Surge in Digital Fraud Cases; UGM Economist Warns of Impact on Investment Climate
Cases of digital fraud in Indonesia have returned to the spotlight following a recent report from the Indonesia Anti Scam Center (IASC), which indicates that losses from digital crime have reached approximately 91 trillion rupiah based on 432,637 reports filed between 22 November 2024 and 11 January 2026. These figures not only reflect the substantial financial losses experienced by the public, but also raise concerns about the impact on the development of Indonesia’s rapidly growing digital economy.
Yudistira Hendra Permana, a lecturer in the Department of Economics and Business at UGM’s Vocational School, argues that such significant losses could influence public perception of the security of digital transactions. According to him, extensive media coverage of large-scale fraud cases can alter the way people view risks in digital economic activities. He explained that as fraud cases become more frequent in the public sphere, risk-averse citizens will increasingly view digital transactions as more dangerous than previously perceived. “As the scale of fraud cases reported in the media increases, risk-averse individuals will no longer see digital transaction risks as a small possibility, but rather as a more tangible threat that is more likely to affect them,” he stated on Friday (13 March).
This shift in perception, according to Yudistira, could encourage the public to exercise greater caution when conducting online transactions. The resulting responses could include a reduction in the frequency of digital transactions or limits on transaction amounts when purchasing goods or services online. On a broader scale, this tendency could affect the development of the digital economic ecosystem, which has been heavily dependent on user confidence levels. “When trust weakens, public participation in digital economic activities can also decline,” he added.
Yudistira emphasised that the impact extends beyond the short term through reduced transaction activity, but can also affect long-term digital economic transformation. “In macro terms, weakening confidence in digital transaction mechanisms can slow the pace of digital financial deepening, reduce transaction efficiency, and slow economic transformation towards more productive and digitalised systems,” he explained.
Beyond affecting consumer behaviour, the rise in digital fraud cases also creates economic consequences for companies operating in the digital sector. Yudistira noted that companies must allocate additional resources to strengthen their security systems to protect users from potential fraud. These efforts include developing security technology, implementing transaction verification systems, monitoring user activities, and increasing consumer education.
Yudistira acknowledged that these consumer protection measures cause some company resources that should be used for business expansion or innovation to be diverted to managing fraud risk. “When fraud increases, companies must spend more resources on security systems, verification, monitoring, and dispute handling. As a result, resources that should be used for expansion or innovation end up being redirected towards fraud prevention and management,” he said.
Furthermore, he highlighted that the prevalence of digital fraud also creates various indirect economic costs. When risk levels increase, users tend to hesitate before transacting, whilst business operators become more cautious in conducting digital business activities. This impact can also affect how investors view Indonesia’s digital economic ecosystem. This becomes increasingly relevant given that Indonesia ranks second in digital fraud risk according to the Global Fraud Index.
“That ranking can be an important consideration for investors, particularly in the fintech and e-commerce sectors. Investors not only look at the large market potential, but also assess the security level of the digital ecosystem in maintaining user growth and transaction stability,” he said.
Yudistira explained that increased fraud risk could lead investors to account for additional costs that companies must incur to strengthen system security and manage potential disputes with users. “When fraud risk is considered high, investors may conclude that security costs, dispute handling, and potential reputational damage also increase. This can prompt investors to demand a higher risk premium or even reduce company valuations,” he explained.
Nevertheless, Yudistira believes that such conditions will not necessarily cause Indonesia to lose its appeal as a digital economy market. He emphasised that the response from government and regulators is crucial in maintaining investor confidence. If the government can demonstrate strengthened regulation, improved digital security, and stronger consumer protection, investors may still view Indonesia as a promising market despite the currently significant risks.
On another front, Yudistira also highlighted that the rise in digital fraud indicates an increasingly organised global criminal network. According to him, digital fraud is not part of the legitimate formal economy, but rather an illegal economy that exploits various formal economic infrastructure to conduct its operations. He explained that fraud networks often use various formally legal tools, such as bank accounts, payment service providers, digital platforms, and shell companies, to disguise their activities.
Additionally, the significant losses from online fraud can be understood as a form of economic leakage from the formal digital economy, representing resources diverted from legitimate productive activities to criminal enterprises.