Hyper-Personalization: How to Blend Fraud Management and CX

Hyper-personalized fraud management is becoming integral to banks’ abilities to extend fraud-protected but friction-free customer experiences

Customers are diversifying their communications technologies, channels, and payments. People have grown accustomed to immediacy in everything they do, including making purchases and moving money. This creates an immediate challenge for fraud management, which we found in recent FICO survey data.

Most consumers are aware of the threat they face from scams — 65% report they have received a scam text, email, or call. Yet, over a quarter have reduced or stopped using a checking, savings, or credit card account (see chart) because identity checks were too complicated. In other words, consumers will change their behavior if fraud controls aren’t convenient or cause frustration.

Still, over a quarter of consumers also say they would feel positive about their bank if it proactively stopped a scam payment they had made. So, consumers want to go fast, but also want do-overs when things go wrong.

Getting just the right degree of friction in the customer experience to satisfy current customer expectations and combat today’s frauds requires hyper-personalization.

Why Hyper-Personalization?

The purpose of hyper-personalization, in a fraud context, is to ensure customers have the freedom to do what they can with their money and banking services without becoming a victim of fraud. An equally crucial aspect is not having their banking services disrupted because a fraud control strategy restricts them — in their eyes — unfairly

From a management perspective, some of the main goals for hyper-personalization should include:

• Gaining a full understanding of customers’ requirements in managing a potential or actual fraud attack effectively.
• Determining where there is need for improvement in today’s processes at every fraud touchpoint, end-to-end.
• Transforming the customer experience positively as it relates to potential or actual fraud events.
• Ensuring the customer is assigned to a segment where the risk appetite and customer experience are relevant to their exposure to fraud, or their prior experience with fraud countermeasures.
• Instilling confidence in the bank’s fraud protection methods and customers’ ability to use their products safely.
• Assuring clarity, empathy, and responsiveness in all customer-facing fraud activities by focusing on experience rather than just procedural compliance.
• Providing guidance in all fraud management disciplines and being recognized as the fraud expert.

When fraud management processes lack hyper-personalization, they may also lack the greater contextual view and insight needed to identify and manage the kinds of frauds commonly happening today. This may result in false positives and negative customer experiences, with negative consequences for the bank’s customer relationships.

Improving Key Customer Lifecycle Touchpoints

There are a few key points in the customer lifecycle where personalized experiences can make a crucial difference. These can include when a customer is opening a new account; is traveling; becomes financially stranded due to theft or fraud; is locked out of product functionality, like their credit card; or has been conned into sending money to a scammer.

In any of these scenarios (and many others), hyper-personalization can make the difference between a negative situation for a customer and an easy one. Here are some examples of how hyper-personalization can balance positive customer experiences with effective fraud detection:   

	Account opening: FICO data has shown that 38% of consumers worldwide will abandon an account opening process for a credit card (40% for a bank account) if the identity checks are too cumbersome. Hyper-personalization can streamline those identity checks to simplify the experience without sacrificing customer authentication.
	Travel: Consider the frustration a customer experiences when arriving late to a hotel after a long flight, only to have their credit card purchases declined on arrival — even though they had called the bank ahead of time to provide notice. Hyper-personalization based on data like customer location, last known card use location and previous card use can tie these loose ends together to help customers with what they genuinely need to accomplish.
	Financial stranding: The lovely couple down the road has retired. As offers are made on their charming home, they make an offer on their dream retirement cottage. As they prepare to move, they find themselves stranded without a mortgage for their new home due to delinquent activity on their credit file.  Their details were part of a data breach they never knew about, and fraudsters have used their information. Hyper-personalization can allow the lender to engage directly with the applicants, as well as pull in additional third-party data as needed to help deliver a loan that works for their goals.
	Lock out: Father’s Day is around the corner and Lupita is excited to buy her husband a wonderful gift from a fancy store she never dared to enter before. As the discerning clerk looks on skeptically, her card is declined because of a false positive – it’s a bigger purchase than normal and she hasn’t been there before. Hyper-personalization could help the issuer analyze in real time all relevant data about the account and the transaction and immediately engage with her on her favorite communication channel.  This could result in a quick notification via WhatsApp, allowing her to confirm it is her and ensure the transaction is approved.
	Scam: Even though the IRS isn’t calling, people are terrified by the idea of a back tax bill. Scammers know this and robocall and text consumers, impersonating agencies and threatening arrests unless payments are made now. The create a sense of urgency which results in consumers sending real-time payments (RTP) as part of the scam. Hyper-personalization techniques can help intervene with targeted, timely communications like SMS messages, warnings in a bank app prior to making an RTP, and evaluation of data points like payment beneficiary and payment amount to follow unique, scam-specific fraud intervention strategies.

Context is Everything

The foundation that enables hyper-personalization is context. Can your fraud management analytics discern between a scam and a legitimate transaction? If a customer’s card is declined for an out-of-town late hotel check-in, that’s not good enough. The process lacked sufficient context to discern an uncommon, out-of-town transaction (which might be fraud) from a real customer in need of a frictionless payment experience.

Bringing in the right data to provide this broader context, along with orchestration to apply it in these and more scenarios, is what can make hyper-personalization highly effectively at balancing fraud controls with frictionless customer experiences. In the end, hyper-personalization will help your organization continue to effectively fight fraud, while delivering on customer expectations.

How FICO Can Support your Hyper-Personalization Efforts

• Explore FICO’s comprehensive fraud protection and compliance solutions
• Review my FICO World presentation on how to use hyper-personalization to balance fraud prevention and customer experience
• Read how orchestration lets you balance real-time decisions and interventions with customer expectations
• Learn more about two-way, contextual customer communications for fraud management