Indonesian banks looking to retain and grow customers need to improve fraud management response
JAKARTA, Indonesia–(BUSINESS WIRE)–FICO (NYSE: FICO):
Highlights
- 1 in 6 Indonesian consumers will leave for a competitor if unsatisfied with their bank’s fraud management response
- 34 percent of Indonesians are most concerned about Account Takeover (ATO) fraud, followed by identity theft (29%)
- 13 percent of Indonesian consumers think banks could do more to protect them
FICO’s latest global fraud survey has revealed that 1 in 6 Indonesian consumers will leave for a competitor if unsatisfied with their bank’s fraud management response. This comes at a point, post-pandemic, where 67 percent of consumers say they will continue to do all their banking online. Indonesia also reported a higher rate of fraud than most markets in the survey.
With Indonesia boasting roughly 135 million banking customers, this 1 in 6 Indonesian consumers still represents a churn of roughly 21 million people which delivers an opportunity for institutions that can best manage the problem.
More information: https://www.fico.com/en/latest-thinking/ebook/fico-consumer-fraud-survey-2021-indonesia
Indonesians Most Concerned with ATO Fraud But May Be Neglecting Other Emerging Threats
The survey of a dozen countries revealed that Indonesian customers were most concerned about ATO Fraud (34%), followed by identity theft (29%). However, only 23 percent of customers have experienced ATO fraud, so the percentage of customers concerned about ATO fraud significantly exceeds those that have experienced it.
At the same time, there are other emerging scams that Indonesians may not be paying enough attention to. While just 17 percent of Indonesian customers are most concerned with card fraud, more than 70 percent of internet credit card transactions attempted in Indonesia are fraudulent. In addition, although more than half (54%) of customers in Indonesia plan to use real-time payments more in the coming year, only 10 percent are most concerned with being tricked into sending a real-time payment to a fraudster – a type of crime known as Authorized Push Payment (APP) fraud.
“APP fraud is becoming a bigger problem in Indonesia as we see a boom in the use of real-time payments,” said CK Leo, FICO’s lead for fraud, security and financial crime in Asia Pacific. “Fraudsters are attracted to these systems as they clear funds instantly, allowing them to deceive victims and then launder the funds through a maze of accounts.
“Protecting their real-time payments requires analytics that look for changes in customer behavior such as using accounts or devices outside of their usual habits, as well as standard anomalies such as time-of-day or frequency of a transfer. FICO has found that the use of targeted profiling of customer behavior to spot scams has yielded some impressive results with 50 percent more scam transactions detected.”
Balancing Strong Fraud Protection with Convenience
In Indonesia, 47 percent of survey respondents say they have reported actual or suspected fraud or scams to their banks, which is higher than the global average of 41 percent. Despite this, most customers in Indonesia (85 percent) say their banks do enough to keep their money safe. Just 13 percent think banks could do more, but this still equates to a potential of more than 17 million customers holding negative perceptions.
When it comes to convenience, 44 percent of customers in Indonesia are most irritated by transaction alerts for fraud that are late or never arrive. A further 29 percent of customers dislike banks changing the methods used to authenticate customers.
“The uptick in adoption of digital payment modes not only expands the fraud attack surface but makes for a more complex set of customer experience concerns,” explains Leo. “This pits the need for superior fraud management against the desire for easier customer communication, authentication, and verification preferences.”
Perception of Security is Everything
The survey also demonstrated there is a correlation between the perceived effectiveness of a security method and people’s preference for using it.
When it comes to payment verification, 37 percent of customers prefer text messages, despite security risks such as SIM swap scams. A further 22 percent would rather use email while just 18 percent prefer to use their bank’s app.
Another 15 percent are ready to move to a third-party messaging app. In fact, Indonesian consumers are more than twice as likely than the rest of the global survey group to prefer third-party messaging apps for payment verification. Most of this group, 70 percent, prefers online banking and 54 percent plan to use more real-time payments in the coming year, demonstrating their willingness to adopt new banking technologies.
With the diverse range of preferences across digital and traditional channels among customers in Indonesia, banks will need to cater to a variety of preferences while still encouraging customers to adopt the safest and most secure communication channels.
“People develop a sense of trust and comfort around a way of doing things, especially if it has protected them from scams so far,” said Leo. “As a result, it takes a while for customers to develop confidence in new security methods even if they are better. Banks need to remain flexible but find ways to show new channels are trustworthy, effective and more convenient.”
The survey was conducted in September 2021 by an independent research company adhering to research industry standards. 1,001 Indonesian adults were surveyed, along with 11,027 other consumers in Brazil, Canada, Chile, Colombia, Germany, India, Mexico, South Africa, Thailand, U.K. and U.S.
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 205 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.
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Contacts
Neil Mirano
RICE for FICO
+65 3157 5680
neil.mirano@ricecomms.com
Saxon Shirley
FICO
+65 9171 0965
saxonshirley@fico.com