In the wake of the pandemic, the world has experienced an unprecedented shift towards remote work and digital transactions. While this has brought about convenience and efficiency, it has also given rise to a new form of economic crime that has left many businesses reeling: platform fraud.
Platform fraud has emerged as a major concern for organizations in India, as they increasingly rely on various digital platforms to conduct their business. From social media to e-commerce and enterprise platforms, these channels have become an integral part of daily operations. Social media connects individuals and businesses alike, while e-commerce platforms offer unparalleled access to goods and services.
Enterprise platforms, on the other hand, enable companies to interact with customers, process transactions, and move funds. In fact, organizations in India operate an average of five platforms as part of their regular business practices – a higher figure than the global average of four.
Digital business platform fraud in India
As the landscape of digital business platforms continues to evolve, newer entrants are finding themselves increasingly vulnerable to sophisticated fraud schemes. However, a survey by PricewaterhouseCoopers Private Limited (PwC) India reveals that many business leaders, both providers and users, remain largely unaware of the risks they face from platform fraud.
In India alone, platform fraud accounted for a staggering 57% of all fraud incidents, with over a quarter of organizations losing more than USD 1 million.
Financial gain remains the most prevalent motive behind such frauds with 44% of perpetrators in India committing platform frauds for monetary gain. However, according to organizations, other motives such as brand damage (32%) and competitive advantage (21%) are also becoming increasingly common.
89% of platform fraud resulted from a fraudulent transfer to/from a platform – PwC survey
Financial platforms were found to be the most vulnerable to fraud, particularly those involving fund transfers, with a staggering 62% of all platform frauds occurring on financial platforms. While the financial impact of these frauds can be significant, the damage to a company’s reputation, loss of customer loyalty, and erosion of trust can have far-reaching consequences.
With these platforms becoming more ubiquitous, organizations must remain vigilant against the growing threat of platform fraud and take proactive steps to mitigate its impact.
How to combat digital business platform fraudsters
To combat platform fraud, businesses need to be proactive and implement effective risk management strategies like:
- Assign a Chief Risk Officer to manage platform risks and establish an enterprise-wide response strategy.
- Develop a proactive fraud response strategy and monitor for red flags, including spikes in online activity and negative media coverage.
- Conduct a risk assessment, implement monitoring systems, and gain knowledge of partners’ controls through third-party audit reports.
- Be aware of risks related to sanctions evasion and ESG practices, including human trafficking and privacy invasion. Take necessary measures to mitigate these risks and stay informed about emerging threats.
Despite efforts to combat fraud, organizations need to build resilience to this type of risk. Measures including risk assessments, monitoring programs, and knowledge of partners’ controls, are essential to combat platform fraud. By taking a holistic approach and placing a strong emphasis on risk management, organizations can better protect themselves and their customers from the damaging effects of digital business platform fraud.
Source: PwC
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