Balancing Fraud Prevention and Customer Experience

This blog is a guest post from our partners at Alloy

Our clients are often faced with the same dilemma: how can they optimize their digital onboarding experience without compromising their fraud prevention standards? Your digital onboarding experience could be completely frictionless, but are you letting in too many fraudsters? On the other hand, you could bring your fraud numbers to virtually zero, but are you manually reviewing each application?

It’s not an easy balance to figure out, but it’s becoming increasingly important in today’s digital banking landscape. The pandemic drove more people online for grocery shopping, work meetings, medical visits, happy hours, and everything in between — including banking. And as users become more and more spoiled by seamless digital experiences from companies like Apple, Uber, and Peloton, they expect that same level of customer experience from all of their apps — again, including banking. At the same time, the pandemic drove an estimated 10-15% increase in identity and account takeover fraud.

Do banks agree with these trends?

In a recent survey, we found that 64% of leaders at enterprise banks said a growing proportion of their customers expect fast, fully-digital experiences and 65% said that increasingly, fraudulent applicants are outmaneuvering their identity decisions. On top of that, less than half said they believe their current identity decisioning tools are very effective at account opening, credit applications, or investment accounts.

Fraud processes and customer experience are closely related to each other. Organizations that are not confident in their identity, fraud & risk decisioning will fall back to manual and offline processes. When you bring things offline, there goes that seamless digital experience your customers are expecting!

The truth about digital account openings today

You’d think that all banks have digital account opening functionality today, right? I mean, we just spent the better part of two years trapped inside our houses and apartments without being able to go in-branch even if we wanted to. Well, think again! Our survey found that around half of all “digital” account openings and credit applications are still not 100% digital. This stat makes me die inside a little more every time I read it. The second you bring people outside of a completely digital experience is the second you will begin to see a drop-off.

Let’s change this.

An automated fraud prevention process will make the onboarding experience a breeze for your customers. Don’t lose people when they’re already at your virtual doorstep. If your onboarding experience is still a bit on the manual-side, here are three tips to create better, automated fraud prevention processes:

1. Assess your current state. Ask yourself, if you needed to change the backend process for making a decision about a customer today, what are all the things from rule execution, getting new data, changing thresholds, etc., you would need? If you needed to change that today because of a new fraud attack, what’s the time to that being in production? Would it be a week? Would it be two weeks? Would it be two months? Would it be two years?
2. Focus on the human side of things. The “right” technology becomes even more powerful if you adjust how your teams work together. Your compliance, fraud, risk and customer experience teams can't work in silos. Get them in the same room to talk about what they’re seeing and how to approach the growing and ever-changing fraud landscape.
3. Upgrade your technology to move with fraud. Fraud isn’t a static ‘enemy.’ In the fraud space, agility and flexibility is the whole game. Can you quickly add a new data source to your fraud prevention toolset or make swift changes to your workflows? Or would it take engineering resources and time to get these changes live? Select a fraud prevention tool that you can easily tweak to fit your evolving needs.

Fraud isn’t going away. The demand for fast customer experiences isn’t going away either. Embrace technology that enables you to offer a safe and seamless experience.