Industries will need to adopt artificial intelligence (AI) deter fraud as scams grow more sophisticated, according to Philippine fintech association Fintech Alliance.PH.

The warning highlights the trade-off at the center of the Philippines’ digital finance growth: the same low-friction access that makes e-wallets convenient for consumers also makes them attractive to fraudsters.

Lawrence Y. Ferrer, president and chief executive officer of CIS Bayad Center, Inc. and a trustee of Fintech Alliance.PH, told reporters on the sidelines of a forum last week that firms must automate their defenses to keep pace with fraudsters.

“For you to compete head-on with fraudsters, you need to use AI because with the volume of transactions, you need a more secure automated way to filter them, to check if transactions are suspicious… the best way to track that is (to have the capacity to handle volume),” he said.

Mr. Ferrer said AI has made fraud more complicated to deal with, requiring not only the latest technology but also coordination between regulators and industry.

“With the advent of AI, the level of sophistication in defrauding customers increases significantly. Fraudsters are highly organized. The way to combat them is for the whole industry to band together, to share information, and to provide both education… and improved security,” he said.

“Security requires also using the tools available on the market. So AI is definitely a powerful tool to protect customers.”

He added that industry data shows fraudsters are moving money out of the Philippines at an increasing rate, with online gaming the most accessible channel for shifting funds abroad.

“When you take a look at the industry data, there’s a notable increase in the way money is (brought out) by fraudsters. They have to move money… outside the Philippines. We all know for a fact that the easiest or the most accessible mechanism (to bring out money) is online gaming,” Mr. Ferrer said.

E-wallets, he said, have become a preferred touchpoint for scammers defrauding consumers. He cited a study by the Global Anti-Scam Alliance, a nonprofit that researches scam exposure across countries, showing that 73% of Filipino respondents sent money to scammers through digital wallets.

He attributed this vulnerability to the ease of opening digital accounts.

“Just remember, banks are primarily brick and mortar, physical stores. When you want to apply for a bank account, you have to physically go to a bank, most of the time. However, for digital wallets, you do it online. So the ease of applying creates that level of vulnerability. It’s a level more fraudsters can access,” he said.

He noted that e-wallet usage has risen despite know-your-customer (KYC) protection systems — the identity checks financial providers run to confirm who is opening an account.

“(Dealing with a bank) requires you to be physically present and provide your physical identification. On the other hand, for wallets (the process is) digital. You have the convenience of using your mobile phone to register your details,” he said.

“The barrier to entry is easier for fraudsters because of accessibility… Digital is obviously easier compared to over-the-counter.”

How quickly the coordination he calls for takes shape between regulators and industry — particularly around information sharing and the digital-wallet vulnerabilities he described — is one of the open questions his remarks leave for the Philippines’ anti-fraud effort.

Source: BusinessWorld, reporting by Aaron Michael C. Sy