Trust is an asset, but with the huge rise in fraud it is depreciating fast

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ITEM: The severity of digital fraud in Asia-Pacific is not only bad, but it’s also getting worse as adoption of digital services increases. What’s worse – that’s having a negative effect on consumer trust, especially for telcos. And they may not even know it.

That’s according to the ‘Digital Trust Index’, part of the Fraud Management Insights 2017 report recently released by Experian and IDC. The index aims to measure trust between customers and organizations via a selection of criteria across industries and countries to determine the level of trust consumers have for digital services. The index is based on four key variables including the levels of digital adoption, industry preferences and fraud rates, and the effectiveness of companies’ fraud management capabilities. A higher score indicates that consumers are satisfied with their digital transaction experience, while a lower score indicates a failure in trust.

In APAC, the scores are not particularly good. On average, trust in digital services is relatively low across the region, which scored just 3.2 out of 10.0 on the index. The breakdown by country shows that New Zealand, Japan and Australia have the highest consumer trust scores (albeit not all that high), while Indonesia is dead last.

 * Based on the average of all DTI scores across the three sectors: Financial Services, Telcos and Retail. The figures are rounded off to the nearest decimal

When you break it down by sector, financial services scored the highest at 4.9 out of 10.0, while telcos had the worst score at 2.1.

One interesting twist to the scores is that they are partly the product of customer expectations. For example, for readers who may be surprised to see countries like Singapore and Hong Kong near the bottom of the list, Experian explains that despite both countries having advanced fraud management systems in place, their customers are generally not impressed because of a low tolerance for fraud and dissatisfaction with the post-fraud management experience. From the release:

This low tolerance to fraud is mirrored in many advanced economies, while there is a greater acceptance of it in countries where fraud incidents are the most prevalent. Retail, particularly e-commerce, tend to do better in this aspect, due to their focus on the post-fraud customer experience and their ability to quickly address issues arising from fraud.

Put another way, there’s a significant gap between the confidence that surveyed companies expressed in their ability to combat fraud (and help customers when fraud occurs) and what consumers are actually experiencing, said Ben Elliott, CEO of Experian Asia Pacific.

“The relatively low Digital Trust Index score of 3.2 out of 10 across the region indicates that there is a divide between how businesses think they manage fraudulent digital transactions and the actual customer experience when fraud does occur,” he said.

Obviously, this already matters today, and will matter even more as digital services become more prevalent and central to just about every aspect of life. Even now, fraud is a regular occurrence – according to the Digital Trust Index, one in five people across APAC have encountered fraud directly, while one in three people or their loved ones have been affected by fraud in some way. That’s only going to get worse unless service providers start taking digital fraud more seriously and take steps to strengthen trust between themselves and their customers.

The starting point, according to the report, lies in three key gaps that service providers need to address:

1. The steep rise in digital transaction volumes: Getting to grips with the increase in scale requires leveraging smart investments in infrastructure to process these transactions (and tools to manage expanding volumes) while ensuring optimal standards of security, availability and reliability of their digital services. Automation is also a must.
2. The race for convenience: While service providers understandably want to deliver a seamless and convenient customer experience, delivering that will come at the expense of effective fraud management if you’re not careful. Service providers need to strike the right balance between fraud management and making online transactions as frictionless as possible.
3. Fraud never sleeps: Like everything else bad online, fraud is an arms race with a wide variety of threats that are constantly evolving, while new threats pop up frequently (and quickly). That means service providers will need to future-proof their fraud detection capabilities – which, Experian says, means breaking down data silos within organizations and better utilizing analytics to get a single view of the ecosystem and their customers.

NOTE: The Digital Trust Index surveyed 3,200 consumers and over 80 organizations from the financial services, telco and retail sectors (collectively referred to as service providers), each with revenues of at least $10 million. The index covers ten markets across APAC: Australia, China, Hong Kong, India, Indonesia, Japan, New Zealand, Singapore, Thailand and Vietnam.

This article was first published on Disruptive.Asia.

Tags: featured, fraud, Trust