Singapore/Sydney, Australia – 13 December 2024 – According to a 31 October 2024 report by global strategic insights practice Canvas8, Australia is in the midst of a growing online fraud epidemic, with reports indicating that cybercrime is affecting people from all walks of life. The report, Can payment friction combat Australia’s online fraud?, was authored by Nikki Natividad and features expert comment from finance and property journalist Sarah Megginson and Courtenay Walker, the head of advice at Australian financial advisory firm Fox & Hare.
Canvas8’s report notes that the latest figures from PayPal’s research reveal that a staggering 97% of Australians have been targeted by online scams, with 93% expressing concern about the rising threat. Despite efforts to bolster cybersecurity, 2023 saw Australians lose over $2.7 billion to fraud, with investment and remote access scams topping the list of the costliest crimes. The elderly and those from culturally and linguistically diverse (CALD) communities are among the most vulnerable groups, but even younger, tech-savvy Australians aren’t immune.
As scams become more sophisticated, many experts believe it may be time to introduce a strategy that’s been largely absent in the digital age—payment friction.
Financial institutions in Australia have long competed to provide seamless, frictionless experiences for their customers, aiming to make online transactions as fast and effortless as possible. But with fraud and scams on the rise, experts suggest that it might be time to dial back the pace of online transactions and reintroduce friction into the system.
Sarah Megginson, a personal finance expert and Head of Editorial at Finder, suggests that reintroducing friction could help protect customers by providing them more time to reflect on their transactions. “The huge advantage people have when trying to pull off a scam is pace and urgency. They’re trying to make you do something really fast,” Megginson explains. “That sense of urgency can overtake anyone.” Reintroducing ‘helpful’ friction into payment systems would slow down transactions, providing individuals more time to assess whether they are being scammed.
Courtenay Walker, Head of Advice at financial advisory Fox & Hare, agrees that this approach could make a significant difference in reducing fraud. “I think if you were to ask anyone, ‘would you be willing to have a more annoying transaction process to ensure you’re not losing money?’ no one’s going to say no to that,” Walker says. This incremental approach to adding friction, she adds, would allow banks to test and adjust systems to ensure they don’t frustrate customers while providing an extra layer of protection.
Cybersecurity experts are also concerned about the increasing sophistication of fraud, particularly as generative AI tools make it easier for scammers to impersonate legitimate organizations. “We are now at a point when deepfake videos can be created in a matter of minutes,” says Megginson. “It used to take weeks or months to really put it together in a meaningful and convincing way. We’re now at a point where there’s technology there to create a video within minutes, and it can be quite convincing.”
AI, which was once a tool used solely by financial institutions to enhance customer service, is now being harnessed by fraudsters to create realistic-looking websites, emails, and even videos. “Scammers and fraudsters are getting more clever than they were 20 years ago,” says Walker. “Whether you’re the most or least intelligent person in the world, I don’t think that matters.”
The rapid growth of AI technology has raised concerns that online scams will only become more widespread. As generative AI enables fraudsters to create increasingly convincing content, the traditional defences against fraud are becoming less effective. To counter this, banks and financial institutions are exploring how AI can be used for proactive cybersecurity measures, such as real-time fraud detection and automated incident responses.
In response to this growing threat, Australian financial institutions have begun to take action. The Scam-Safe Accord, a collaboration between Australian banks, aims to reduce the risk of scams through improved fraud intelligence, biometric verification, and payment delay measures. These measures are designed to introduce just the right amount of friction to prevent scammers from capitalizing on the speed of transactions.
Banks like Westpac are already testing innovative solutions like the ‘Westpac Verify’ system, which pauses suspicious payments to allow customers to review transactions. “We need to find the ways to go fast in some areas but a bit slower in others, to make sure that the customers are kept safe,” said Commonwealth Bank Group Executive Angus Sullivan. This sentiment is shared by many industry leaders, as the right balance between speed and security becomes crucial in the fight against online fraud.
While these measures are a step in the right direction, the onus is not just on financial institutions. It is also up to individual Australians to take steps to protect themselves, such as using complex passwords, enabling two-factor authentication, and avoiding suspicious links. But as Megginson notes, “I’m hesitant these days to put my information on an online booking portal or even for a booking at a restaurant,” reflecting the heightened sense of caution among Australians.
The fight against online fraud requires a concerted effort from banks, governments, and businesses alike. In addition to strengthening technological defences, there needs to be a broader national effort to tackle fraud from all angles. “It is important for every business that deals with finance to have the most robust scam and fraud policies,” says Megginson. Governments can also play a key role, as evidenced by South Korea’s successful use of a government-standard digital identity system to combat e-commerce fraud.
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Nick Morris, UK-based founder and Managing Director of Canvas8, said, “As Australia grapples with an increasingly sophisticated and fast-evolving cybercrime landscape, the balance between convenience and security will be a critical factor in determining whether the country can reduce online fraud. As financial institutions experiment with adding friction to payment systems, one thing is clear: the fight against scams will require both innovative technology and an ongoing commitment to safeguarding the nation’s finances.”
