Fraud Protection & Compliance
I’ve been writing recently about the results of our recent global consumer fraud survey. One of the most interesting takeaways for me is that banks have an opportunity for proactive, personalized customer communication, in the channel of their choice, to provide fraud detection and fraud prevention, as well as to manage fraud cases so that they can be bought to a conclusion more quickly and with a better customer experience.
But like most things, it’s not as simple as it sounds, as large customer groups are likely to switch banks if they are dissatisfied with their response to a fraud management incident (more on that in a moment). Expectations for customer communication are constantly evolving, and banks that don’t measure up may find their churn rates to be quite high.
As my FICO colleague Darryl Knopp notes in his article about humanizing the customer experience: “Find ways to be proactive and show [customers] that you care about their financial wellbeing.” What better way to show that care than working to detect, prevent and notify customers about fraud!
Providing good customer experiences isn’t just about helping customers when fraud has happened. Fraud detection is never 100% accurate, and while fraud teams look to drive down false positive rates, there will always be cases that look like fraud but aren’t.
In these scenarios, customer communication strategies are imperative. Think about a customer making a legitimate purchase, let’s say expensive diamond earrings. Because the purchase amount and the merchant are not normal transactional details for the customer, the transaction is flagged as a potentially fraudulent transaction.
A quick, automated SMS message from the bank can enable the customer to verify the purchase and avoid embarrassment at the checkout. Get it right and your customer feels protected; get it wrong and it’s a negative experience that requires significant resources to put right and can ruin customer relationships.
So how do customers want you to communicate?
Consumers Prefer Digital Communications
Globally, customers prefer digital communications over analog (e.g. a phone call). In my last post, I noted that: When we asked customers how they prefer to verify payments, nearly 80% globally said they prefer to use digital channels including text messaging, emails, bank apps, and 3rd party messaging services. The majority prefer text (43%) while another 17% prefer email, despite security flaws described as early as 2016.
But payment verification preferences vary significantly by country. In the USA, 64% of customers prefer a text message while only 2% want to use a 3rd party messaging app. Brazil, by comparison, is far more diverse; 28% prefer a text message, 30% prefer a bank app, and 12% prefer a 3rd party messaging app to verify payments. Thailand stood out from the rest of the global group in communications preference, where 41% of the respondents indicated a preference for a phone call to verify payments.
In other regions, such as the EU, regulation drives how customer verification happens with strong customer authentication defining that many payments must be authenticated with two of three methods:
- Inherence – something you are (e.g. a biometric)
- Possession – something you have (e.g your mobile phone)
- Knowledge – something you know (e.g a password)
This approach is being widened globally with the adoption of 3-D Secure 2 for card payments.
With all the diversity of preferences in the market, banks working to communicate with customers in their preferred channels clearly have their work cut out for them.
Gaps in Contact Information Can Create Negative Experiences
Inaccurate customer contact information may prove to be the fly in the ointment for banks when it comes to proactive outreach. 22% of credit card customers worldwide report that their card provider does not have an accurate mobile number for them. Debit card providers face similar rates of inaccuracy in customer contact information, with 18% of customers reporting inaccurate mobile numbers and 28% reporting inaccurate home addresses.
Basic customer contact issues aside, the increasing dependencies between mobile numbers, user security, and anti-fraud controls make this more than a data accuracy problem. In the UK nearly 20% report that their bank does not have the correct mobile phone number. If their card issuer is reliant on sending one-time passcodes by SMS to authenticate payments, they will be unable to do so. In many cases, the requirements of PSD2 Strong Customer Authentication do not allow issuers to bypass checks, and they will either need to find another route to authentication for that individual or the payment will fail.
Given roughly 50 million adults in the UK with a current bank account, 70% of which also have a credit card, more than 10 million will have a mismatch between their actual mobile number and the mobile number their credit or debit card providers wants to use to communicate, authenticate, and verify their identity and transactions.
Negative Experiences are Costly for Banks
What happens when banks struggle to contact and engage customers? The short answer is that they face significant repercussions. 83% of customers worldwide will either complain to their bank (56%) or change banks (27%) if unsatisfied with their bank’s response to a fraud event.
According to the US-based Bank Administration Institute (BAI), banks spend up to $10 per contact on the call center. Any upward pressure on contact center volume will result in escalating costs for banks, not to mention the propensity for customers to simply switch their bank. Clearly, proactive and personalized communications are vital for stability and growth.
Delivering on Customer Expectations
To recap: Consumers prefer digital outreach. But banks may be missing vital contact information to connect with a consumer, and that can create a negative experience. That negative experience can lead to increases in contact center costs, erosion of brand equity, and customer churn.
What’s a bank to do? As I mentioned in my recent overview of our Consumer Fraud Survey:
One recommendation for financial institutions is to personalize communication channels that are tailored to customer needs.
FICO’s innovative approach to this involves capabilities that support timely, personalized verification checks on suspicious behavior, through consumer-preferred channels and self-service confirmation options.
Using technology to support proactive outreach goes far beyond a dialer or an SMS option. It requires a dialogue between the financial institution and the customer, one that puts the customer at the center of the exchange and delivers an outstanding experience that’s minimally interruptive, quick and easy.
With FICO, you can proactively, automatically connect with your customers through their preferred methods, while maintaining accurate, centralized details to inform a 360-degree view of your customer relationships.
Fraud management is high stakes, both for banks and for consumers. The right technology partner can help you stack the odds in your favor – and meet increasingly demanding customer expectations.
For more insights about global consumer sentiments on fraud prevention, download our recent whitepaper: FICO® Consumer Fraud Survey: 2021.
Thoughts on consumer concerns about scams, or wondering how to put the best fraud detection and prevention tools in place at your financial institution? Tweet me on Twitter @identity_sarah.
How FICO Can Help You with Customer Communications for Fraud
- Review the FICO Consumer Fraud Survey: 2021 whitepaper for insights about global customer communications preferences and expectations.
- Read our Fraud Survey Results eBooks for specific stats about individual countries:
- Explore FICO Customer Communication Services for Fraud
