With the number of data records breached in 2019 surpassing four billion, fraud prevention and regulatory compliance are, inevitably, top priorities for financial institutions (FIs).
A recent report from Javelin, for example, found that FIs are significantly more focused on investing in digital fraud mitigation than companies in other industries. According to the report, 52% of consumer banks plan on implementing additional security solutions to keep customers’ accounts secure, and 46% want to invest in better identity verification measures.
But with attention – and budget – devoted almost exclusively to security and compliance, it’s easy for areas like innovation, customer engagement, and user experience to fall by the wayside. In the report cited above, only 28% of banks indicated an interest in adding support for new channels.
The situation is more complex than simply devoting a larger share of the budget and focus to fraud prevention and security: as companies find new ways to engage with their customers through new features and touchpoints, criminals find new vulnerabilities to exploit.
It’s no surprise, therefore, that more than a third of companies in the study report that “fraud is a significant impediment to digital innovation efforts, forcing them to slow the expansion of their features and functionality as they seek ways to mitigate the new risks these innovations attract”.
Fraud prevention on the spot
Research and experience have showed that fraud mitigation and cutting-edge security strategies can go hand-in-hand with – and even drive – innovation, customer engagement and a great user experience.
Consumers have indicated that they want more information about their transactions and more control over authenticating them. Today, digital channels enable financial institutions to give their customers the insights and control they demand, while making it easy to check all the necessary security and compliance boxes. With the right approach in place, there need be no trade-off between fraud mitigation and customer engagement.
Imagine, for example, a state-of the art in-app messaging solution that combines instant communication with banking-grade security and on-the go self-service functionality. A customer can be alerted when a suspicious activity occurs on their account, with the option of responding immediately by approving or rejecting the transaction before it’s processed. This eliminates frustration and other effects caused by false declines, while putting the customer in control of fraud prevention.
Turn insights into relevant engagements
Many FIs are starting to realize that there’s a missed opportunity when it comes to making the most of insights they already have on their customers. Even though the use of consumer data is a matter of increasing global concern – as regulations like Europe’s GDPR and California’s Consumer Privacy Act illustrate – much can be gained from using insights for good. And in the case of banking, what’s good for the customer is also good for the bank.
Customers demand relevant, personal experiences from their banks. If they don’t get it, they’re not afraid to look elsewhere – a recent report conducted by Capgemini indicated that 63% of consumers are currently using a financial product from a big tech company. But banks that are willing to invest in personalization and tailor advice, loyalty offers, and relevant products to customers based on their profile, will reap rewards. BCG reports that one bank that reinvented its personalization strategy saw a 20% increase in revenues over three years.
Use engagements to build trust
Apart from gaining revenue, banks can also use relevant, meaningful engagements with their customers to build trust and foster lasting relationships. In the U.S. today, the most-used functionalities of mobile apps have been checking account balances, managing card controls, and depositing checks.
With peer-to-peer payments becoming an increasingly popular and familiar function in banks’ mobile apps, banks have introduced another touchpoint through which they can engage with their customers, increase loyalty and provide an alternative source of revenue.
While introducing faster payments services ticks a big box when it comes to addressing customers’ needs, fraud and security remain crucial considerations – and potential roadblocks to adoption. Traditionally, banks have used the lapse in payment completion as time to examine transactions and respond to suspicious activity.
Now, the pressure for speed has impacted the time available to ensure accuracy. But by implementing a truly customer-focused omnichannel authentication strategy, FIs can offer customers a one-touch in-app authentication experience that engages them in real time, all while eliminating fraud and providing a great user experience. The bank can rest assured that it has digitally signed proof of consent of the transaction, while the customer feels secure, in control, and on the way to transacting more.
Opportunities moving forward
It is more important than ever for banks to remain competitive and innovative, but it should not come at the cost of customers’ security and increased fraud rates. Preventing fraud and delivering the best in digital security comes down to identifying the customer and engaging with them securely, when and where it matters. Keeping them engaged and building loyalty is a matter of trust, built by offering consistent, relevant experiences regardless of when and where a customer chooses to interact with their bank.