Banking and related services are no different. The industry has been turned on its head by digital-only new entrants that were “born in the cloud” and, today, some competitors aren’t even banks at all. They’re service providers looking to “Uber-ize” payments with overlay services, using the real-time rails to which banks used to enjoy exclusive access.
Many heritage banks have responded to the new expectations set by these disruptive business models with their own equivalent services and experiences – and with admirable speed and agility, given their size.
From my position as a financial crime consultant at ACI Worldwide, providing on-the-ground consultancy services to traditional banks, neobanks and new non-bank entrants, I see this change most clearly in the way customer experience has climbed the list of priorities for fraud detection and prevention strategies.
It’s no longer the default position that some fraud types, including identity and account takeover, social engineering scams and authorized push payment fraud, are the customer’s problem (thankfully). That doesn’t wash with regulators, who rightly deem financial institutions (FIs) to be the experts on fraud and payments risk, rather than their relatively vulnerable consumers. It doesn’t wash with customers, either. Influenced by the predictive experiences of Amazon, Netflix and YouTube, they expect their bank to know they’ve been a victim of fraud – or attempted fraud – even before they do. They know their bank has enough data to know what their “normal” looks like and proactively alert them when something changes to protect them (even from themselves).
Serve, don’t sell
In that context, fraud detection and prevention are not only about stopping unauthorized financial transactions. They’re a jumping off point to create contextual, empathetic moments – non-financial transactions – that are an opportunity to touch customers in a service capacity rather than a sales one.
To do this, a modern payments risk management strategy (at least on its customer-facing side) must take a stance of educate and inform, not frustrate and interfere. And to do that, banks need to be able to accurately segment customers and assess risk on the fly, in real time. This can be achieved by enabling fraud and risk experts to develop bespoke behavioral profiles and leverage adaptive machine learning models that can be applied at a tactical level. It’s a myth that one size fits all when it comes to the customer impact of any other approach.
By truly getting to know customers in this way, banks and other financial institutions can tailor their level of protection based on what risk looks like for them as an individual. And they can do the same for the way they communicate with customers around fraud prevention when the need arises. Some customer groups, such as seniors who are typically less digital savvy, are more vulnerable to online fraud, while for some digital-natives this is less of a concern. But, in reality, most are somewhere in between.
To be able to treat each customer in a way that works for them, banks should be leveraging the data they hold to hunt for the genuine activity just as much as the fraudulent. And, based on advanced segmentation, they should be looking to create unique experiences for each customer that both reduce their risks of being a victim of fraud and ensure that, if the worst does happen, they know their bank has their back.
Achieving this will also allow banks to use their highly skilled human resources better, automating processes to reduce operational overheads and freeing up fraud prevention staff to focus on the highest priority work; servicing customers by protecting them.
How to capture this opportunity
Our new eBook, “Achieving Digital Differentiation Through Risk Management,” shares our experiences of how FIs can focus on three core areas to increase capabilities and improve operational efficiencies to capture the maximum upside of this potential opportunity. These are:
- Enhancing opportunity management and regulatory compliance through strong customer authentication (SCA)
- Democratizing access to machine learning and leveraging the power of shared intelligence
- Pursuing relentless efficiency through robotic process automation
Not all friction is bad
Some degree of friction is unavoidable to detect and prevent payments fraud, but not all friction is bad. Indeed, if your authorization challenges to the customer are seamless and tailored to them and what they’re trying achieve at any given moment, then they can have a service feel to them that is more likely to delight than disappoint.
Payments risk management in the era of digital transformation is about more than being good at fraud detection. It’s about being masterful at customer interactions. Because there are real people behind every detection rate KPI or false positive, and each one has unique expectations of their bank or FI.
To learn more about how a strong payments risk management strategy can be a key competitive differentiator that enables FIs to capture growth, download the eBook “Achieving Digital Differentiation Through Payments Risk Management.”
ACI Fraud Management for Merchants 