Can payment friction combat Australia’s online fraud? may be downloaded here for a limited 2-week period:Singapore/Sydney, Australia – 13 December 2024 – According to a 31 October 2024 report by global strategic insights practice Canvas8, Australia is in the midst of a growing online fraud epidemic, with reports indicating that cybercrime is affecting people from all walks of life. The report, Can payment friction combat Australia’s online fraud?, was authored by Nikki Natividad and features expert comment from finance and property journalist Sarah Megginson and Courtenay Walker, the head of advice at Australian financial advisory firm Fox & Hare.
Canvas8’s report notes that the latest figures from PayPal’s research reveal that a staggering 97% of Australians have been targeted by online scams, with 93% expressing concern about the rising threat. Despite efforts to bolster cybersecurity, 2023 saw Australians lose over $2.7 billion to fraud, with investment and remote access scams topping the list of the costliest crimes. The elderly and those from culturally and linguistically diverse (CALD) communities are among the most vulnerable groups, but even younger, tech-savvy Australians aren’t immune.
As scams become more sophisticated, many experts believe it may be time to introduce a strategy that’s been largely absent in the digital age—payment friction.
Financial institutions in Australia have long competed to provide seamless, frictionless experiences for their customers, aiming to make online transactions as fast and effortless as possible. But with fraud and scams on the rise, experts suggest that it might be time to dial back the pace of online transactions and reintroduce friction into the system.
Sarah Megginson, a personal finance expert and Head of Editorial at Finder, suggests that reintroducing friction could help protect customers by providing them more time to reflect on their transactions. “The huge advantage people have when trying to pull off a scam is pace and urgency. They’re trying to make you do something really fast,” Megginson explains. “That sense of urgency can overtake anyone.” Reintroducing ‘helpful’ friction into payment systems would slow down transactions, providing individuals more time to assess whether they are being scammed.
Courtenay Walker, Head of Advice at financial advisory Fox & Hare, agrees that this approach could make a significant difference in reducing fraud. “I think if you were to ask anyone, ‘would you be willing to have a more annoying transaction process to ensure you’re not losing money?’ no one’s going to say no to that,” Walker says. This incremental approach to adding friction, she adds, would allow banks to test and adjust systems to ensure they don’t frustrate customers while providing an extra layer of protection.
Cybersecurity experts are also concerned about the increasing sophistication of fraud, particularly as generative AI tools make it easier for scammers to impersonate legitimate organizations. “We are now at a point when deepfake videos can be created in a matter of minutes,” says Megginson. “It used to take weeks or months to really put it together in a meaningful and convincing way. We’re now at a point where there’s technology there to create a video within minutes, and it can be quite convincing.”
AI, which was once a tool used solely by financial institutions to enhance customer service, is now being harnessed by fraudsters to create realistic-looking websites, emails, and even videos. “Scammers and fraudsters are getting more clever than they were 20 years ago,” says Walker. “Whether you’re the most or least intelligent person in the world, I don’t think that matters.”
The rapid growth of AI technology has raised concerns that online scams will only become more widespread. As generative AI enables fraudsters to create increasingly convincing content, the traditional defences against fraud are becoming less effective. To counter this, banks and financial institutions are exploring how AI can be used for proactive cybersecurity measures, such as real-time fraud detection and automated incident responses.
In response to this growing threat, Australian financial institutions have begun to take action. The Scam-Safe Accord, a collaboration between Australian banks, aims to reduce the risk of scams through improved fraud intelligence, biometric verification, and payment delay measures. These measures are designed to introduce just the right amount of friction to prevent scammers from capitalizing on the speed of transactions.
Banks like Westpac are already testing innovative solutions like the ‘Westpac Verify’ system, which pauses suspicious payments to allow customers to review transactions. “We need to find the ways to go fast in some areas but a bit slower in others, to make sure that the customers are kept safe,” said Commonwealth Bank Group Executive Angus Sullivan. This sentiment is shared by many industry leaders, as the right balance between speed and security becomes crucial in the fight against online fraud.
While these measures are a step in the right direction, the onus is not just on financial institutions. It is also up to individual Australians to take steps to protect themselves, such as using complex passwords, enabling two-factor authentication, and avoiding suspicious links. But as Megginson notes, “I’m hesitant these days to put my information on an online booking portal or even for a booking at a restaurant,” reflecting the heightened sense of caution among Australians.
The fight against online fraud requires a concerted effort from banks, governments, and businesses alike. In addition to strengthening technological defences, there needs to be a broader national effort to tackle fraud from all angles. “It is important for every business that deals with finance to have the most robust scam and fraud policies,” says Megginson. Governments can also play a key role, as evidenced by South Korea’s successful use of a government-standard digital identity system to combat e-commerce fraud.
Nick Morris, UK-based founder and Managing Director of Canvas8, said, “As Australia grapples with an increasingly sophisticated and fast-evolving cybercrime landscape, the balance between convenience and security will be a critical factor in determining whether the country can reduce online fraud. As financial institutions experiment with adding friction to payment systems, one thing is clear: the fight against scams will require both innovative technology and an ongoing commitment to safeguarding the nation’s finances.”
Can payment friction combat Australia’s online fraud? may be downloaded here for a limited 2-week period:
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