The Rise of Virtual Banks in Asia is Posing New Cybersecurity, Fraud Risks: Jumio
Across Asia-Pacific (APAC), regulators are opening up their markets to new entrants that promise to transform the traditional banking model. By leveraging digital platforms and cutting-edge technologies, virtual banks aim to offer more affordable and convenient banking services, and reach the unbanked and traditional underserved markets. But as virtual banks are poised to transform the banking sector, their arrival is also introducing new risks related to cybersecurity and identity fraud, according to a new report by Jumio, an online payments and identity verification company.
Cybersecurity risks and fraud on the rise
In a report titled How eKYC is Streamlining Digital Banking: An Asia-Pacific Perspective, the company delves into the need for companies in the financial services industry to adapt to the evolving landscape and adopt modern digital know-your-customer (eKYC), anti-money laundering (AML) and identity verification technologies.
According to the report, adopting such solutions will not only allow them to respond to the new risks arising from digital solutions, such as online identity fraud and account takeovers, but will also allow them to meet customers’ demand for a seamless onboarding experience.
In April 2019, Experian, a leading information services company, released its 2019 Global Identity and Fraud Report which found that 50% of businesses in APAC had seen an increase in fraud losses over the past 12 months from account originations and account takeovers. 67% of businesses reported an increased concern for fraud losses since 2018.
Similarly, the Jumio report notes that 78% of APAC banks claim that the introduction of real-time payments platforms in their country has resulted in increased fraud losses, with social engineering named by two in five banks as the top form of attack by fraudsters. These figures call for additional identity and authentication technologies, the report says.
UX versus compliance
The need to adopt smart and efficient eKYC solutions is even more critical for virtual banks which operate solely digitally. These solutions allow them to provide customers with a seamless onboarding experience and reduce paper-based procedures and time spent on administration. They can also reduce the costs of and time spent on verification, making it more profitable for organizations, the report says.
Integrating such solutions helps banks differentiate themselves and enables them to tap into different customer segments and markets, and most particularly the unbanked populations.
But while banks and fintechs must ensure that customers have a smooth digital onboarding experience, they must also ensure KYC and AML compliance with local and regional laws, a daunting, expensive and time-consumer task.
APAC is home to over 40 different regulators and varying complex approaches to AML regulation and customer due diligence obligations. This regulatory landscape adds a layer of complexity, the report says.
According to a FICO study dated June 2019, three out of five banks in APAC still do not have full digital account opening for new customers, with 28% citing the region’s changing regulations as the biggest challenge.
By adopting powerful digital identity verification solutions that leverage cutting-edge technologies, fintechs and financial institutions can cut down the costs of onboarding by reducing manual review and lowering customer abandonment. Additionally, these solutions are often accurate and less prone to human errors.
Jumio, a company based in Palo Alto, provides end-to-end online identity verification and authentication solutions that leverages a wide variety of technologies including informed artificial intelligence (AI), optical character recognition (OCR), computer vision, face-based biometrics, automated watchlists and human review, to deliver more robust solutions for digital identity verification, fraud detection, watchlist monitoring, as well as to provide a more fully compliant solution for regional regulators.
Jumio claims its solutions are used by leading companies in the financial services including CIMB Bank Philippines, as well as businesses in the sharing economy, digital currency, retail, travel and online gaming sectors. Jumio has verified more than 225 million identities issued by over 200 countries and territories from real-time web and mobile transactions.