Fraud Detection and Prevention Market

[516 Pages Report] The Fraud Detection And Prevention (FDP) Market size is projected to grow from USD 28.8 billion in 2024 to USD 63.2 billion by 2029 at a Compound Annual Growth Rate (CAGR) of 17.0% during the forecast period. The key driver of fraud detection and prevention is the proliferation of mobile devices, and digital payment methods have created new opportunities for fraudsters to exploit vulnerabilities. Fraud detection solutions are constantly upgrading to adapt to the changing landscape of mobile and digital transactions, incorporating specialized capabilities for detecting mobile fraud patterns.

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FRAUD DETECTION AND PREVENTION MARKET DYNAMICS

Driver: Rise of synthetic identities

According to the McKinsey Institute, synthetic identity fraud is currently the fastest-growing form of financial crime in the US and is also experiencing an increase globally. Presently, it constitutes 85% of all fraud cases. This fraud involves perpetrators amalgamating genuine personal information with fabricated identifiers to craft new identities. They blend authentic data fragments with false details to establish entirely new personas. Organizations face significant challenges in combatting synthetic identity fraud since its essence lies in creating fictitious victims that lack real-life existence.  Lenders face staggering exposure, with an estimated USD 3 billion in losses attributed to synthetic identity fraud across credit cards, auto loans, and unsecured loans. The surge in digital transactions and the accessibility of AI tools likely contribute to the escalation of fraud losses. AI is poised to facilitate synthetic identity theft, with platforms capable of swiftly generating synthetic customer data to link with existing Social Security Numbers. Furthermore, AI can streamline the credit application process online, as institutions often require minimal identity verification for digital presence establishment.

Although distinct from AI-generated fraud, which involves the creation of deepfakes or mimicking biometrics, synthetic identity theft is anticipated to evolve with AI assistance. Moving forward, organizations will intensify efforts to combat synthetic fraud by investing in solutions such as behavioral biometrics. These technologies scrutinize individuals' social media usage and credit activities over recent years to detect abnormal patterns, thereby impeding the proliferation of forged identities.

Restraint: False Positives

False positives present a challenge in fraud detection and prevention. Overly sensitive fraud detection systems may flag legitimate transactions as suspicious, leading to unnecessary delays, inconvenience for customers, and potential damage to customer relationships. Moreover, excessive false positives can strain resources and undermine the efficiency of fraud detection efforts. Mitigating false positives requires fine-tuning detection algorithms, incorporating contextual information into decision-making processes, and continuously refining detection strategies to balance accuracy and efficiency in identifying fraudulent activities. 69% of global buyers are reducing their spending, as reported by PwC, so it's imperative not to miss out on transactions. False positives are a direct path to customer attrition, with 25% of buyers who experience unjustified purchase rejections switching to a competitor. When a genuine customer is blocked, a genuine sale is blocked. The cost of false positives for online merchants is USD 443 billion annually. The cost of actual credit card fraud is estimated to cost online merchants USD 408 billion over the next decade. According to Forbes, one-third of shoppers in the US who encounter a false decline state said that they won't patronize the same merchant again. This figure increases to two-fifths in Europe.

Opportunity: Increasing use of predictive analytics in FDP

The opportunity presented by predictive analytics lies in its capacity to empower organizations to foresee and preempt fraudulent activities before they materialize. By harnessing predictive analytics and machine learning algorithms, businesses can analyze vast datasets to identify patterns, trends, and anomalies indicative of potential fraud. This proactive approach enables organizations to implement preemptive measures, such as enhanced authentication protocols, transaction monitoring, and anomaly detection, to thwart fraudulent attempts before they inflict financial losses or reputational damage. Leveraging predictive analytics enhances the efficacy of fraud detection and prevention efforts and streamlines resource allocation by focusing on high-risk areas. Ultimately, organizations equipped with predictive analytics capabilities can stay one step ahead of fraudsters, fortifying their defenses and safeguarding their assets and stakeholders more effectively. Companies providing predictive analytics tools include SAP Analytics Cloud for healthcare, marketing, and manufacturing, Alteryx AI Platform for finance and supply chain, and Tableau for retail.

Challenge: Cross-Channel Fraud

Due to its multifaceted nature, cross-channel fraud poses a significant challenge to fraud detection and prevention efforts. Fraudsters adeptly exploit various channels, including online platforms, mobile apps, and in-person transactions, to perpetrate fraudulent activities. The interconnectedness of these channels complicates detection efforts, as fraudulent behaviors may manifest differently across different touchpoints, making it difficult to discern patterns and identify suspicious activities.  Recent instances of cross-channel fraud include fraudulent money transfers to fictitious deposits or mule accounts, followed by cash withdrawals from ATMs. Often, innocent third parties unwittingly become accomplices in these fraudulent activities. In October 2021, QIIB, one of Qatar’s leading banks, recently selected IBM to deliver cross-channel fraud prevention to its customers. This supports QIIB’s aim to provide its customers with the ability to bank securely while offering an innovative and positive customer experience.

Fraud Detection and Prevention Market Ecosystem

By vertical, Healthcare is expected to grow at the highest CAGR during the forecast period.

