Fraud Detection And Prevention Market Size, Share & Trends Analysis Report By Solutions, By Component, By Services, By Application, By Organization, By Vertical, By Region, And Segment Forecasts, 2021 - 2028

Report Overview

The global fraud detection and prevention market size was valued at USD 20.98 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 15.4% from 2021 to 2028. The growing concerns regarding digital frauds, despite technological advancements facilitating ease of payment options or data access, calls for the deployment of fraud detection solutions. Sophistication in digital frauds, financial crimes, and cyberattacks are challenging the growth of several businesses worldwide. With the increasing popularity of e-banking, digital payment apps, and cross-border transactions, the number of fraudulent cases involving identity thefts, data breaches, and payment frauds is also increasing. All these aforementioned factors are creating avenues for market growth.

The ever-evolving technology landscape has amplified cybercrimes and cyber frauds over time. Hackers continue to evolve and have become skilled in finding vulnerabilities and loopholes in systems. The resulting action increases the risk of a corporate data breach, and its consequent impact increases economic losses for a business. Therefore, the need to curb losses from data breaches has compelled enterprises to opt for proactive fraud prevention solutions, a trend expected to continue over the next few years.

Incumbents from industries, such as BFSI, healthcare, and e-commerce, are proactive in recognizing the need to update outdated tools and existing strategies to combat digital fraud. However, certain businesses still use and follow conventional fraud investigation methods, which are complex and time-consuming. Sophistication in Advanced Persistent Threats (APTs) and fraudsters continuously modify their intruding techniques and remain undetected using traditional concepts. Thus, with the adoption of analytical and authentication tools, real-time detection in fraudulent behaviors becomes easy and is subsequently expected to favor the adoption of fraud detection and prevention (FDP) solutions.

As such, proactive measures have become one of the top priorities among industries. Customer-centric fraud prevention techniques have become a part of business security strategy. Adoption of such techniques and measures bridges the gap between improved payment experience and security. For instance, financial institutes adopt voice recognition technologies across their contact centers to reduce identity fraud attempts. In addition, the application of fraud authentication technologies, such as device fingerprinting and geolocation, adds another layer in identity theft security and enhances customer verification.

The rising adoption of web applications and digital payment applications has resulted in an increased number of online frauds and scams. Cyber threat agents target such vulnerable applications to gain personal data. These fraudulent activities surged in 2020, during the COVID-19 pandemic. According to the F5, Inc., a U.S.-based security solution provider’s 2020 phishing report, a 15% growth in phishing incidents was observed. Furthermore, the report also highlighted a significant rise in phishing attacks accounting for 220% yearly average during the peak of the pandemic in comparison to the previous year.

Fraud Detection and Prevention Market Trends

Increasing fraudulent activities coupled with the growing number of online transactions are driving the market growth. The increasing adoption of next-generation digital channels to interact, transact, and market products and services is one of the major factors for the rise in fraudulent activities. Digital channels comprising social applications, messaging applications, and e-commerce applications attract a large volume of traffic at once. This makes it challenging to measure and detect patterns of unusual traffic, thus creating a need for fraud detection and prevention solutions. Additionally, advancements in technologies for effectively identifying and tracking real-time anomalous behavior across applications and the web are also expected to boost the market growth over the forecast period.

The risks of online fraud have been increasing in line with the rising popularity of B2C, B2B, and C2C e-commerce transactions, which often involve a mutual exchange of critical information, identity information, and personal data of individuals and enterprises. The boom in mobile gaming and the growing use of social media is also adding to the risks of subsequent fraud. While frauds are getting more sophisticated, the losses stemming from these attacks are also increasing. An analysis of over 44 billion events across 800 million active users globally by Help Net Security revealed a rapid increase in the complexity of emerging attacks. This has triggered the need for a strong emphasis on contextual detection strategies capable of proactively thwarting intrusions before any potential losses.

