Study: 1 in 6 Indonesians to leave bank for competitor if fraud response lacks

One in six Indonesian consumers will leave for a competitor if unsatisfied with their bank’s fraud management response, said a recent report by FICO. According to the report, Indonesia boasting roughly 135 million banking customers, so this still represents a churn of roughly 21 million people which delivers an opportunity for institutions that can best manage the problem. Currently, 13% of Indonesian consumers think banks could do more to protect them. Around 34% of Indonesians are most concerned about account takeover (ATO) fraud, followed by identity theft (29%).

All of these findings comes on the back of the pandemic, where 67% of consumers say they will continue to do all their banking online. Indonesia also reported a higher rate of fraud than most markets in the survey.

In Indonesia, 47% of survey respondents say they have reported actual or suspected fraud or scams to their banks, which is higher than the global average of 41%.

Despite this, most customers in Indonesia (85%) say their banks do enough to keep their money safe. Just 13% think banks could do more, but this still equates to a potential of more than 17 million customers holding negative perceptions. When it comes to convenience, 44% of customers in Indonesia are most irritated by transaction alerts for fraud that are late or never arrive. A further 29% of customers dislike banks changing the methods used to authenticate customers.

“The uptick in adoption of digital payment modes not only expands the fraud attack surface but makes for a more complex set of customer experience concerns,” explains CK Leo, FICO’s lead for fraud, security and financial crime in Asia Pacific. “This pits the need for superior fraud management against the desire for easier customer communication, authentication, and verification preferences.”

The survey also demonstrated there is a correlation between the perceived effectiveness of a security method and people’s preference for using it. When it comes to payment verification, 37% of customers prefer text messages, despite security risks such as SIM swap scams. A further 22% would rather use email while just 18% prefer to use their bank’s app.

Another 15% are ready to move to a third-party messaging app. In fact, Indonesian consumers are more than twice as likely than the rest of the global survey group to prefer third-party messaging apps for payment verification.

With the diverse range of preferences across digital and traditional channels among customers in Indonesia, banks will need to cater to a variety of preferences while still encouraging customers to adopt the safest and most secure communication channels.

“People develop a sense of trust and comfort around a way of doing things, especially if it has protected them from scams so far,” said Leo. “As a result, it takes a while for customers to develop confidence in new security methods even if they are better. Banks need to remain flexible but find ways to show new channels are trustworthy, effective and more convenient.”

Biggest threats

The survey of a dozen countries revealed that Indonesian customers were most concerned about account take over fraud (34%), followed by identity theft (29%). However, only 23% of customers have experienced ATO fraud, so the percentage of customers concerned about account take over fraud significantly exceeds those that have experienced it.

At the same time, there are other emerging scams that Indonesians may not be paying enough attention to.

The study highlighted that just 17% of Indonesian customers are most concerned with card fraud, despite more than 70% of internet credit card transactions attempted in Indonesia being fraudulent. In addition, although more than half (54%) of customers in Indonesia plan to use real-time payments more in the coming year, only 10% are most concerned with being tricked into sending a real-time payment to a fraudster - a type of crime known as authorised push payment (APP) fraud.

“APP fraud is becoming a bigger problem in Indonesia as we see a boom in the use of real-time payments,” said CK Leo, FICO’s lead for fraud, security and financial crime in Asia Pacific. 

 “Protecting real-time payments requires analytics that look for changes in customer behavior such as using accounts or devices outside of their usual habits, as well as standard anomalies such as time-of-day or frequency of a transfer. FICO has found that the use of targeted profiling of customer behavior to spot scams has yielded some impressive results with 50% more scam transactions detected.”

The survey was conducted in September 2021 by an independent research company adhering to research industry standards. 1,001 Indonesian adults were surveyed, along with 11,027 other consumers in Brazil, Canada, Chile, Colombia, Germany, India, Mexico, South Africa, Thailand, U.K. and U.S.