Financial Crime World

Financial Institution Fraud Prevention in Indonesia: Escalating Complexity and Volume of Fraud Threatens Banking and Finance Sector

Introduction

Indonesia’s financial institutions are facing a significant challenge in combating fraud and cyber-attacks, as the country’s widespread digital usage provides an opportunity for fraudsters to operate. According to a recent study by GBG (Global Technology Specialist in Fraud and Compliance Management) and The Asian Banker, the rate of fraud in Indonesia shows no signs of abating and is projected to escalate further in 2020-21.

Key Findings

  • Financial institutions in Indonesia are facing significant challenges in detecting and preventing fraud, particularly money mule fraud.
  • Synthetic (55%) and stolen ID (53%) fraud types have the highest growth rate in Indonesia this year.
  • Indonesian financial institutions estimate a budget of USD$88.9 million to purchase new fraud prevention technology in 2020, making it the country with the third-highest budget to prevent fraud in the Asia Pacific region.

Challenges Faced by Financial Institutions

  • Coordinated social engineering and unsuspecting first-party scenarios make money mule fraud a huge challenge to detect.
  • The unbanked segment also projects the largest growth rate as a new customer segment focus by local financial institutions.

Solutions Offered by GBG

  • Digital Risk Management and Intelligence Platform: provides end-to-end digital fraud and compliance technology to help financial institutions and governments fight fraud and cyber-financial crime.
    • Machine learning modules to lower false positive rates
    • Orchestration modules to enhance fraud detection

Importance of Innovation and Convergence

  • Financial institutions need to innovate and converge mobile credit risk scoring with fraud technology to bridge the lack of data.
  • Striking a balance between negating the rise of digital fraud patterns and creating a safe digital banking environment is crucial.

Conclusion

The study highlights the need for financial institutions in Indonesia to prioritize the safety and security of their customers while using digital products. With the estimated budget of USD$88.9 million, it is essential to invest in new fraud prevention technology to combat these threats. For more insights into the research, download the report “Future-Proofing Fraud Prevention for Digital Channels: APAC FI Study.”