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Incorporating Fraud Prevention into the Digital User Experience

By Ken Allen, SVP, Fraud & Identity, Equifax

Ken Allen, SVP, Fraud & Identity, Equifax

While placing an emphasis on customer experience is not a new concept for the banking industry, it is changing along with the digital landscape and gaining more popularity as competition among financial institutions (FI) for customers intensifies. Aside from engagement factors such as genuine interactions that include respect, listening, and transparency, consumers are expecting businesses to incorporate better fraud prevention measures to ensure personal information is protected while transacting business via digital channels.

This is critical as EMV enabled cards in the US are transforming how and where fraud occurs. Fraudsters are adapting and moving their focus from point of sale (POS) card fraud to new account fraud (NAF). In the digital age, consumers can, will and do sign up for new accounts via digital channels such as websites and mobile devices, making them susceptible to an increased risk of fraud. Best in class financial institutions are taking note. According to new data by global research and advisory firm Aite Group, improving the customer experience gathered weight as one of the most important factors in the decision to buy a new fraud solution. For financial institutions to remain competitive, they must find ways to improve channel strategies by delivering frictionless and consistent user experiences across channels for customer and consumer convenience and security while not opening the door to fraud.

It all begins with the digital identity experience, which is used to establish trust between the consumer and the FI. Here’s how it currently works: Consumers must type in personal information to complete their first transaction or establish an account. Then the business entity authenticates the protocol via some inconsistent method. The consumer must enter different credentials, per each new business entity. This can lead to ID/password fatigue, and even though businesses have adopted more consumer friendly techniques in this regard, the process is still largely insecure across business entities. Consumers will get frustrated by account lockouts and painful password resets. Finally, the account freezes due to false suspicious behavior alerts, leaving consumers with a bad experience that will typically have a negative impact on their relationship with the brand and possibly forcing them to move on to a competitor.

"Improving the customer experience gathered weight as one of the most important factors in the decision to buy a new fraud solution"

Though it sounds futuristic, most companies have the ability to streamline digital application processes and provide security. By using a combination of innovative technology, unique and differentiated identity data and advanced analytics, businesses can provide insights that drive better consumer digital experiences. Such a combination would allow consumers to provide their authenticated credentials to a new business entity without needing to key in or supply their personal information–just one single, secure credential to authenticate the same way for every business entity. With the help of a partner to offer differentiated and unique consumer profile and credit data to expand opportunities to improve consumer digital experiences and business outcomes across the digital interaction ecosystem, consumers can be well on their way to getting what they want–again, convenience and security.

These practices can be used to power interactions and to identify credit-eligible consumers with personalized and prescreened offers of credit, identify consumers within close proximity to their physical location to upsell or cross-sell special offers, extend credit and enable instant provisioning into profile or digital wallet and simplify and speed the application or purchase of goods or services.

The saving grace for businesses is that they seem to be aware of their blind spots when it comes to fraud and customer experience. Aite Group research further found that 59 percent of FI executives agree that fraud losses are the most important factor in the decision to buy a new fraud solution. Other factors include regulatory issues (15 percent) and payback period (11 percent). In over two-thirds of FIs, a cross-functional project team is focusing on how to improve the customer experience. In 74 percent of FIs, every new business case is examined to determine its impact on the customer experience, and there are multiple projects underway to improve that experience. Since 64 percent of executives see signs of action around the customer experience, clearly this is a case of FI executives reading the writing on the wall.

In Volume II of Arthur Schopenhauer’s The World as Will and Presentation, he says “we feel pain, but not painlessness...” I think this notion applies to financial institutions and their customers as well. Both feel the effects of fraud, but not a life without it. Not only is fraud intrusive and personal, but consumers who have experienced it, they have a diminished trust in their financial institution’s ability to keep them protected. And the financial impact will be felt. This year’s Identity Fraud Study by Javelin Strategy found that fraud costs consumers $188 per incident and a whopping $2,712 per incident for financial institutions. Businesses can’t afford to take a break from fraud or the user experience.