How banks can prioritize fraud prevention with the customer in mind

Technology is increasingly disrupting traditional banking and payment systems, and financial institutions face an ever-growing array of challenges in managing fraud risks while providing a seamless customer experience. Over the next few years, financial institutions will need to grapple with several key challenges in the realm of fraud prevention and mitigation. 

AI is a double-edged sword 

Fraudsters continually up their game by leveraging emerging technologies, and artificial intelligence (AI) is no exception. As AI grows in accuracy and use cases, it will be easier for fraudsters to create deep fakes and voice cloning to commit identity theft and prey on customers.  

Fortunately, the same technology exists for fraud fighters— AI will be essential for financial institutions in detecting and managing fraud. In addition, by efficiently analyzing large amounts of data and spotting inaccuracies that a human could miss, AI can free up resources so financial institutions can focus on improving these technologies and minimizing discontinuity in the customer experience. 

The importance of communication and explainability 

Before thinking through specific fraud-fighting tactics, financial institutions need to think about their impact on the customer. Leadership may think, “Shouldn’t we simply find ways to make it more difficult to break into secured accounts?” However, this approach often neglects the customer. An added protection could become a burden, especially for certain customer segments, and won’t always seem logical to the layperson who is simply trying to access their account. 

Because of these complexities, financial institutions need to ensure their security processes are invisible to the customer and easily explained when needed. Customers don’t need to know how many layers of protection are embedded within their accounts—they just need to easily access their account, validate their identity with minimal effort and get support if they get stuck in the process.  

Leveraging biometrics 

One method of secure verification without making it too complicated for customers is leveraging biometric authentication. Biometrics is the industry-standard security protocol that can help customers validate their identity. Through tools such as facial and voice recognition, in addition to device and login patterns, customers can get immediate, easy and secure access to their accounts with little manual effort. Biometrics will remain the solid identity verification standard across financial services.  

The power of behavioral analytics 

Adopting behavioral analytics is another excellent way to provide a quicker and more seamless way to verify customer or potential customer identities. Behavioral analytics finds abnormalities in how an applicant or customer interacts with the company’s interfaces, such as apps and websites. For example, analytics can track how fast someone typed a name or a social security number, how many mistakes were made or how long it takes to answer the designated security questions. Based on this and a network of similar information, financial institutions can seamlessly assess risk while providing valid consumers with a delightful experience.  

Behavioral analytics can also help eliminate the need for identity verification by stopping fraud at the source. Over time, advancements in behavioral analytics will drive better real-time fraud detection and help provide more robust fraud prevention resources without compromising the customer experience.  

Regulatory compliance 

Financial institutions operate in a highly regulated environment, with stringent requirements for customer identification, transaction monitoring and data protection. Quite often, the line between real-time fraud prevention and regulatory compliance blurs, which provides fantastic opportunities for streamlining infrastructure and operations that manage both needs. Tools used for regulatory compliance often help deter fraud by flagging data inconsistencies and vice-versa. Leadership should consider regulatory compliance more than a check-the-box item and opportunistically leverage customer touchpoints for both regulatory compliance and fraud prevention.  

A key component of seamless consumer banking experiences moving forward will be the ability to constantly adapt and fight against fraud in an evolving technology landscape. In a highly regulated, evolving industry, financial institutions have to be nimble and open to embracing new tools and technologies to keep themselves and their customers protected. By establishing trust with customers early in their lifecycle and adopting the right strategies and technologies, financial institutions can get a leg up in the ongoing struggle to balance security with a positive customer experience. 

Gaurishankar Gopalakrishnan is the head of enterprise fraud, collections and recoveries at Mission Lane.