Financial services remain the most vulnerable to online fraud, such as account takeovers, which are carried out using a complex combination of manual and bot-powered methods. The popularity of fraud detection and prevention solutions is increasing in the BFSI sector with growth in cyber scams such as phishing, identity frauds, card frauds, insurance frauds, and investment frauds. Furthermore, as fraud attacks grow more sophisticated, both digitally and physically, a need for data mining and advanced analytics-based solutions has been observed by banks and financial institutes to prevent fraud. The retail and e-commerce verticals have also witnessed significant traction in the adoption of fraud detection & prevention solutions. The growing use of advanced technologies such as POS systems, self-checkout systems, digital transactions, and e-commerce payment transaction has, in turn, led to increased fraud attempts, leading to excessive chargeback fees, and loss of merchandise. According to LexisNexis, a U.S.-based organization that offers legal, risk, and professional solutions, the overall fraud costs account for an average of 2.38% of the U.S. e-commerce revenue.

Fraud detection and prevention relies to a large extent on the ability to identify the threat patterns and develop suitable solutions capable of protecting enterprises from recurring attacks. Although business intelligence (BI) tools have been used conventionally to summarize the large volumes of data churned every quarter in any particular business, these conventional analytics methods are not capable of providing in-depth insights on a granular level to predict the possible outcomes. Hence, advanced analytics tools, such as predictive analytics, data mining, big data analytics, and machine learning, are increasingly being preferred to examine large volumes of data and extract the patterns showcasing various trends across various industries on regional and global levels. These tools are based on a mathematical approach to interpret data and machine learning techniques, such as deep learning, to identify patterns, form correlations, and group the data sets. Arranging the historical data in an identifiable pattern allows enterprises to counter foreseeable threats by triggering required actions leveraging fraud detection and prevention solutions.

The outbreak of the COVID-19 pandemic in 2020 has triggered the adoption of mobile banking services as banking service users prefer to avoid travel and human contact within bank premises. MX, a digital transformation platform for credit unions, banks, and fintech, revealed new research finding related to consumer spending and mobile banking adoption amid the economic uncertainty stemming from the COVID-19 pandemic. The data released in April 2020 has revealed a 50% increase in mobile banking engagement to control the finances and plan the individual economic future. While the adoption of mobile banking is rising significantly, mobile banking is also getting potentially vulnerable to fraudulent activities, such as account takeovers, carrier data breach, call center fraud, subscription fraud, and phishing, among others, thereby driving the demand for fraud detection and prevention solutions over the forecast period.

Component Insights

The solutions segment held the largest revenue share of more than 64.0% in 2020. The growing incidences of Account Take Overs (ATO) and phishing emails have compelled enterprises to adopt advanced tools and solutions to detect anomaly patterns of fraud at a preliminary stage. These solutions process large data sets in real-time and reduce the detection time. In addition, these solutions also help enterprises in meeting compliance requirements.

The services segment is estimated to register the fastest CAGR over the forecast period. Organizations in developing economies are increasingly implementing robust fraud prevention strategies. To implement a robust framework, organizations require integration, consulting, training, and support services from fraud prevention service providers. The need for such professional consulting and other third-party services to detect fraud in real-time is expected to drive the segment growth over the forecast period.

Solutions Insights

The authentication solutions segment dominated the market in 2020 and accounted for more than 43% of the overall revenue share in the same year. Over the years, enterprises have relied on authentication solutions to secure customer credentials and customer-sensitive information. However, the increasing sophistication in fraud attempts in customer-facing applications has compelled organizations to opt for advanced authentication solutions with capabilities, such as single factor & multi-factor, and voice biometrics. Furthermore, securing critical information shared within the enterprises using cloud technologies in every industry vertical to avoid data breaches is important. Thus, the need to secure credentials and offer safe access to specific users within the organizations is expected to augment the segment growth over the forecast period.

The fraud analytics solutions segment is anticipated to register the fastest CAGR over the forecast period. Digital technologies are on the rise, and data assimilation from these technologies transforms the business environment, creating new business growth opportunities. As organizations store large volumes of data, analytical solutions help examine fraud and anomaly behaviors. Applications of such predictive and preventive analytical tools help enterprises in taking essential remediation measures. These potential benefits offered by the solutions are expected to drive the segment growth over the forecast period.

