May 11, 2015
The existing approaches banks use to manage fraud are broken! Fraud occurs before it can be detected and its identification is not very accurate. It takes a long time to resolve fraud causing consumer frustration.
To make matters worse, the two-way communication between consumers and banks to resolve fraud isn’t ideal either. The experience usually starts with the consumer experiencing a moment of shock when their funds are compromised or a credit card is lost. They then pick up their phones and talk to a bank agent, the agent generates a case and blocks the account, a point-of-compromise is identified and after several days a new account is finally issued for the consumer to use. It’s a slow, laborious, and painful experience.
Most banks typically manage fraud in two ways. The first approach involves enabling necessary platforms and tools as well as enforcing policies that help in identification and prevention of fraud. The second approach involves refunding consumers for any loss due to fraud. The latter approach is worse because it trains consumers to be negligent of their surrounding environments.
In the end, the fraudsters win and the banks lose. Consumers aren’t winners either since they risk losing their identities to fraudsters who may cause them further harm.
It’s time to reboot the entire fraud identification, management, and prevention process. Using new digital and algorithmic platforms, data analytics and borrowing from new products introduced by start-ups, banks can design an experience that’s not only consumer-friendly but also allows some control to consumers for preventing fraud. A few such approaches are highlighted below:
Firstly, some basics:
Secondly, digital-led approaches that make use of new technology can be used to redefine the way fraud can be prevented:
The banking experience is going to change forever. Consumers aren’t going to tolerate the embarrassing moment of their cards declining during the moment of purchase or the frustrating experience of calling banks to close accounts and wait for a new account to be issued. Banks will need to embrace digital and new technologies in a rapid manner. If they don’t, they risk losing consumers to those that create products like BillGuard, Ondot and Bionym.