In light of FICO’s European fraud map, published last week, we know fraud is on the up! Now the debate is over what to do about it.
One reason for the rise in losses is a focus on the customer experience, as FICO’s Martin Warwick has explained. Banks in the UK and some other countries brought fraud levels much lower, then focused on how to make the purchase process much more streamlined. This has allowed fraud losses to rise. Martin Warwick has suggested that banks will now look at how they can bring losses back down, including through automated contacts and verification.
This seems obvious enough, but has prompted some publications (perhaps desperate for a headline) to suggest that consumers will be barraged by “annoying phone checks” to verify transactions are genuine.
We beg to differ. A recent FICO survey found that 91% of participants were happy with auto resolution, and 89% said auto-resolution had increased their confidence in using their card. Targeted and focused customer contact doesn’t have to mean encroachment, it can mean empowerment!
Martin would be the first to note that automated verification isn’t the only way card issuers will be fighting fraud. Continued investment in fraud detection capabilities, and advances in online risk assessment such as FICO’s new behavior-sorted lists, adaptive analytics and merchant profiling will give financial institutions the ability to identify more fraud.
But there will always come a time when customer engagement is necessary to confirm abnormal activity, and to protect accounts from potential abuse. Automated transaction and activity verification is a vital tool in the armory of many financial institutions to reach more customers than would be possible with just human agents.
My colleague Brian Kinch and I have recently been blogging about the necessity of customer interaction during fraud verification, how to make fraud protection a better customer experience, and how to use customer preferences to improve fraud resolution.
Automated communication and case resolution is becoming a necessity for all institutions with fraud verification needs. With the emergence of mobile devices and electronic communication channels, institutions can engage with their customers using multiple media channels, in intelligent automated dialogs. By getting to know customers, and using this knowledge in segmented contact strategies, lenders can create a better experience for them, and ultimately increase the speed and success of communications.
One FICO client has seen that customers aged 30-59 are 7% more likely to resolve fraud alerts by voice than customers aged 29 and under. Interestingly, another FICO client has seen that those aged 30 and under can be twice as likely to respond to an interactive SMS than older customers. It’s all about knowing YOUR customers.
Correctly built and implemented verification tools using an intelligent, demographic-based contact strategy, and targeting earlier activity prior to transaction declines, can ultimately lead to a better customer experience, and more importantly, customer loyalty.
For a look at fraud trends across Europe, check out our new infographic: