As virtual banks continue to proliferate throughout the globe, financial services are available to more people in more locations than ever before–however, online payments and identity verification company Jumio has also identified a unique set of risks associated with the proliferation of these platforms–particularly in the Asia-Pacific (APAC) region.
In a report entitled “eKYC is Streamlining Digital Banking: An Asia-Pacific Perspective,” Jumio described the ways in which companies operating in the financial services industry must adapt to the changing world of online banking with digital anti-money laundering (AML) and know-your-customer (eKYC) practices.
Learn more about the current state of digital banking in Asia-Pacific and the best approach to online identity verification for eKYC: https://t.co/bEgh0ooJR7 #APAC #digitalbanking #eKYC #AsiaPacific pic.twitter.com/TfVuZRnXDh
— Jumio (@jumio) March 12, 2020
Jumio claims that adopting appropriate solutions will allow these companies to adequately respond to the new set of risks that have arisen from a global shift toward digitization in financial services–namely, online identity fraud and account takeovers. The report also argues that adopting these solutions will improve customers’ onboarding experience.
An increase in online banking has brought a new set of security risks
There has been cause for concern surrounding online financial services in APAC in the past.
Jumio found that 78% of APAC banks claim that the introduction of real-time payment platforms in their home countries has resulted in an increase in fraud-related losses. Scams that involve malicious social engineering were named by two in five banks as the most prevalent form of attack.
An increase in fraud related to virtual banking was also noted by information services firm Experian. In its 2019 Global Identity and Fraud Report, the company found that 50% of businesses in APAC had seen an increase in fraud losses over the past 12 months from related to identity theft and account takeovers. The report also found that 67% of businesses reported an increased concern for fraud losses since 2018.
This may be particularly relevant to the APAC region because of its particularly strong shift toward online banking compared to some other areas of the world.
In July of 2019, S&P Global reported that the growth of online banking might be due to its ability to solve a two-pronged problem.
Indeed, on the one hand, online banking does well to serve underbanked populations, which are “primarily a factor in emerging markets.” There are several emerging markets n the APAC region. “Virtual banking facilitates the introduction of simple banking products through accessible means other than branches,” the publication says.
Virtual banking also “[serves] the overbanked,” which is “primarily a driver in developed markets,” where virtual banking mainly seeks to provide customers with greater banking convenience at a lower cost.”
On the other hand, a FICO study dated June 2019 found that three out of five banks in APAC still do not have full digital account opening for new customers; 28% of the respondent banks cited the region’s changing regulations as the biggest challenge.
Indeed, with over 40 regulators in the financial sector, Jumio says that navigating the setup and operation of virtual banking services in the APAC region is a challenge.