Rising Fraud, the Digital Customer Experience and How Banks, Credit Unions and Fintechs Can Stay One Step Ahead

Each year, as criminals hone their skills and discover new ways to capitalize on vulnerabilities, the methods they use to target financial institutions become increasingly sophisticated. In recent years, rapid digital transformation and adoption have opened the door to fraud and, in many cases, made their jobs easier. Staying ahead of fraud is an ongoing challenge, and with it comes a host of ancillary factors financial services providers must consider.

The market is teeming with financial services providers and is more competitive than ever. Banks, for example, must meet the demand for personalized experiences that rival those offered by digital disruptors. With nearly endless choices for who they do business with, 91 percent of consumers said they would be more likely to shop with a brand that recognizes them and provides relevant offers (Source: Accenture Personalization Pulse Check).

While this sounds simple enough, consumers also have growing privacy concerns over how their Personal Identifiable Information (PII) is collected and what companies do with it (Source: IDology 5th Annual Consumer Digital Identity Study). This highlights the importance of personalized, transparent policies for collecting and using customer data. Balancing the need for data required to support personalization with digital privacy concerns is no easy task.

Preventing fraud while meeting consumer demand for personalized experiences and capturing market share has led many financial services providers from banks and credit unions to fintech companies to rethink identity verification. 

At the heart of creating better digital banking experiences, lowering fraud risk, and driving growth is a comprehensive identity verification solution that makes it possible to:

Verify with less information. A data-diverse identity verification solution can quickly verify consumer identities without collecting excessive data. This is achieved by analyzing readily available but less invasive information, such as IP addresses, phone numbers, and email addresses. Not only will this put the customer at ease, but it will also ensure onboarding is quick and easy and step-up verification methods are used only when necessary.

Balance risk with customer experience. Removing unnecessary friction during the identity verification process is critical. Evidence of this is shown in the fact that 93 million Americans in 2020 abandoned signing up for a new account because the process was too difficult, too time-consuming, or seemed untrustworthy (Source: IDology 4th Annual Consumer Digital Identity Study). Improving the customer experience while deterring fraud requires a digital identity verification solution that can “orchestrate” multiple dynamic data sets to not only detect and deter fraud but also deliver a seamless customer experience.

Reach more customers. Across the board, identity verification will play an essential role in helping financial institutions reach consumers who may not have established credit or lack traditional identity documentation. With the ability to use alternative data sources to verify identities, financial institutions can service a wider demographic. This is critical for reaching the unbanked and underbanked. It’s estimated that 4.5 percent of households, accounting for nearly six million people, don’t have a checking or savings account. This lack of financial inclusion notably impacts minorities, immigrants, low-income individuals, elderly consumers and young people with limited financial history, and can be improved with better onboarding solutions.  

Understand fraud trends before it’s too late. It’s common for fraudsters to jump from industry to industry as they carry out their plans, which is why effectively fighting fraud is a group effort. Some identity verification solutions provide real-time visibility into and continuous monitoring of fraud data across industries and channels to help financial institutions spot repeated activity across the network.

Bring human expertise and emerging technology together. Machine learning can play an essential role in building trust, removing friction, and fighting fraud. By applying machine learning to the identity verification process, financial services providers can analyze massive amounts of digital transaction data. But human oversight is necessary to get the best results and continuously improve acceptance rates and efficiencies that accelerate the verification process. 

Machine learning comes with risks in its propensity for bias, lack of data transparency, and absence of governance. While machines are great at detecting trends that have already been deemed suspicious, they cannot detect new forms of fraud. With a hybrid approach that supplements machine learning with human intelligence, companies can discover patterns that improve decision-making. 

 Across banking, fintech, and payments, the landscape becomes more complex each year. As fraud risk continues to increase and consumer expectations reach new highs, having the right strategies, processes, and technology to verify customer identities safely and quickly is imperative for staying competitive and unlocking growth.  

About Author: 
Christina Luttrell is the Chief Executive Officer for GBG Americas (Acuant and IDology), the premier identity verification, regulatory compliance and fraud prevention provider and partner of choice for establishing digital identity trust worldwide.

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