Fraud has always been a battle, if not a mortal enemy, of the Finance function, as one wrong move or decision can cripple the organisation's operations and finances.
That is why it is only customary that chief finance officers and finance leaders have mastered how to get around risks, handling the evolving landscape of fraud and payments to always be prepared amid emerging technologies and shifting regulatory demands.
Ben Wong, general manager for Southeast Asia & Hong Kong at financial technology platform Adyen, believes that with the vast amount of payments data available, businesses have an untapped opportunity to leverage artificial intelligence and machine learning to combat increasingly sophisticated fraud.
Major changes
Over the past 12 months, Wong observes that the payments industry is undergoing a silent but sure change.
"For one, the rise of the platform economy makes such SaaS providers an integral part of the ecosystem – so much so that they are now going beyond their core offerings to bridge merchants with payment innovation," Wong says.
He believes these businesses are acknowledging the value of embedding payments, as a means to diversify revenue streams and provide customised solutions to meet their users' evolving needs.
"At the same time, contactless payments and e-wallets have continued to pick up pace in the region. Thirty-one percent of consumers in Singapore say they never carry a wallet on them anymore and instead rely on mobile payments."
He notes that new ways of paying are now emerging, including frictionless payment methods that enhance speed and convenience, and leverage biometric authentication.
The flip side, according to Wong, is that such developments are leading to more sophisticated fraud techniques as fraudsters come up with new ways to exploit loopholes in the payments ecosystem.
"For instance, card-not-present fraud, usually more common online, has seeped into the physical domain in the advent of more convenient ways of paying in store."
Wong says the payments landscape does not operate in isolation, as it is deeply interconnected with broader economic forces, industry shifts, and evolving business needs.
"In today’s macroeconomic climate, finance leaders are under mounting pressure to optimise costs, making every operational decision strategic."
Ben Wong, general manager for Southeast Asia & Hong Kong, Adyen
"Payments have long been recognised as an area for efficiency gains, with many finance leaders tracking payments costs as a KPI," he says. "However, forward-thinking leaders are now going beyond cost cutting to explore how payments can be a competitive advantage in terms of driving revenue and business growth, and enhancing customer experiences."
The changes in the payments landscape requires finance leaders to strike a balance between maximising revenue, optimising costs, and mitigating fraud risks.
According to Wong, payments must now be seen as a conversion and revenue driver, which means ensuring that as many legitimate transactions as possible are successfully processed while being secure to protect revenue and foster consumer trust, and simultaneously ensuring that these security measures do not impact user experience.
Digital transformation in finance
With the technological advancements coming in left and right, Wong observes that finance professionals are starting to recognise payments as an opportunity to optimise business performance, rather than a commodity.
"Many are looking to boost revenue and improve long-term business performance through meaningful technology integration. In Singapore, 21% of businesses are investing in financial technology to understand where revenue can be made from greater efficiency."
He explains that a key area of progress is the streamlining of the payments process.
"The average business has more than 10 intermediaries processing their payments, leading to higher costs. More businesses are starting to reduce reliance on multiple intermediaries to optimise costs, performance, and efficiency."
Additionally, Wong notes that large enterprises and global retailers are connecting their backend payment systems, enabling seamless transactions across both online and offline channels, and even countries as businesses expand worldwide.
"Businesses also benefit from a single source of data on their consumers, resulting in deep consumer understanding that enables the use of data-driven insights to drive sales and revenue growth."
Dealing with fraud
Wong says payments integration across different sales channels gives businesses a transparent and unified view of consumers and their usual spending patterns, as this makes it easier for businesses to identify anomalies in purchasing behaviours and spending patterns and assess the legitimacy of transactions to determine the best approach to fraud management without compromising sales.
"Adyen’s single platform solution, for example, detects fraud trends by linking transactions across a global network of first-party payments data," he notes.
"Today, this approach is bolstered by AI and machine learning. Traditional risk management processes are rules-driven, where teams configure risk rules that would decline certain transactions deemed risky. Such processes are labour intensive, especially for global businesses that process millions of dollars of transactions daily."
Wong believes that by training machine learning models on curated historical data, providers like Adyen enable precise predictions to determine the best route for maximising conversion, minimising costs, and managing fraud, unlike traditional risk management processes.
In his observation, as of January, refund fraud, card testing, and phishing were among the most common types of payment fraud faced in Singapore. Advanced fraud techniques with the use of technology like AI makes attempts difficult to detect. That is why finance leaders must take action to ensure business protection and survival.
He adds that finance leaders must also adapt to evolving consumer demands for faster and more convenient retail experiences.
"For example, there’s a rule of thumb at fast food and quick-serve restaurants that reducing wait times by seven seconds can boost market share by one per cent, while other evolving trends like the preference for ordering ahead and picking up later to cashier-free stores reflect opportunities to surpass these consumer expectations to drive conversion and sales."
Recommendations
Wong admits that risk management is laborious, especially for bigger companies. Greater transactional volumes bring more fraudulent attacks, and even with a risk team, risk management is still manpower intensive.
"Harnessing AI and machine learning with the support of payment partners will help simplify fraud management, improve fraud detection and automate decision-making in the business’ favour while freeing resources to focus on other strategic priorities."
He concedes that fraud is always evolving, and with AI and machine learning systems relying on existing data, finance leaders must work with partners that consistently update their models to help optimise payments performance according to the latest trends, and that constantly test and execute different strategies simultaneously. Otherwise, risking less optimal results.
"Ultimately, businesses will not only combat fraud more efficiently but also experience an uplift of their payment conversion rates."
