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The global fraud detection and prevention market size stood at USD 19.27 billion in 2018 and is projected to reach USD 110.04 billion by 2026, exhibiting a CAGR of 25.5% during the forecast period.
Increasing incidence of cyberattacks and rising revenue losses due to fraud are some of the major factors driving the fraud detection and prevention market growth. Also, the growing number of online transactions is propelling the growth of the market. Furthermore, incorporation of Artificial Intelligence (AI) and Machine Learning (ML) in fraud detection and prevention is expected to create lucrative opportunities for the market. For instance, in July 2019, Nucleus Software, one of the leading providers of lending and transaction banking solutions, launched FinnAxia 6.5, a real-time payment fraud detection and prevention solution that uses artificial intelligence to offer better support for real-time faster payments.
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"Adoption of High-Performance Analytics by Businesses to Mitigate Fraud"
For the past few years, frauds have become prevalent across businesses and is becoming more complicated and rampant. In this complex landscape, fraud rules and statistical models alone are insufficient to detect fraud in real-time. Therefore, organizations are continually struggling to incorporate effective and efficient fraud detection systems to rapidly scrutinize massive amounts of data using various technologies such as grid computing, in-memory analytics, and in-database analytics. Additionally, to set up an effective fraud detection system, it has become vital to combine streaming analytics, batch analytics, and predictive analytics with domain expertise. Thus, businesses have started combining big data sources with risk profile analysis and real-time monitoring to score on fraud risk, which has led to the road of recovery and emerged as one of the top fraud detection and prevention market trends.
"Machine Learning (ML) and Artificial Intelligence (AI)-Based Fraud Detection in Banking Sector to Fuel the Market"
Nowadays, financial service organizations are suffering from fraud-related losses and damages. Therefore, financial institutions are shifting their focus from rule-based fraud detection systems to ML-based fraud detection. Increasing accuracy of machine learning provides financial firms with a significant reduction in the number of false positives and false negatives. The need for security in the banking sector has encouraged numerous AI firms to develop AI-based solutions. Teradata, a provider analytics-related software, products, and services, is selling fraud detection solutions to banks to enhance banking fraud detection capabilities. The company claims that its data analytics software can recognize potential fraud cases while avoiding acceptable deviations from the norm. For instance, MasterCard, one of the leading financial institutions, integrated ML and AI to track and process transaction size, location, time, device, and purchase data to protect their business, and combat fraudsters.
"Growing Preference for Electronic Transactions to Fuel Market Growth"
Recently, the volume of electronic transactions (e-transaction) has increased significantly, mainly due to the popularization of electronic commerce (e-commerce) retailers. Increasing usage of e-transaction and utilization of internet technology, in turn, has led to the number of risks to personal information and breach of security policies. Therefore, to tackle this issue, appropriate security measures need to be implemented by monitoring the possible threats during e-transactions. Organizations are coming up with well-structured detective and preventive measures that can mitigate frauds in e-transaction, thereby increasing the reliability of e-transaction systems. Some of the anti-fraud tools available are Address Verification Service (AVS), Card Verification Value (CVV), Payer authentication, and Universal Payment Identification Code (UPIC) among others. Thus, owing to the growing preference for e-transactions, it is important and necessary to develop and apply techniques that can assist in fraud detection and prevention.
"Need for Fraud Detection and Prevention Solutions in the Healthcare Sector to Drive the Market"
Frauds in the healthcare sector are perpetrated in many different ways and almost every insurance company is affected by it. False claims for medically unnecessary services like unnecessary widespread testing, ambulance transport even if patients are fully mobile and not at risk; services that were never rendered by the provider or on the individuals, and purposeful overstatement of the amount, type, or complexity of the service are the most common types of healthcare fraud. In order to combat these frauds, healthcare providers should incorporate comprehensive fraud detection solutions or follow some compliance programs to detect and prevent fraud. Most of the healthcare organizations have started deploying anti-fraud systems to quickly and efficiently detect, manage, and prevent fraud related to administration and recordkeeping, thereby accelerate the fraud detection and prevention market revenue.
"Limited Data Visibility Often Produces False Positives Outcomes"
For fraud detection and prevention tools to work effectively and efficiently, they should be able to deal with surprising and unknown fraud occurrences. Fraud detection and prevention solutions should have the ability to provide a versatile mix of features to collect and analyze the data, produce correct conclusions, take actions based on results, and finally produce a comprehensive result. Moreover, these solutions should be able to integrate with the existing ecosystem. However, not every solution in the market lives up to this standard, thereby impacting data visibility. Usually, each tool has a limited purview into data and thus limits the ability for accurate decisions. Payment processors and e-commerce companies mainly implement several checks such as Address Verification System (AVS) and Card Verification Value (CVV), which additionally block the right customers from checking out. For instance, the address verification system often blocks people who frequently travel, do not have permanent homes or are students. Thus, limited data visibility often produces false positives outcomes, which is hampering the growth of the market.
"Authentication Segment Accounts for the Largest Market Share"
Based on component, the fraud detection and prevention market is segmented into solutions and services. The solutions segment is further sub-segmented into fraud analytics, authentication, and governance, risk, and compliance. The services segment is further bifurcated into professional services and managed services. Among these, the authentication segment holds the major market share owing rise of credential breaches in almost every sector. Moreover, regulations such as Know Your Customer (KYC) and Revised Directive on Payment Services (PSD2) is driving the adoption of biometric authentication, especially in financial services.
"Insurance Claims to be the Fastest-growing Segment"
On the basis of application, the market is segmented into insurance claims, money laundering, electronic payment, and others. Among these, the insurance claims segment is expected to be the fastest-growing segment during the forecast period. Increasing number of fraudulent claims, including accident insurance fraud, contractor insurance fraud, break-in insurance fraud, and disaster insurance fraud, are creating a financial burden on insurers and result in higher overall insurance costs.
