Extending the Fraud Diamond Theory: An Adaptive Framework for Preventing Customer-initiated Fraud in the Digital Banking Ecosystem

Ali Maskur, Ignatius Hari Santoso

Abstract


The rapid expansion of digital banking ecosystem has transformed financial service accessibility while simultaneously creating new opportunities for customer-initiated fraud. Compared to conventional banking systems, digital platforms present unique vulnerabilities arising from technological complexity, remote transaction, and reduced direct oversight. Although the Fraud Diamond Theory has been widely used to explain fraudulent behavior through pressure, opportunity, rationalization and capability, its applicability in customer-driven fraud within digital environment remains underexplored. This study aims to extend the Fraud Diamond Theory by introducing perceived severity as an adaptive construct to explain customer-initiated fraud intention. A mixed-method approach is employed using two sequential stages, which is in-depth interview and partial least square method to empirically test the new construct using 111 digital banking users. The findings reveal that financial pressure, rationalization, and perceived severity significantly influence customer-initiated fraud intention, meanwhile, perceived opportunity and capability are found to have no significant effect. This study contributes theoretically by extending Fraud Diamond Theory through the inclusion of deterrence-oriented perspective. Practically, the findings suggest that financial institution should complement technological security measures with behavioral interventions, user education and communication strategies emphasizing the consequences of fraudulent actions.

Keywords


fraud diamond theory; customer-initiated fraud intention; digital banking; perceived severity; digital banking

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References


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DOI: https://doi.org/10.24167/jmbe.v8i1.15491

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