Navigating Regulatory Trends, Rising Fraud Threats and Compliance: Insights from Industry Leaders

As more and more people shift toward a digital lifestyle, it has become increasingly apparent that digital payments are the future of financial transactions. More than 6 billion people across the globe use digital payment options on a regular basis. The convenience, speed, and security that digital payments offer are unparalleled, making it the most efficient way for individuals and businesses alike to make payments.

According to a study by Juniper Research, global digital wallet transactions are projected to reach $12 trillion by 2026. However, during this period, online payment fraud rates are also expected to rise by 131%. This relays a challenge for businesses — especially considering that four out of five consumers in Asia Pacific expect businesses to take necessary steps to protect them online.

So, how can you keep up the fight against the rising threat of fraud, while keeping abreast of evolving regulations and managing the cost of its compliance? Three industry experts share their insights.

Biometric Authentication: The Shield Against the Rising Tide of Fraud

Fraudsters, like chameleons, are apt at constantly adapting and blending into any environment. Nowadays, tech-savvy criminals are utilizing the latest technologies, such as AI, to find new ways to exploit the vulnerabilities in digital systems. This has led to emerging fraud threats, such as face swapping, synthetic identity fraud, deepfake videos, as well as digital injection attacks — where criminals bypass video biometrics with synthetic imagery. On top of this, popular tools such as ChatGPT are becoming even more widespread in the creation of convincing and sophisticated messages for phishing scams.

As industries such as finance, retail, gaming, and other services moved towards digitization, the need for ensuring the identity of individuals became increasingly significant, says Frederic Ho, vice president, Asia Pacific, Jumio. Additionally, businesses are now focusing more on combating fraud instead of pursuing market share, as fraud has become significantly more prevalent than what they were dealing with three years ago. Louis Smith, head of risk, Southeast Asia, Visa, also notes that e-commerce sites are often targeted by fraudsters, who seek to obtain sensitive data such as credit card numbers. To mitigate this risk, Visa takes a strong stance on protecting sensitive data and requires that it be stored in PCI-compliant environments. In addition, Visa advocates for the use of tokenization, which can render stolen data useless or at least significantly reduce its usability.

To that extent, Ho believes that biometric authentication is a highly effective solution against account takeover and phishing. Its efficacy is further enhanced when combined with liveness detection, which provides protection against deepfake technologies and digital injection attacks.
This is due to the fact that unlike traditional methods of identity verification, which rely on passwords or personal information that can be stolen or guessed, biometric authentication uses unique physical characteristics to verify a user’s identity, making it more difficult for attackers to bypass authentication systems.

The Changing Seas of Compliance and Regulation

Boosted by the pandemic-induced digital transformation, Southeast Asia is leading the shift toward the future of payments via cashless transactions. The region also experienced burgeoning cross-border payments, with its digital payment market expected to hit $2 trillion in transaction value by 2030. This exponential growth and fast-evolving business models have brought forward the need to strike a balance between industry stability and safety.

As such, Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations are becoming stricter. Ho emphasizes that there will be higher expectations for reporting, and teams will have to do more work — whether it’s monitoring transactions or securing KYC processes in a feasible way for businesses. This is where finding specialist industry partners or vendors can help plug the gaps and empower businesses to align seamlessly with regulations through the use of automation.

Automating manual labor-intensive KYC checks, transaction monitoring, and alert reviews can reduce 70% of the workload on staff, freeing up their time to effectively identify risks to the business, according to Alia Mahmudi, customer in residence & global regulatory affairs, ComplyAdvantage.

Therefore, it is advisable for businesses to incorporate compliance as an integral part of their operations, considering that financial institutions were penalized a significant sum of $2.7 billion in 2021 for their failure to comply with KYC and AML regulations and lack of due diligence.

This is why, while compliance was once viewed as a cost burden, larger regulatory fines and sanctions on companies have led businesses to realize that compliance can be a profit center — aiding in scaling operations while minimizing fraud and compliance risk.

Maneuvering Threats with Advanced Risk Signals

Risk signals are to businesses what spidey-sense is to Spiderman — they both serve as early warning systems that allow businesses and superheroes to detect and respond to potential threats before they can do harm.

Risk signals enable businesses to set a tolerance of acceptable risk and initiate additional checks at certain points and thresholds, ensuring a thorough vetting of higher-risk users without overburdening those who are low-risk.

In addition to ID verification, risk signals (such as checks on IP addresses, device information, email addresses and phone numbers) play a critical role in detecting potential fraud and enhancing security measures by flagging high-risk transactions for additional scrutiny.

As such, risk signals not only help businesses stay one step ahead of fraudsters, but also provide a secure and seamless online experience for their customers.

Putting the Pieces Together with a One-stop Solution Provider

At this crucial moment, business leaders find themselves facing a formidable challenge — being under regulatory scrutiny, witnessing fraud rates that show no signs of regression, and grappling with the high cost of fraud prevention amid an ever-changing economic landscape and credit crunch.

It has become imperative for businesses to partner with a reliable and trusted provider that can streamline their fraud prevention processes and solve their compliance challenges, including managing multi-jurisdiction KYC/AML compliance and rising compliance costs.

With the right tools like Jumio’s KYX Platform and expertise at their disposal, businesses can stay ahead of the curve and secure their online operations in today’s digital landscape.