GBG: Six predictions for the financial services and fraud landscape in 2021

By Dev Dhiman, Managing Director of GBG Asia Pacific

SINGAPORE – Media OutReach – 28 January 2021 – 2020 catapulted financial institutions forward in their
implementation and optimisation of technology. According to 71%
of Asia Pacific (APAC) technology decision-makers the pandemic has caused
their organisations to step up digital transformation, while 70%
of financial services organisations in APAC  believe innovation is now a “must”, reflecting
the impact of COVID-19 in shifting consumers and businesses to being digital-first.

When looking ahead at how financial institutions (FIs)
will be impacted by these trends in 2021, there are six key ways in which FIs
are expected to evolve.

1. COVID-19 drove a dichotomy in fraud technology
investment

There is a distinct difference in investment between
FIs in countries still heavily impacted by COVID-19, and those in the stages of
emerging from the pandemic.

For countries that have yet to enter into a stable
recovery period, FIs will be making a more conservative approach to overall investment
and sustaining cashflow, but deprioritising investments in fraud technology
could leave them unprepared for the potential rise in financial crime and fraud
during financial hardship. FIs in Indonesia, Malaysia, Thailand, and the
Philippines, which are seeing reinstatement or continued lockdowns in the
country, may become even more hard-pressed for stronger fraud prevention
technology to combat an increase in financial crime, as basic fraud systems may
not adequately protect them against emerging and complex fraud typologies.

For FIs in Asia Pacific emerging from or preparing to emerge from
the pandemic, such as Singapore, Australia, Vietnam, and Taiwan, while
confidence will be relatively higher, spending will be cautious, as maintaining
substantial cashflow will remain a priority. Rather than overhauling fraud and
compliance systems, FIs would likely choose to recalibrate, update and optimise
their digital onboarding as well as payments and transaction monitoring
technology. Investments would be specific to address prominent gaps and data
intelligence. Alternative data to onboard more challenging cohorts, creating
readiness against cyber endpoint threats, and relationship analysis may be
considered to address acquisition growth strategy and growing volumes and
complexity of online fraud attacks.

2. Digital customer experience expectations will
continue to skyrocket

 

Global ecommerce powerhouses like Alibaba and Amazon
and has normalised expectations around customer experience (CX) including same-day
delivery services, real-time shipping tracking, and more, in turn significantly
impacting customers’ CX standards for FIs. A recent
study showed seven in 10 customers demonstrated a deeper loyalty to
financial services and insurance companies that heavily invest in CX.

In 2021, the industry is already seeing FIs and fintechs race to
deliver instantaneous services through new financial products, with GBG’s
latest research finding 31% of FIs in APAC planning to offer instant bank
accounts and instant loans, 29% planning to offer instant credit cards, and 22%
planning to offer user voice activated fund transfers and bill payments. To
take CX to the next level, there is a probability that the financial services
sector will explore replicating successes from other industries, such as retail
businesses that have effectively used augmented reality (AR) and virtual
reality (VR) technologies to re-create in-store experiences, which could be
used by banks to create virtual in-branch experiences.

3. Cross-vertical collaboration and consumer data
drill-down are re-shaping digitalisation standards

 

Collaborations amongst major enterprises in the digital banking
space demonstrated the investment across seemingly unlikely industries in
working together to effectively serve customers at scale. Last year, for
example, Trip.com
Group partnered with Standard Chartered, PCCW and HKT to launch a new
virtual banking service and Asia’s first all-in-one numberless bank card, Mox,
while multinational ride hailing company Grab
teamed up with Singtel to prepare to launch their own digital banking
license in 2022. While both of these examples span multiple industries, they
each highlight the impetus among businesses to use business partnerships to
gain truly 360-degree views of their customers’ needs.

Looking at 2021 and beyond, this collaborative mindset is likely to
continue as government and regulatory bodies work together to focus on
accelerating digital identity availability, while also teaming up with partners
like telco providers, educational institutions and aggregators to create access
to more comprehensive and accurate data sets. FIs would become more active in
exploring the use and ingestion of incremental data sets, beyond the basic
internal data and official sources, to feed into their core fraud engine and
enhance fraud detection and prevention.

FIs have already reinvented partnerships to form new market
propositions. This openness and innovation would spill over into fraud
management and propel them to leverage on an expanded ecosystem to layer their
data with intelligence from specialists in location, mobile data, devices,
cybersecurity, data co-relation, and IP. This broader and deeper approach will
more effectively equip FIs with appropriate fraud prevention capabilities as
the world becomes increasingly digital-first.

4. Expanding availability of shorter-term credit
offerings across SEA

 

The rise of Buy Now, Pay Later (BNPL) businesses has
disrupted the credit landscape with shorter-term credit services for everyday
purchases, faster or no credit checks, instant approvals, and “zero interest”. New
BNPL players across
APAC have been setup and are quickly catching onto opportunities to offer
new and more agile types of loans.

FIs need to remain vigilant in how BNPL products are
rolled out, credits are distributed, and debts are managed. This ease in
obtaining credit can lead to more exposure to higher risk borrowers. FIs
focusing on growing their BNPL offerings need to build in stronger measures to
onboard consumers who have the ability and intent to pay back what they have
borrowed while keeping the standards of BNPL experience to ensure this revenue
stream does not go sideways in the long term.

5. Mobile-first technology and data intelligence as
fundamental building blocks for dynamic digital onboarding and transacting

 

Mobile devices are widely used to accelerate the
digital onboarding and transacting process. FIs are automating the identity
verification journey and streamlining biometric and facial verification,
document verification and data match altogether in instant KYC.

Today, mobile devices do more than enabling the
identity verification process. In Southeast Asia, seven
in 10 adults are either “underbanked” or “unbanked“and excluded from many
traditional financial services. FIs have begun to ascertain the quality of consumers
with limited identity documentation, or thin file clients, leveraging their
mobile phones as a personal identity verification device.

Mobile metadata, device usage patterns and SIM card
records are alternatives to traditional verification methods, datasets and data
sources. These alternatives offer data intelligence that FIs could use to fill
gaps in physical records, providing assessment and validation to the authenticity
and quality of consumer profiles and borrowing intent of these untapped
segments.

 

6. Socially engineered first party fraud and
identity crimes taking on a new level of complexity

 

Bringing together the above trends and predictions, the combination
of accelerated digital transformation among businesses, skyrocketing consumer
usage of social media, ecommerce, ebanking and online platforms, and increased collaboration
across FIs and non-bank organisations result in growing opportunities for
fraudsters and crime syndicates to mine data.

Consequently, socially engineered first party fraud,
identity crimes like synthetic ID and impersonations would take on a new level
of detection complexity. FIs have a responsibility to counter these attacks,
proactively manage the growing volume of channels where bad actors can access
personal information, and guard against financial crime and identity theft. As such
threats continue to broaden alongside other industry-wide trends, consumers’
expectations of FIs’ commitments to protecting and futureproofing their
financial services and products will also grow.

Organisations will need to reflect their commitments
to customer satisfaction and retention with more sophisticated and agile
approaches to fraud prevention and fraud technology investments.