Services Insights

The professional services segment held the largest revenue share of over 70% in 2020 and is expected to retain the leading position throughout the forecast period. The professional services comprise consulting, support, and training & development services. Vendors offering these services assign a dedicated team of experts to help organizations deploy technologies and train professionals. Training and support programs is one of the necessary element offered as a part of the professional services, as it helps professionals to mitigate security gaps and implement fraud detection procedures.

However, the managed services segment is anticipated to grow at the fastest CAGR over the forecast period. Organizations that are keen on taking preventive measures to curb fraud in real-time adopt managed services. Managed service providers monitor business transactions and mine unusual user behavior in real-time across big data generated across all touchpoints. Reviewing and mining such data in real-time is a proactive approach in detecting fraud. Furthermore, outsourcing such risk-based security frameworks to managed service vendors allows businesses to focus on other value-added activities. These factors are anticipated to increase the demand for managed services across all industry verticals over the forecast period.

Application Insights

The payment fraud application accounted for the maximum revenue share of over 53% in 2020 and is expected to continue to grow at a steady CAGR over the forecast period. The growing demand for cashless payment modes and e-wallet among consumers has created avenues for fraudsters. Vulnerabilities or loopholes in these applications can provide easy access to banking and financial reserves. Thus, detecting such frauds in real-time and the need to patch all the vulnerabilities within the applications is contributing to the segment growth.

The identity theft segment is anticipated to register the fastest CAGR over the forecast period. Identity theft practices are increasing significantly as criminals begin to adapt to the foiling authentication process. The Federal Trade Commission’s investigative tool, named “The Consumer Sentinel Network”, tracked 4.8 million fraud and identity theft reports in 2020 representing a growth of around 45% from the previous year. Thus, the need to curb growing identity theft activities is expected to drive segment growth.

Organization Insights

The large enterprise segment accounted for the largest revenue share of more than 74% in 2020. Fraudulent activities ranging from phishing and money laundering to distributed denial-of-service are prevalent among large enterprises, and such attacks could negatively impact business profit. Thus, it is necessary that large enterprises adopt preventive solutions and services. Investments focused on deploying preventive measures are one of the critical business strategies to ensure organizational data security. However, the SMEs segment is estimated to record the fastest CAGR over the forecast period.

The segment growth is attributable to the increasing fraud cases in these organizations. The growing dependencies on digital solutions and the lack of efficient security frameworks among SMEs results in cyber-attacks. Furthermore, limited awareness related to frauds and their impact on business profits challenges SMEs, in terms of managing data protection compliance standards. In addition, growing cross-border trade contributes to increased fraudulent activities. Thus, a need for solutions that could assess, identify, mitigate, and report frauds among SMEs is estimated to drive the segment growth over the coming years.

Vertical Insights

The BFSI segment accounted for the highest revenue share of more than 30% in 2020. Rapid digitization and electronification of operations have made the incumbents of the banking and financial services industry a popular target among cybercriminals. Furthermore, the growing popularity of products, such as mutual funds, stockbroking, and insurance, among consumers to digitally access these solutions across several touchpoints, compels enterprises to adopt preventive tools to track frauds and their activities. In addition, growth in identity thefts and card fraud cases across the globe is promoting the adoption of authentication solutions in this segment.

The retail & e-commerce vertical segment is anticipated to register the fastest CAGR over the forecast period. Incumbents in the retail & e-commerce industry rely on electronic devices and digital platforms to improve customer experience. However, the adoption of such solutions increases the risks of payment frauds and digital frauds. Therefore, to protect customer information and strengthen security infrastructure, the demand for authentication and other fraud prevention solutions is expected to grow in this segment over the forecast period.

Regional Insights

North America was the leading regional market in 2020 and accounted for a revenue share of over 36% in the same year. A rise in the number of cases comprising payment frauds, identity thefts, and money laundering across the U.S. and Canada contributed to the growth of the regional market. The market will expand further with a steady CAGR from 2021 to 2028 owing to growing investments by several organizations to protect data breaches and improve security IT infrastructure. In addition, increasing stringency in data security compliance standards and the need to comply with these standards to avoid hefty fines will upkeep the regional demand over the coming years.

