Balancing Fraud Prevention and the Customer Experience at Financial Institutions
By Shirley Inscoe, senior analyst at Aite Group
Just a few brief years ago, financial institutions (FIs) weren’t really focused on the customer experience. With the exceptions of making sure ATM downtime was minimized, branches were staffed appropriately, contact center calls were answered within acceptable time frames, and the online banking system worked properly, bankers were just doing business as usual. The world has changed dramatically, and many FIs with a focus on the customer experience have created a new department whose primary goal is to ensure every aspect of a new product or process is evaluated in the context of its potential impact on customers.
As the importance of the customer experience has grown, so too have fraud threats, seemingly attacking FIs from every direction and from around the globe. The dual threats of application fraud and account takeover are both growing quickly. While properly verifying the identity of applicants and authenticating existing customers are extremely important, these goals sometimes clash with the desire to minimize negative impacts to the customer. What happens when beefing up risk management requirements and improving the customer experience collide?
FIs are really serious about improving their customers’ experience with every interaction, and it is evident not only in what they say, but in what they do. In my recent study Financial Institution Fraud Trends: ATO and Application Fraud Rising Rapidly, 44% of FIs report that the customer experience is a very important component of a business case for a new fraud solution, and an additional 39% say it is an important component. Indeed, 9% of FIs state that improving the customer experience is the most important component of the business case for a new fraud solution.
While this level of emphasis on customer experience is relatively new, it is taken very seriously at the majority of FIs, as demonstrated by these findings:
- 68% of FIs have a cross-functional project team working to improve the customer experience.
- 74% of FIs have multiple independent projects underway to improve the customer experience.
- 74% of FIs examine every new business case for its potential impact on the customer experience.
- 83% of FIs state that improving the customer experience is an important component in a business case.
Another interesting aspect of the customer experience department is the role it plays in selecting and funding new fraud solutions. At 12% of FIs, the customer experience department selects new fraud solutions, and at 11%, it also funds new fraud solutions. While those percentages may seem low, this is a significant difference than in the past, when the customer experience department would have not been involved at all in fraud-solution selection or funding. It will be interesting to watch if this level of influence continues to grow.
For the benefit and protection of customers, it is vitally important that FIs find the best balance between risk mitigation and the customer experience. While customers demand convenience, they also expect their accounts to be protected. Achieving both goals is the challenge for every FI to remain competitive in today’s market environment.
For more information on this topic, listen to a prerecorded webinar presented by Equifax and Julie Conroy of Aite Group titled “Walking the Tightrope: Striking the Balance Between Fraud Prevention and UX.” Click here to listen to this complementary webinar.
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