THIRTY-SIX per cent of consumers in Singapore have experienced card fraud in the past five years, according to a new study done by ACI Worldwide and Aite Group.
ACI is a global payments company which helps financial institutions in electronic payments and banking, while Aite is an independent research and advisory firm focused on business, technology and regulatory issues, and their impact on the financial services industry.
The global fraud study of more than 6,000 consumers across 20 countries revealed that, compared to ACI's 2014 benchmark study, card fraud rates - unauthorised activity on three types of payment cards (debit, credit and prepaid) - has risen 8 per cent in Singapore.
The report showed that 14 of the 17 countries surveyed in both years reported an increase in card fraud between 2014 and 2016. Risky behaviour (such as leaving a smartphone unlocked when not in use) has a direct correlation to fraud, and the overall risk of fraud is rising due to the global increase in smartphone and tablet usage, the survey noted.
In the Asia-Pacific region, Australia (40 per cent), India (37 per cent) and Singapore (36 per cent) experienced the most card fraud in 2016. Consumers in Thailand, India and Indonesia exhibited the riskiest behaviour among countries in the region, compared to their counterparts in Australia, New Zealand and Singapore. Risky behaviour is defined as leaving smartphones unlocked when not in use, shopping online from computers without adequate security, responding to emails or calls asking for banking details, and keeping the PIN (personal identification number) along with the card.
The top risky behaviour among respondents in Singapore was throwing papers or documents with account numbers (for example, bank statements) into the trash bin. Among the countries in the region, Singapore had the highest percentage of respondents (35 per cent) who had done so in the past five years.
Speaking to BT, ACI's Giselle Lindley noted there is higher potential for fraud attacks to occur in more affluent markets like Singapore. Hence, security must always be a priority.
"Financial institutions and merchants need to put in place fraud solutions which accurately detect and prevent fraudulent transactions themselves. This will help address consumer concerns around identify theft and data breaches. Of equal importance will be that these solutions also accurately identify genuine activity in real time to ensure minimal friction for legitimate customers," added Ms Lindley, ACI's Asia-Pacific solution and fraud consultants leader, payments risk solutions and big data.
Ben Knieff, senior research analyst at Aite Group, added that card fraud rates are on the rise in the majority of countries included in the survey. "The data shows that consumer education and customer service remain a challenge for financial institutions globally, as risky behaviour has a direct correlation to experiencing fraud," he noted.
The analyst observed that data breaches have become de rigueur, and "issuers and merchants can safely assume that payment card details as well as other information, such as PINs, emails and addresses, for any given customer have been breached".
As a result of some breaches, some card issuers mail replacement cards to their cardholders even if there has not yet been fraud on the account, though many issuers try to limit card reissuance and prefer enhanced monitoring. This reduces costs for the issuers and inconvenience for consumers.
The survey noted that in the Asia- Pacific region, consumers who received at least one replacement card range from a low of 14 per cent in Thailand to almost 34 per cent in Singapore.
This may be a reflection of fraud attacks and data breaches targeted at more affluent regions such as Singapore, India, Australia, and New Zealand. As in other regions, some consumers received multiple replacement cards during the past year, Mr Knieff said.
Consumer satisfaction rates with financial institutions' aftercare experience vary dramatically by country. Around 40 per cent were at least somewhat unhappy in Singapore (up from 33 per cent in 2014). In many cases, customer aftercare is still evolving, as is the sophistication of card fraud monitoring in the growing economies.
Compared to other regions, the Asia-Pacific region's switching rates are rather high. ACI's Ms Lindley said consumers who are dissatisfied with how they are treated by their financial institution after experiencing fraud sometimes change providers. "In Singapore, 21 per cent of consumers switch financial institutions after experiencing fraud - much higher than in Australia and New Zealand.
"We see great mutual benefit in creating a partnership with consumers by providing education to reduce the risk of fraud in the first place than having strong aftercare processes when a fraud does occur."
With 2,260 confirmed data breaches in 2015 alone, security remains top-of-mind within the financial services industry and among consumers, the study noted. Despite the adoption of fraud analytics solutions by financial institutions and merchants - along with EMV in most countries - card fraud rates are on the rise in many parts of the world.
"This study confirms that card fraud remains an issue of deep concern for consumers around the globe," said Andreas Suma, ACI's VP and global lead, fraud and data. "It's no surprise that there is a direct correlation between fraud and lower consumer trust and card loyalty . . . And as this data illustrates, it's more critical than ever for financial institutions to implement and actively maintain effective fraud prevention solutions that address fraud, security and customer experience needs."
Ms Lindley added that in the Asia- Pacific region, there is a clear correlation between risky behaviour and fraud incidents.
"This reveals an opportunity for consumer education focused on how consumer behaviour affects the potential for fraud to occur. This will not only help reduce the incidence of fraud, but also empower consumers to gain confidence in their ability to protect themselves from fraud," she said.
This article was first published on July 14, 2016.
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