One of the things that I did not anticipate being asked last fall at the FICO APAC Fraud Forum was whether managing fraud at an "enterprise" level actually had any real value.
Conventional wisdom has promoted a customer-centric approach (as opposed to a product, account or event approach) for some years now. While the means of achieving this has changed focus somewhat — from the initial monolithic "single system does everything" to the "single platform supporting various inter-connecting modules" — the general consensus is that the more information and attributes available about the customer, the greater the propensity for accuracy of risk assessment and appropriateness of treatment.
Now someone was challenging the rationale. Sometimes the simplest of questions are the most thought-provoking: This felt like an emperor’s new clothes moment!
This challenge got me thinking whether there is ever an argument for not taking a more customer-centric approach, or even whether conventional wisdom might eventually be overhauled and "enterprise" become a thing of the past.
Taken to a logical conclusion, taking a truly customer-centric approach would mean knowing pretty much everything about a customer. Most banks do not have that luxury.
Customers can be both fickle and promiscuous in their financial product acquisition, use, connections and willingness to share information. How many of us have accounts or financial products with more than one organization, and with more than one financial associate (e.g., a mortgage or a joint account with a spouse) and how many of us would prefer that not every element of our financial history be drawn together?
Certainly regulators have recently been active in monitoring the suitability of organizations taking information innocently or inadvertently divulged by customers about their preferences and using them to manipulate what is then presented to the customer.
Also the principles of Big Data refer to the capability to draw sometimes unexpected conclusions from a wealth of sometimes seemingly unrelated information. Some remarkable findings are originating from those sorts of analyses, and therefore if customer-centricity is about pulling all known connected information together, is this just one viewpoint and are we missing a trick in excluding the unseen data?
Some people may assert that there are good arguments for not pursuing the enterprise approach. But I believe these arguments are centered upon the evolution of the enterprise approach, not a revolution of past thinking.
For a while now I have been promoting what I see as "the next stage" of enterprise. We have gone through the eras of connected decisions and holistic account management but enterprise is part of the journey, not the destination.
I believe the evolution is going to take us to the point of customer selectivity. This is where the customer, supported by the regulators and enabled by all of us in the banking industry, has the choice of what information they reveal can be used for what purpose. In the same way as a customer has long been required to "opt in" or "opt out" of certain services and offerings, so they will be empowered to elect characteristics and select data vectors that can be used in concert, and to suppress anything which they consider inappropriate or irrelevant.
I don’t see customer selectivity being applied to suppress all data elements that are in the organization's, industry's or public's interests to share. But I can foresee customer selectivity applying to elements that are more circumstantial or behavioral. It is, therefore, going to become incumbent upon us all in a customer education context to explain what data we are seeking to link, why, and what the benefit will be. We need to be ahead of the curve here so that consumers do not unwittingly exclude information which could prove incredibly valuable if combined and shared in helping prevent fraud and reducing false positive results.
I actively encourage an industry debate on these issues, and I’d like to thank that individual for asking a question many people wouldn’t. I certainly look forward to more of the same type of challenges at this year's Forum!
For more thoughts on enterprise fraud management, watch our recent Fraud Minute with Julie May.