Asia Pacific is expected to emerge as the fastest-growing regional market over the forecast period. Digital acceleration has led enterprises and governments in this region to enhance their security infrastructure. As a part of the security infrastructure, several awareness programs related to fraud prevention and detection are promoted in Asian countries. With the increasing cases of fraud, enterprises are expected to adopt advanced security solutions, subsequently favoring regional market growth over the forecast period.

The emergence of e-commerce and e-banking and the increasing usage of IP-based services are expected to propel the fraud detection and prevention market in North America. Further, the U.S. experienced an increase of 25.07% in the number of digital frauds in the first four months of 2021. According to data published by TransUnion, digital fraud attacks against the financial industry specifically had increased by 109% in the U.S. during the same period. As such, financial companies are engaged in deploying and upgrading their security infrastructure to safeguard critical data, thereby driving the adoption of fraud detection and prevention solutions in North America.

The pandemic outbreak led to a surge in the adoption of digital services, a trend which is expected to stay post pandemic. Several organizations in APAC shifted to digital platforms to engage with their customers, thereby increasing the risk of fraud. Further, according to a survey conducted by Experian in May 2021, about one-third of businesses in the Asia Pacific are focused on generating revenue rather than prioritizing fraud prevention and security. Additionally, several businesses in the region adopt traditional, outdated methods such as security questions and passwords to mitigate the risk of fraud. However, this picture is expected to change with several consumers feeling more secure with biometrics and one-time passwords on their mobile devices. As such, increasing usage of digital services and changing consumer behavior are some of the prime factors expected to drive the adoption across the Asia Pacific.

Key Companies & Market Share Insights

The market is highly fragmented and characterized by several companies actively offering a wide range of products. Factors, such as advancement in fraud detection solutions and establishing strategic deals like partnerships and collaborations, intensify the market competition. Key players are involved in product innovation and collaboration strategies to expand their business growth. For instance, in June 2019, Oracle announced the launch of Oracle Financial Services AML Express Edition for small- and mid-sized banks. The solution enables organizations to stay compliant with the guidelines and become reactive to threats by effectively making a business decision, detecting suspicious activities, and monitoring customer behavior to counter frauds in real-time.

Also, several investments, fundraising events, and acquisition trends are anticipated to drive market competition. Security vendors seek investors’ support to develop new products as a part of their business expansion strategy. For instance, in March 2021, FiVerity, Inc. secured USD 2 million from Mendoza Ventures LLC and a class of super angel investors from the financial service and cybersecurity industries. Some of the prominent companies in the global fraud detection and prevention (FDP) market include:

• Total System Services, Inc.

• Software AG

• SAS Institute, Inc.

• SAP SE

• Oracle

• IBM

• Fiserv, Inc.

• Experian plc

• Equifax, Inc.

• BAE Systems

• ACI Worldwide, Inc.

Fraud Detection And Prevention Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2016 to 2028. For the purpose of this study, Grand View Research has segmented the global fraud detection and prevention market report based on component, solutions, services, application, organization, vertical, and region:

• Component Outlook (Revenue, USD Million, 2016 - 2028)

  • Solutions

  • Services

• Solutions Outlook (Revenue, USD Million, 2016 - 2028)

  • Fraud Analytics

  • Authentication

  • Governance, Risk, and Compliance

• Services Outlook (Revenue, USD Million, 2016 - 2028)

  • Professional Services

  • Managed Services

• Application Outlook (Revenue, USD Million, 2016 - 2028)

  • Identity Theft

  • Money Laundering

  • Payment Fraud

  • Others

• Organization Outlook (Revenue, USD Million, 2016 - 2028)

  • SMEs

  • Large Enterprises

• Vertical Outlook (Revenue, USD Million, 2016 - 2028)

  • BFSI

  • Government & Defense

  • Healthcare

  • IT & Telecom

  • Industrial & Manufacturing

  • Retail & E-commerce

  • Others

• Regional Outlook (Revenue, USD Million, 2016 - 2028)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

  • Asia Pacific

    • China

    • India

    • Japan

  • Latin America

    • Mexico

    • Brazil

  • Middle East & Africa