Major data breaches put consumers on edge in 2018, bolstering concerns about their financial information’s security. In fact, 53 percent of those in the U.S. reported being “very” or “extremely” concerned that their personal data had been exposed by a breach, as digital identity verification and authentication solutions provider IDology noted in a recent study – and their fears aren’t exactly unfounded.
Approximately 1.1 million Americans reported experiencing fraud in 2017, according to a 2018 Federal Trade Commission (FTC) report. The Consumer Financial Protection Bureau (CFPB) found in its own study that these consumers were often duped into transferring money to scammers, with 52 percent of fraud reported by older adults involving such transactions and 44 percent pertaining to checking or savings accounts.
Fraud doesn’t just hit consumers, though – it greatly affects FIs, too. Each dollar of fraud in 2018 cost banks and CUs about $2.92, a 9.3 percent increase in losses over 2017, but robust fraud-fighting strategies could help ameliorate some of the damage.
CUs need to take extra defensive measures to safeguard their customers and bottom lines as fraud rises. Those that do will stand out from the pack, positioning themselves to retain and win over more members.
Fifty-six percent of consumers said they were more likely to choose FIs that offer advanced identity verification methods, and 86 percent of CU members said security was the most important onboarding element.
Other FIs are also realizing this need. Eighty-five percent of them regard identity verification as a “strategic differentiator,” according to IDology’s study, and want to more quickly detect fraudulent accounts (41.7 percent), reduce fraud’s overall impact (41.7 percent) and minimize the impact on customers (16.6 percent).
CUs are employing various strategies to better authenticate members’ identities, creating a first line of defense while maintaining a seamless and friction-free process. This includes leveraging AI and machine learning (ML) to analyze various types of identifying information, such as geolocation and mobile network data, as well as using card controls and real-time alerts, among other tools. The latter two can also reportedly reduce the average number of fraud attempts that occur before a response, from 2.87 to just 1.05.
With data breaches challenging consumers’ safety and fraudsters eagerly mounting more attacks, digital account users are more wary than ever, and looking to their FIs for help. An effective fraud-fighting strategy can help CUs keep their members safe, protect their institutions from losses and stand out from the crowd.