Fraud detection and prevention solutions are gaining traction within the healthcare vertical as organizations seek to combat fraudulent activities such as billing scams, identity theft, and prescription fraud. Leveraging advanced technologies such as machine learning and data analytics, these solutions enable healthcare providers to proactively identify irregularities in claims, patient records, and financial transactions. By implementing robust fraud detection measures, healthcare organizations can protect themselves from financial losses, uphold the integrity of patient data, and ensure compliance with regulatory requirements. As the healthcare industry becomes increasingly digitized, adopting such solutions is essential for safeguarding patient trust and maintaining the overall integrity of the healthcare system.

By organization size, the SME segment is expected to grow at the highest CAGR during the forecast period.

SMEs increasingly recognize the value of fraud detection and prevention solutions in navigating complex regulatory landscapes and mitigating operational risks. By implementing such solutions, SMEs can proactively mitigate risks associated with fraud, such as fraudulent transactions, identity theft, and internal malpractice. Moreover, as cyber threats continue to evolve, adopting robust fraud detection and prevention measures becomes imperative for SMEs to maintain trust among customers and stakeholders, fostering sustainable growth and resilience in today's dynamic business landscape.

By region, North America accounts for the highest market size during the forecast period.

North America will lead the fraud detection and prevention market during the forecast period. The US and Canada are expected to contribute substantially to the North American market. The presence of key players such as Fiserv, Microsoft Corporation, SAS, and FIS Global makes it a leading region in the fraud detection and prevention market. The increasing implementation of cloud adoption, growing data breaches, and other cyber threats contribute to the region's fraud detection and prevention market growth.

Key Market Players

The key players in the fraud detection and prevention market are Fiserv (US), FIS Global (US), LexisNexis Risk Solutions (US), TransUnion (US), Experian (Ireland), NICE Actimize (US), ACI Worldwide (US), SAS Institute (US), RSA Security (US), SAP (Germany), FICO (US), Software AG (Germany), Microsoft (US), F5 (US), AWS (US), Bottomline Technologies (US), ClearSale (Brazil), Genpact (US), Securonix (US), Accertify (US), Feedzai (Portugal), Caseware (US), OneSpan (US), Signifyd (US), BioCatch (Israel), Friss (Netherlands), MaxMind (US), DataVisor (US), Cleafy (Italy), Gurucul (US), Riskified (Israel and US), Thomson Reuters (US), Sift (US), NoFraud (US), Featurespace (UK), HUMAN Security (US), XTN Cognitive Security (Italy), Equifax (US), Alloy (US), Castle (US), Enzoic (US), Kubient (US), SpyCloud (US), SEON (Hungary), Deduce (US), Incognia (US), Resistant AI (Czech Republic), Alfa Group (Italy) and Amani Technologies (UAE).

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Scope of the Report

The study categorizes the fraud detection and prevention market into North America, Europe, Asia Pacific, Middle East & Africa, and Latin America.

By Fraud Type:

• Check Fraud
• Identity Fraud
• Insider Fraud
• Investment Fraud
• Payment Fraud
• Insurance Fraud
• Friendly Fraud
• Others

By Offering:

• Solutions
  • Fraud Analytics
    • Predictive Analytics
    • Descriptive Analytics
    • Prescriptive Analytics
    • SNA
    • Text Analytics
    • Behavioral analytics
  • Authentication
    • Single-factor Authentication (SFA)
    • Multi-factor Authentication (MFA)
  • GRC
• Services
  • Professional
    • Risk Assessment
    • Consulting and Training
    • Implementation and Support
  • Managed

By Deployment Mode:

• Cloud
• On-Premises

By Organization Size:

• Small and Medium Enterprises (SMEs)
• Large Enterprises

By Vertical:

• Banking, Financial Services, and Insurance (BFSI)
  • Banking and Financial Institutes
  • Insurance
• Retail & eCommerce
• Government
• Healthcare
• Manufacturing
• Travel & Transportation
• Real Estate
• Telecommunications
• Others

By Region:

• North America
  • US
  • Canada
• Europe
  • UK
  • Germany
  • France
  • Spain
  • Italy
  • Poland
  • Ireland
  • Czech Republic
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • AnZ
  • Singapore
  • Rest of Asia Pacific
• Middle East and Africa
  • Middle East
    • GCC
      • UAE
      • KSA
    • Rest of GCC
  • South Africa
  • Rest of the Middle East & Africa
• Latin America
  • Brazil
  • Mexico
  • Colombia
  • Rest of Latin America

Recent Developments

• In March 2024, FIS partnered with Stratyfy, an alumnus of the FIS Fintech Accelerator, to enhance its SecurLOCK card fraud management solution. This collaboration aims to significantly increase the accuracy of identifying and preventing fraudulent card transactions.
• In November 2023, LexisNexis Risk Solutions announced a new alliance with Agenium, a leader in disruptive platform technology, to integrate data and analytics into the life insurance application process, delivered through an innovative, no-code configurable platform.
• In September 2022, Fiserv acquired The LR2 Group, which operates as The City POS. The City POS provides payment processing and point-of-sale services. The City POS has been an important ISO partner of Fiserv for over a decade.

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