landscape for Banking and Financial Services report, approximately 26% of venture funding raised for AI in the banking industry has been for fraud and cybersecurity applications, more than any other use-case category.

Fraudtech startups landscape in Asia

In APAC, most fraudtech startups are located in Singapore, one of the region’s largest fintech hubs.

Advance.ai, for example, is a data-driven company from Singapore that uses AI to reduce fraud risks and improve operational efficiency for its clients, serving operators in sectors such as fintech, banking, and retail.

Advance.ai’s flagship product is Advance Guardian, which assists banks and other businesses in eKYC (electronic know your customer), fraud detection and credit scoring. The startup said in September 2019 that it had over 300 enterprise customers in Singapore, Indonesia, Vietnam, the Philippines and India. Last year, it raised US$80 million in a Series C funding round for its regional expansion in Asia.

Shield, formerly CashShield, is another Singaporean fraudtech startup that leverages AI to help companies block fraud in real-time. Founded in 2008, Shield claims it was the first to introduce a 100% fully automated fraud solution, says that each year, it profiles more than 5 billion devices and over 500 million user accounts globally. Shield serves companies in industries such as e-wallet, super apps, e-commerce, travel, retail and gaming.

Finally, Group-IB is another fraudtech and intelligence company headquartered in Singapore. Group-IB provides solutions aimed at detection and prevention of cyberattacks, online fraud and IP protection. Last month, the company raised funding from Singapore’s Cyber Security Agency to develop a cyber investigation solution for the nation.

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