The COVID-19 pandemic has resulted in an increase in platform fraud, a new type of economic crime that involves fraudulent activities related to social media, e-commerce, enterprise and FinTech platforms. The rise of remote work, e-commerce, delivery applications and contactless payments has contributed to the increase in this type of fraud, a survey from PwC India reveals.

According to the second edition of PwC’s Global Economic Crime and Fraud Survey 2022: India Insights, titled “Platforms: The new frontier of fraud in India”, 57 percent of all fraud incidents in India were platform fraud. Additionally, more than 26 percent of Indian organisations suffered losses of over USD 1 million due to platform fraud, and 44 percent of the perpetrators were found to commit fraud for financial gain.

Economic crime and fraud continue to be a significant challenge for Indian companies, with 66 percent of organisations experiencing at least one form of economic crime in the past two years as per the first edition of the report. Platforms have emerged as a new avenue for committing economic crime.

The survey highlights that 99 percent of fraud incidents in the past 24 months have been on platforms such as financial, social media, goods, enterprises, media sharing, knowledge sharing and services.

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Amongst the motives identified in such cases, financial gain is the most prevalent, with 44 percent of perpetrators in India engaging in such activities for monetary reasons. Brand damage is another common motive cited by 32 percent of the surveyed organisations, followed by competitive advantage at 21 percent.

Puneet Garkhel, Partner and Leader, Forensics Services, PwC India, said, "Indian consumers and organisations have been rapidly embracing new platforms over the past few years. On average, an Indian company operates with five different platforms as part of its regular business activities today. The emergence of and surge in e-commerce, contactless payments, home delivery models, remote working, etc., have not only led to various platform-based innovations but also opened avenues of entry for fraudsters."

"Organisations need to be cognisant of these evolving threats and adequately invest in fraud prevention and detection strategies to safeguard themselves," he added.

The survey also revealed that enterprise platforms are a prime target for malware, phishing, money laundering and ransomware. The threat of ransomware, in particular, has grown to an alarming level.

Financial frauds on transactions made to or from platforms accounted for 89 percent of all platform frauds. These frauds vary from basic unauthorised digital purchases to more complex identity theft and triangulation fraud. Further, payment fraud, particularly through credit cards and digital wallets, accounted for 92 percent of all customer frauds in India. Customers also face various other types of frauds, such as impersonation, authorised push payments and application/lending fraud.

"Business leaders are often unaware of their exposure to platform fraud, as they do not view platforms as a distinct sector with common risk considerations. Instead, they treat each platform as a separate vendor with its own threat profile. As transaction processing shifts to platforms, the obligation towards security is also transferred, but many platforms are not equipped to identify, prevent and mitigate fraud like banks are," Puneet added.

With its rapid growth and increasing sophistication, platform fraud is a major threat to Indian organisations. Despite anti-fraud measures, platform fraud remains a serious and mounting threat, exacerbated by the pandemic’s impact on digital transactions.

For the second report in this series, PwC surveyed 111 organisations across India from diverse industries such as technology, financial services, banking and capital markets, consumer products and retail, education, healthcare, hospitality and leisure, and industrial products and manufacturing.

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