Build Strategy for Financial Crime Management Solutions Losing Attractiveness Among APAC Financial Institutions

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Build Strategy for Financial Crime Management Solutions Losing Attractiveness Among APAC Financial Institutions

GBG (AIM: GBG), the global experts in digital identity, helping businesses prevent fraud and meet complex compliance requirements, today announced the release of the IDC InfoBrief “Build, Buy or Rent: Evaluating an Effective Strategy to Fight Rising Financial Crime and Fraud in Asia/Pacific.” Financial institutions (FIs) across APAC continue to grapple with financial crime management strategy and investment— to take full ownership and build in-house systems, buy a solution, or utilise managed services from a solution provider. This IDC InfoBrief, commissioned by GBG, is designed as a consultative guide to help financial institutions (FIs) perform due diligence in evaluating critical parameters and triangulate to a decision for their next-generation (next-gen) anti-fraud solution.

GBG has recently commissioned IDC to conduct market research on “Next-Gen Financial Crime Management: APAC Finance, Banking, and Ecommerce” with over 800 respondents across 8 key markets in APAC including Singapore, Malaysia, Indonesia, Vietnam, Thailand, Hong Kong, Australia, and Philippines. The research finds that more than one in four (26 per cent) FIs in APAC is currently using a self-built origination/application fraud management system. However, the preference for internally built anti-fraud solutions is expected to decline, where only 21 per cent is choosing a build strategy to deploy their next-gen origination fraud system.

This downward trend in preference for internally built solutions is also seen for next-gen transaction fraud systems, end-to-end financial crime management platforms, anti-money laundering (AML)/compliance solutions, Know Your Customer (KYC)/identity verification solutions, machine learning/AI, and orchestration solutions.

Dev Dhiman, Managing Director, APAC, GBG said, “Build, buy, or rent is an age-old dilemma that start-ups and established financial institutions contend with. This conundrum has come under even more debate with the pandemic accelerating digitalisation and transforming fraud risk management processes. We are now in an era of smart technology and hyperconnectivity, which enables fraud and financial crime to escalate in complexity and sophistication. As access to technology gets democratised and time spent on mobile devices increases, fraudsters can more easily harness innovative and orchestrated tactics to compromise consumers and organisations.”

“Financial institutions need to carefully consider their financial crime management investment strategy. Fundamentally, their approach needs to be sustainable in terms of IT resourcing, quickly scalable to grow new channels and business models, have the longevity in managing the complexities in existing and emerging fraud typologies, and provide a balance to better customer experience,” continues Dhiman.

Amongst FIs that have deployed built solutions in APAC, 85 per cent reported that they would replace systems they have built within three years — with one in four indicating a replacement every 12 months. Financial crime solutions typically require about three months to establish a rhythm in fraud detection and prevention after deployment is completed. Organisations would usually continue to expand fraud prevention to more services or channels, optimise effectiveness in fraud detection accuracy, and minimise customer friction. For systems that utilise machine learning, there is continuous need to train and retrain models to detect new fraud typologies. By having to restart the setting up of a core system regularly would create gaps in effective fraud management.

Michael Araneta, Associate Vice-President, IDC Financial Insights said, “Financial institutions now operate on rapidly digitalising consumer markets, and they are facing new risks in financial crimes and fraud. Their response must be new, ultimately enabling them to respond fast and effectively to limit adverse impact to both the institution and the customer. To attain this speed and effectiveness, they will need to pool together a set of technology solutions, skills, and intelligence — and all of them from trusted technology partners. The choice to build, buy, or rent these solutions is up to the bank based on its business, but the effort should be more intense than ever, to effectively tackle modern day financial crimes.”

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