Report Shows Rising Digital Fraud In India; FDP Solutions Critical For Enterprises
The Anatomy of Fraud Report 2023 assesses the fraud landscape, along with its detection and prevention.
The ever-expanding digital landscape brings with it a host of merits, not to mention the risk of online frauds. According to reports, the period of July–December 2021 witnessed almost 130 million fraudulent incidents globally during account logins. This staggering number underscores the criticality of implementing enhanced security measures for fraud detection and prevention—because it's not just financial losses at stake, but also the credibility of businesses.
Taking stock of the growing landscape of digital fraud, Bureau, a no-code platform that assesses the trustworthiness of digital identities, and research and consulting firm Praxis Global Alliance Ltd. have launched the Anatomy of Fraud Report 2023. The report offers a comprehensive analysis of the FDP market, along with its trends and best practices.
The Indian FDP Market
With Covid-19 triggering digital transformation and legacy modernisation, IT spending in the country is expected to reach $160 billion in 2027 from an estimated $104 billion in 2022. The Unified Payments Interface accounted for around 57% of transaction volumes in FY22, followed by debit cards at around 13%.
According to the report, the Indian FDP market is growing at a compound annual growth rate of around 37% and is expected to reach $7.6 billion in 2027, from $1.5 billion in 2022. In the world of fraud, the banking, financial services and insurance sector is considered a gold mine, requiring the maximum protection. The BFSI share in the total FDP addressable market in 2022 was expectedly the most, around 73%, followed by around 24% for e-commerce, which is indicative of the growing digitisation of these sectors and the increasing investments in FDP solutions they warrant.
Keeping pace with advancements in technology, fraud has become more advanced—from voice phishing to artificial intelligence-driven sophisticated and complex attacks. Modern threats such as identity theft, account takeover, distributed denial-of-service, ransomware, keylogger, card-not-present and pharming require advanced and strong authentication processes by FDP players.
The Fraud Landscape
The study found that account-related fraud makes up approximately 65% share in financial services and around 54% share in e-commerce. Among the major challenges in fraud detection were verification of customer journey and balancing fraud prevention with seamless customer experience.
Advances (3,800+), followed by cards/internet (3,500+) witnessed the highest number of frauds in FY22. Although FDP solutions can help identify and mitigate transaction-related fraud, limited access to data points and ever-evolving fraud patterns are some key challenges faced by banks.
UPI is driving the digital payments revolution in India, and new users are getting on board daily. As one would expect, UPI-related fraud constituted approximately 55% of the total digital payment fraud in May 2022, although half of the UPI scams were of low ticket size (less than Rs 10,000). Some of the most common UPI frauds include phishing, malware, vishing, deceptive UPI handles, remote screen monitoring and SIM cloning.
The report also depicts emerging trends in fraud, which include rising vulnerabilities due to digital payments, use of stolen identities in buy-now-pay-later models, web browser frauds, frequent bot attacks and loss during card/UPI payments.
Need Of The Hour
The government of India has introduced key initiatives—including two-factor authentication, Central Fraud Registry and data privacy policies—for enhancing security in the face of rising fraudulent activities, which is also driving the adoption of FDP solutions by enterprises.
Most companies in the BFSI and gaming sectors are developing in-house FDP solutions. Since April 2020, FDP investments are on the rise, and many FDP companies have secured funding from investors. At the same time, large enterprises are acquiring FDP firms to boost their security prowess and expand their portfolio.
Even as FDP players face challenges such as delivering enhanced security with seamless customer experience and lack of quality data, rapid digitalisation and growth in fintech startups will continue to be major drivers for the FDP segment.
Powered by technologies, such as advanced AI, machine learning, biometrics and blockchain, and delivering high fraud detection accuracy, real-time monitoring, and ease of integration, advanced FDP solutions will be critical for enterprises looking to protect their financial and reputational interests.