The case for real-time cross-channel fraud management solutions is one that has found its voice in leading analysts and Banking fraud thought leaders. It is no secret that multi-channel pervasion of services is always high on the agenda of Banks in fulfilling their customer’s demands. However, moves by Banks in this regard while achieving greater customer convenience also results in greater exposure to fraud. Current strategies by Banks in retaliation to this by way of customer education are short sighted in vision and delivery. This blog post attempts to address some of these trends bolstered by thought leaders from CapGemini, Gartner and Tower Groups.

Step 1: Cross-channeling customer delight!

Banking customers are increasingly expecting more personalization, convenience, accessibility and reliability across channels. There is a clear demand for banks to invest in making their channel network more customer-centric and user friendly. Technology advancements and changing client preferences have driven a shift in customer demands and usage patterns that has resulted in direct channels emerging as important media to reach a larger audience at a much lower cost. The five key trends across retail banking channels as observed in 2011 Retail Banking Voice of the Customer Survey by Capgemini :

1. Increased online market presence using advanced technology platforms such as Web 2.0 and social networks

2. Investment in enterprise mobile financial service solutions to drive innovation and reduce costs

3. Increased push towards web-based activities to put the online channel on an equal footing with branch networks

4. More emphasis on seamless multi-channel integration to better serve clients and gain competitive edge

5. Increased spending on customer analytics tools to improve customer relationships

Step 2: Cross channel also means cross channel fraud

Faster, convenient methods for banking create a lot of opportunities for banks but at the same time pose greater threats from fraudsters. Growth in online banking, emergence of mobile banking/mobile payments, accelerated settlement initiatives like Faster Payments and Single Euro Payments Area (SEPA) create potential targets for fraudsters. Part of the growth of maturity of the associated systems also involves understanding and investing in mechanisms like anti-fraud which serve as checks and balances to ensure that customers’ trust in the conveniences availed is not misplaced.

Step 3: Current State of Fraud Management

Many banks have invested in efficient fraud detection systems but monitoring a specific channel and may not be able to identify or predict fraud that involves activities across channels. As fraudsters get more sophisticated, their schemes more complex and the cost of fraud that can run into billions, banks need to recognize the need for having a 360 degree view of a customer to detect the fraud fast as well as in a better way. It has been demonstrated that frauds have a statistically significant reputational risk impact that is relevant both in terms of strength and length and that frauds detected due to customers’ complaints are more damaging from a reputational risk point of view than the ones detected due to internal controls.

“Many institutions only know about fraud when they get notified by the customer, and that is not indicative of an industry that is really trying to address the problem,” says George Tubin, a senior research director for TowerGroup, focusing on delivery channels and financial security.

According to the Faces of Fraud: Fighting Back survey, whose results have just been released in an Executive Summary by Information Security Media Group , 39 percent say cross-channel fraud accounts for less than 10 percent of all fraud incidents. “Many small to mid-sized financial institutions simply don’t believe cross-channel fraud is a problem .Institutions have a hard time determining when cross-channel fraud actually occurs, When they do see fraud, they see the end result, such as check fraud, and they classify it as a fraud that occurred that way rather than working their way back to follow the fraud trail” Tubin says.

Novarica’s research in 2011 revealed that 41 per cent of banks cite organizational silos as the main concern in detecting fraud. It also showed that many financial institutions blame a lack of resources as one of the main reasons for their anti-fraud strategy not working effectively.  76% banks believe that customer and employee education is the best way to fight fraud. But industry analysts beg to differ. “They are relying much on customer education and manual processed, rather than on automated fraud-detection processes and workflow”, Gartner VP, Avivah Litan, says.

The next step: Real-time Enterprise Fraud Management!

Today, as fraud patterns get more sophisticated and cross more organizational silos, banks need to invest in analytics, traditional channel security as well as a system that digests information obtained from different channels to provide actionable insights.  In order to combat cross-channel fraud, banks not only need to adopt technology that would give them a single view of the customer but also bring out organization wide consciousness that working in silos might not help anyone except the fraudster.

So is your organization ready for real-time intelligent fraud management solution? Is your strategy different – tell us, we’d love to know!

– By Madhavi Natukula

CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

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