Five predictions that will shape the online fraud landscape in 2016

The ever-growing risk of online fraud is a major concern today, for both online merchants and their customers, though retailers have taken increased precautions to heighten security. This is particularly true for the financial-services industry, which will face unique challenges in 2016. According to the latest KPMG Cybercrime Survey Report, nearly 72 per cent of Indian companies faced cyber-attacks in 2015. Emphasizing the current cybercrime scenario in India, the report shows that 74 per cent respondents believe that the banking and financial services sector is a top target for cybercrime, with about 63 per cent indicating that these crimes more often than not amount to gross financial loss.

As technology advances, so has its capability to detect online fraud and cybercrimes before they actually occur. Technology will continue to change the battlefield for fraud in 2016, creating brand new challenges, but also providing companies with new opportunities to combat fraud and be customer champions while doing so.

Below are five predictions on what will shape the fraud landscape, and the fight to prevent and detect fraud in 2016.

#1: Social networks will help fraudsters get more sophisticated

Fraudsters are constantly deploying advanced tactics to attain personal information online. A 2014 Deloitte India study  found that 80 per cent of users were concerned about privacy issues on social networking sites, yet almost 60 per cent of them were unaware of what their own account’s privacy settings were. According to the latest Internet Security Threat Report (ISTR) by Symantec, India is ranked No.2 globally in social media scams, just behind the United States.

In 2016, as major social networks become more easily accessible, fraudsters will take full advantage of these capabilities to reach their victims.  By closely examining an individual's status, photos, friends, check-ins and location data – all of which can be easily searched anonymously today- it's getting easier for fraudsters to create more sophisticated social engineering attacks that trick people into revealing additional information.

The coming year is sure to see a level of automation and scale to these attacks that will continue to surprise us all. For consumers, avoiding these attacks means following simple consumer safety tips: Make your social profiles visible to only friends and family; use strong passwords, change them often; and report phishing attempts.

#2: More fraud will move to mobile.

Fraudsters follow the money. The Indian e-commerce industry is likely to be worth USD 38 billion by 2016, according to industry body ASSOCHAM,  ASSOCHAM also revealed, that roughly 60-65 per cent of the total e-commerce sales in India are being generated by mobile devices and tablets. As mobile shopping continues to gain popularity with consumers, fraudsters will be sure to up their mobile targets in 2016.

Success in fighting fraud on the mobile platform will depend on how we make innovative use of the unique data and capabilities that the mobile platform creates – from location information to unique IDs. There is opportunity to not only fight fraud well on mobile, but also enable user experiences that are intuitive and easy. For instance, the use of fingerprint sensors in mobile devices is making it easier and more secure for people to authenticate. There will be increased need to focus on innovation and invest in next-gen infrastructure and payment platforms and services. Companies like PayPal believe in extensive collaboration across the industry, businesses and consumers—not just within the walls of its own payments platform- and works with developers, businesses and consumers to improve security standards online and on mobile.

#3: Financial companies need to do more with less.

2015 witnessed a huge transformation in the payments and personal finance space due to the massive growth of financial technology (FinTech) companies in India. As of today, there are over 750 FinTech companies in the country, of which a 174 were launched in 2015 itself, according to Traxcn - a data-driven research platform for private market investors.

Continuous changes in technology will force companies to do more, but with less data. Today, customers can walk into a store with a mobile phone, and tap it to buy an item. Frequently (especially with NFC-equipped devices), the transaction is tokenized, meaning the merchant doesn't receive any financial or personal information. So instead of knowing customers, merchants find themselves selling to anonymous "guests." As a result, financial companies will need to find unique ways to do more to verify a customers' identity with less information about them.

#4: Advanced machine learning combined with human detectives is the need of the hour

According to a joint report by ASSOCHAM and PwC, around 65 per cent of the total fraud cases reported by banks were technology-related. Just as fraudsters take advantage of new technology, the most important tools we'll see used in 2016 to fight fraud are improvements in technology. However, human intelligence and understanding how your customers interact with your services will remain key to leverage the technology.

In the report "Top 10 Strategic Technology Trends for 2016," Gartner identified Advanced Machine Learning as one technology that will impact organizations' long-term plans, programs and initiatives. According to Gartner, "the explosion of data sources and complexity of information makes manual classification and analysis infeasible and uneconomic." Analytical tools such as advanced machine learning will become even more crucial in predicting and preventing fraud, with companies like PayPal able to sift through enormous amounts of data rapidly to spot the patterns and markers of fraud. Even with all this technology, humans are integral in stopping fraud. Techniques like machine learning depend on analyzing the right data with the right parameters, and only humans can make those determinations.

#5: Data and advanced analytics will play a larger role in regulatory and compliance efforts.

As today’s digital economy grows, threats and costs are increasing in tandem with various opportunities. According to The Global State of Information Security Survey 2016 conducted by PwC, CIO and CSO, security is the least discussed topic in Indian boardrooms, while across the globe, security has already become a board level agenda. In 2016, private enterprises and government regulators will need to increase discussions about what can and can't be done with big data and unstructured data.

This year, the use of data and advanced analytics will remain crucial in fighting fraud and cybercrime, and also play a larger role in areas key to payments, like anti-money laundering efforts. India is already receptive to this critical role. Stronger collaboration with regulators, along with greater usage of data, will ensure an effective and scalable approach to meeting regulatory and compliance requirements, while enabling a fantastic customer experience that companies can be proud of. For instance, the ability to use existing transaction data to meet "know your customer" requirements will help improve accuracy and eliminate the need for customers to separately upload information like driver's licenses and bank statements.