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Online fraud has increased for 42% of UAE organisations year-on-year

For the first time in EMEA, digital channels account for more fraud losses than physical channels

In the UAE, 42 per cent of companies reported an increase in fraud, a recent survey has shown.

The LexisNexis True Cost of Fraud™ Study – Europe, Middle East and Africa revealed that UAE organisations incurred an average cost of Dh4.19 (Dh3.62 for retailers and Dh4.99 for financial institutions) for every dirham lost to fraud. These costs encompass financial losses due to fraud, as well as internal labor expenses, external costs, interest and fees, along with the expenses associated with replacing or redistributing lost or stolen merchandise.

LexisNexis Risk Solutions has unveiled the findings of its 2023 The annual report, based on a commissioned survey conducted by Forrester Consulting, reveals that businesses in Europe, the Middle East and Africa (EMEA) now bear a cost of fraud that is 3.90 times the face value lost in fraudulent transactions.

While rapid adoption of digital payments not only improves payment experiences, it also exposes numerous systems and channels to more innovative fraud attacks. Across EMEA, digital channels account for 52 per cent of overall fraud losses, surpassing physical fraud for the first time. Consequently, cybercriminals exploit the anonymity of digital, cross-border transactions to execute fast and untraceable fraud. Additionally, the rise of scams and the use of technology, such as artificial intelligence (AI), expands cybercriminals’ ability to exploit both consumers and businesses.

The study also reflects the evolution of criminal tactics. More than half (52 per cent) of businesses in EMEA identify the rise of synthetic identities as the primary challenge in customer identity verification. Fraud remains a widespread problem for businesses, exerting pressure not only on financial resources but also impacting overall operational efficiency, customer trust and reputation.

“It is self-evident that new forms of fraud increase the risk of financial losses for consumers and businesses,” said Jason Lane-Sellers, director, fraud and identity, EMEA at LexisNexis Risk Solutions. “The issues facing businesses become even more challenging due to the fraud multiplier effect, where the losses experienced by organisations continue to increase and far exceed the lost face value in any transaction. Preventing fraud requires a multi-layered approach throughout the customer journey.”

Key findings

Commercial Impact: Fraud significantly affects how customers perceive and interact with businesses. Ninety-two per cent of UAE respondents report that fraud has influenced customer satisfaction compared to 75 per cent across EMEA. Ninety-six per cent notice its impact on customer conversion, higher than the 71 per cent recorded in EMEA. These findings demonstrate that the UAE has a particular sensitivity to customer experience. Any impact of fraud or fraud prevention techniques can affect customer satisfaction and lead to broader impacts on companies’ bottom line, so balancing prevention with appropriate customer experience controls is essential.

Evolving Fraud Management Practices: Criminals constantly innovate. This dynamic nature of criminal behavior means that fraud and its associated costs are not static threats that businesses can simply diminish. For instance, new payment methods provide fraudsters with opportunities to exploit vulnerabilities in the retail sector. Financial institutions are realising increasing trends in identity theft, scams and digital wallet fraud.

Moving Forward: Given the rising threat of fraud and cybersecurity risks, organisations should embrace forward-thinking fraud management and authentication solutions. This involves leveraging the capabilities of technologies such as AI, machine learning, and biometric and behavior-based authentication methods.

The report was based on a survey of 1,845 global fraud management decision-makers at financial institutions and retail companies, including 55 in the UAE. Data collection and survey questions reference a 12-month period. The study leverages data and analysis to understand the current state of fraud and the challenges associated with digital payments in emerging markets.

"The widespread adoption of digital services is fueling the growth of fraud for all types of businesses and service providers in the Middle East and globally," said Lane-Sellers. The increasing use of apps, digital self-service, and instant payments and financing is exacerbating the threat of fraud. The LexisNexis Risk Solutions Cybercrime Report recorded a 27 per cent global growth in automated attacks, where criminals employ bots or automated scripts to launch attacks.

"Digital services are empowering criminals to target, interact and manipulate people on an unprecedented scale. The surge of scams is an example of this trend, particularly in economies that have undergone rapid digitalization, such as the Middle East. Businesses need to construct robust defences for their digital platforms without compromising the digital customer experience, as adding friction to the customer journey can impact revenue," Lane-Sellers added.