FICO Study Reveals the Top 3 Findings Regarding Financial Fraud in Mexico

Highlights:

• Having good fraud protection" is the number one consideration for 38% of Mexican clients when considering a new bank, with 75% placing it in their Top 3.
• 31% of clients would halt the opening of a personal bank account if identity verification were too complex or time-consuming.
• Banks face a high risk of first-party fraud, meaning fraud committed by the client themselves, as over one-third of respondents see exaggerating income when trying to open a bank account as a normal action.

Mexico, March 22, 2024 - FICO, a global leader in predictive analytics and decision management software, has released the results of its "2023 Consumer Survey: Fraud, Identity, and Digital Banking" for Mexico, based on surveys conducted with consumers of banking services in the country last November. A key takeaway for professionals in the financial sector is the need to strike a balance between fraud prevention strategies and those aimed at providing the best customer experiences.

According to the study, there are three key findings that fraud teams and banking business areas should consider when shaping their future strategies. These are as follows:

1. Trust is a Two-Way Street

Customers need to trust their bank, as the survey showed: an overwhelming 75% of banking consumers in Mexico believe that having good fraud protection is one of their top three considerations, with 38% considering it the most important factor, ahead of others such as "ease of use" (29%), "good value for money" (12%), or "ethical use of customer data" (8%).

However, a revealing finding from the exercise is that, for 41% of Mexicans, exaggerating income on financial product applications - which constitutes first-party fraud - is considered acceptable or normal behavior in some circumstances.

The cost of living in Mexico may lead to financial strains, and falsifying data could be the only way to secure credit, but these customers are likely unable to repay. FICO's recommendations for banks include:

• Ensuring that all applicant data and their requests are available in a format that can be used for fraud detection.
• Using analytics to detect anomalies suggesting attempted deception.
• Continuously monitoring accounts for signs of behavior that could lead to fraud or default.
• Having clear definitions of first-party fraud, third-party fraud, and synthetic fraud to manage risk effectively.
• Properly handling cases that appear to be fraud to prevent headaches for collection teams.

2. Banking Fraud Worries More Than Cash Theft in Mexico

According to the study results, respondents are more concerned about banking fraud than non-banking fraud, such as cash theft or scams while making online purchases. Identity theft-related fraud was the most likely to appear in customers' top three concerns, ranking first as a primary concern with 36% of responses, followed by concerns about being defrauded with 27%.

However, while Mexicans are concerned about identity theft and for 63% of respondents, having their identity used to open an account is one of their top three fraud concerns, a third (31%) say it is unlikely to have happened to them. Nevertheless, this can pose a significant risk, as 6% of Mexicans acknowledge that a criminal has used their stolen identity to open a bank account. "It may not seem like much, but it could amount to 6 million victims," said Rafael Caballero, Global Business Consulting for Mexico and Colombia at FICO.

Banks must manage various types of fraud throughout the customer lifecycle, each with the potential to damage the experience. These are our recommendations:

• Breaking down silos in identity verification, with data ingestion from internal and external sources accessible to all for appropriate use.
• Sharing data to achieve better results that reduce fraud losses and optimize customer experience.
• Putting the customer at the center of the strategy, adopting an approach that incorporates all possible types of fraud and works across different portfolios and channels.

3. Identity Verification is the New Competitive Advantage

For 54% of customers, opening a bank account digitally is more likely now than a year ago, but they expect agility in the application process: two out of three (67%) want to spend less than 30 minutes on this. If identity verification is too difficult or time-consuming, a higher percentage of consumers will abandon the application compared to the results of the survey from a year ago.

Currently, there are many ways to verify the identity of bank customers, with new options continuing to emerge. For those surveyed by FICO, the top three authentication methods that provide excellent protection are facial scanning, fingerprint scanning, and iris scanning (in that order), but when evaluated for preference of use, the order is fingerprint scanning, facial scanning, and iris scanning. However, while biometrics is preferred, there is no one-size-fits-all scheme. It is crucial to consider consumer opinions on the relative efficiency of solutions before deciding what to implement.

To make fraud protection a competitive advantage, FICO recommends:

• Orchestrating which solutions to implement and in what order, depending on the unique circumstances of each verification.
• Adding and removing identity verification systems as needed with simple API integrations.
• Identifying at which point in the process people abandon their applications.
• Seeking bidirectional and automated communications to help applicants overcome any difficulties in the process.
• Achieving adaptive fraud protection, where all data and identity solutions work together with centralized decision-making.

"Fraud teams may be considered a necessary general expense to reduce losses, but our survey proves that fraud departments are vital for attracting new customers and building trust," highlighted Rafael Caballero.

Likewise, "for financial institutions to achieve the perfect balance with effective fraud prevention that cares for the customer experience, FICO® Platform is the best option for many reasons, including: discovering suspicious activity by linking records of known fraudulent accounts; improving the experience by allowing workflow-based orchestration that covers multiple processes; its models reduce false positives, with additional fraud control only for applicants who warrant it, avoiding customer frustration, and providing savings with its ability to simulate, test, and compare strategies before deploying them," said Luis Silvestre, FICO's Business Consultant. "Implementing change is difficult and disruptive, but with our technology and FICO experts, financial institutions can accelerate the time-to-value of their investments," he added.
 

About FICO 
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and has been made available in over 40 other countries, improving risk management, credit access and transparency. 
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Media Contact:
Olivia Castañón
Porter Novelli for FICO
olivia.castanon@porternovelli.mx

Marcela Garfias
Porter Novelli for FICO
marcela.garfias@porternovelli.mx