Australian FIs are seeking more robust crime management solutions, report finds

Nearly all (90%) Australian financial institutions (FIs) are planning to replace financial crime management solutions built in-house within the next three years, according to a new IDC InfoBrief commissioned by GBG.

FIs across APAC are continuing to grapple with financial crime management strategy and investment to take full ownership and build in-house systems, buy a solution, or utilise managed services from a solution provider.

The research finds that more than one in four (26%) FIs in APAC is currently using a self-built origination/application fraud management system.

However, the preference for internally built anti-fraud solutions is expected to decline, where only 21% is choosing a build strategy to deploy their next-gen origination fraud system.

More than one in five (22%) Australian banking and financial services institutions and eCommerce providers reported using in-house built origination/application fraud management systems, the report finds.

A further 21% are considering building their own next-gen origination fraud system, representing a decline of just 1% as compared to the rest of APAC, which showed a more significant downward trend.

The decline in APAC in preference for self-built solutions is also seen for next-gen transaction fraud systems, end-to-end financial crime management platforms, anti-money laundering (AML)/compliance solutions, Know Your Customer (KYC)/identity verification solutions, machine learning/AI, and orchestration solutions.

In addition, the report finds that 88% of Australian FIs are replacing a solution that is self-built within the next three years.

About one in five are replacing their solutions every 12 months (22%) or every two years (18%), and almost half (48%) are replacing their in-built solution every three years.

GBG regional manager for Australia and New Zealand, Carol Chris, says, "In Australia, the past 18 months has seen record numbers of scams and fraud instances as scammers capitalise on this era of hyperconnectivity, with financial crimes escalating in complexity and sophistication.

"Building an anti-fraud system requires huge number of resources but the biggest challenge remains to be the upkeep of the system.

"A good financial crime management system needs to continuously meet regulatory requirements, prevent emerging and increasingly innovative fraud typologies, and deliver a high standard of fraud detection accuracy to avoid penalising legitimate customers.

IDC Financial Insights associate vice-president Michael Araneta says, "Financial institutions now operate on rapidly digitalising consumer markets, and they are facing new risks in financial crimes and fraud.

"Their response must be new, ultimately enabling them to respond fast and effectively to limit adverse impact to both the institution and the customer.

"To attain this speed and effectiveness, they will need to pool together a set of technology solutions, skills, and intelligence and all of them from trusted technology partners.

"The choice to build, buy, or rent these solutions is up to the bank based on its business, but the effort should be more intense than ever, to effectively tackle modern day financial crimes.