"Cloud Segment to Account Largest Market Share during Forecast Period"
By deployment, the market is divided into cloud and on-premises. Among these, the cloud segment holds the largest market in 2019 and is expected to augment during the forecast period. Cloud-based fraud detection solution providers have attracted enterprise customers with the promise of rapid elasticity, on-demand provisioning, and high availability of the solution. For instance, Signifyd, Inc. designs and offers cloud-based financial fraud detection solutions for businesses of all sizes to helps secure online transactions and prevent unauthorized data breaches.
"Large Enterprises to Hold Largest Market Share During Forecast Period"
Based on organization size, the market is bifurcated into small and medium-sized enterprises (SMEs) and large enterprises. Among these, large enterprises account for more than half of the market share. Large enterprises are increasingly shifting towards digitization, leading to the generation of the large volume of digital transactions. This has encouraged large enterprises to opt for sophisticated fraud management solutions to detect and prevent fraud.
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"BFSI is Expected to Hold Largest Market Share During Forecast Period"
On the basis of vertical, the market has been segmented into BFSI, IT and telecom, retail and consumer packaged goods, government, construction and real estate, energy and utilities, travel and transportation, manufacturing, healthcare and life sciences, media and entertainment, and others. BFSI accounts for the largest market share in 2019 and is expected to continue to hold a significant amount of share during the forecast period. In the banking sector, fraud is often conducted through customer account takeover, synthetic identities, digital payments and authentication, nefarious applications, procurement, and other financial crimes. Therefore, to combat these frauds, almost all the banking and insurance organizations have adopted fraud management solutions to protect their organizations' private data.
North America generated a revenue of USD 6.51 billion in 2018 and is anticipated to dominate the fraud detection and prevention market share during the forecast period. In 2018, North America led this market on account of the early adoption of online-based services and e-retailing in the US and Canada.
Growth witnessed in the region is likely to be driven by the presence of strong and prominent players across the US. Also, continuous spending by the US government towards fraud detection and prevention systems in various private and public organizations is boosting the growth of this market in North America.
North America Fraud Detection and Prevention Market, 2018 (USD Billion)
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Asia-Pacific generated a revenue of USD 3.76 billion in 2018 and is expected to showcase highest CAGR during the forecast period. Growing adoption of advanced software by small and medium enterprises to protect their assets and private data from fraudsters is expected to fuel the growth of the market. Emerging economies such as India and China are anticipated to show a significant contribution to the fraud detection and prevention market in the coming years.
"IBM Corporation is Adopting Organic and Inorganic Growth Strategies to Stay Competitive in the Market"
Companies from all the sectors are witnessing continuous attacks by organized crime rings owing to a shift towards digitization. Therefore, it has become vital to organizations, large or small, to have a fraud prevention plan in place. Even though the frauds are growing in speed, sophistication, and automation, there are lot of technologies available to deal with them. For instance, by combining AI with fraud detection solutions would enable digital businesses to accurately and quickly detect automated and increasingly complex fraud attempts.
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The fraud detection and prevention market report provides qualitative and quantitative insights on this market along with a detailed analysis of the size and growth rate for all possible segments in the market. Along with this, the report provides an elaborative analysis of the market dynamics and competitive landscape. Various key insights provided in the report are the price trend analysis, recent industry developments such as mergers & acquisitions, the regulatory scenario in key countries, macro, and microeconomic factors, SWOT analysis, and key industry trends, competitive landscape, and company profiles.
Value (USD billion)
By Organization Size
By Application Area
As per our (Fortune Business Insights) study, the global fraud detection and prevention market is predicted to reach USD 110.0 Bn by 2026 with a CAGR of 25.5% (2019 -2026).
As per our study, adoption of fraud detection and prevention is being driven by data-intensive industries such as healthcare, BFSI, and IT &Telecommunication. Currently (in 2019), global Fraud Detection and Prevention market value at USD 22.4 Bn, and it is anticipated to reach USD 110.0 Bn by 2026 at a CAGR of 25.5% during the forecast period (2019 -2026)
Globally, spending on fraud detection and prevention solutions is increasing each year. Some of the regions, such as in Europe generated a revenue of USD 4.5 Bn in 2018 and is expected to generate a remarkable revenue share by 2026. Start-ups, SME’s and the large size enterprises are making substantial investments in Fraud Detection and Prevention solutions.
In the fraud detection and prevention market, solutions segment is the leading segments. Fraud detection and prevention solutions includes fraud analytics, authentication and governance, risk, and compliance.
Some of the driving factors for the fraud detection and prevention market are growing importance of real-time alert systems for early detection and prevention of fraudulent activities to avoid financial losses. Also, rising demand to increase operational efficiency, reduce cost, data security and improve flexibility across organizations and inflating online monetary transactions, uncontrollable cybercrimes would drive the market growth.
In the fraud detection and prevention market, some of the key players are Fico, IBM, Fiserv, Inc., FIS Global, ACI Worldwide, and Bae Systems. These players are focusing on acquisition and partnership with domestic players to provide Fraud Detection and Prevention solutions.
North America is expected to hold the highest market share in the Fraud Detection and Prevention market. Factors triggering the market growth are availability of adequate IT infrastructure and massive investments of government and organizations for secured data solutions. Furthermore, North America houses the key market players, which contributes to market growth.
BFSI industry is expected to exhibit high adoption of fraud detection and prevention solutions. As BFSI industry is completely based on the monetary actions it is therefore prone to fraud and cybercrimes. Followed by BFSI, Retail industry is expected to exhibit a significant growth during the forecast period.
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