The Rise of Virtual Banks in Asia is Posing New Cybersecurity & Fraud Risks.

April 14, 2020

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 un-banked and traditionally 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.

 

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.

 
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.

 

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.

 

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