The old adage is that a journey of 1,000 miles begins with a first step. In banking, the customer journey, of course, begins with the first steps involved in setting up a relationship — offering up names, addresses, Social Security numbers (SSNs) and a wealth of other data to set up accounts. However, that’s a process that needs to keep up with the times.
Jim Priestley, chief revenue officer at Feedzai, pointed out that mobile banking has changed in the past five years — and as mobile banking efforts change, so, too, must the ways banks approach account openings. Where once, as he said, “several years ago, the best mobile strategies were typically tied to top-tier banks, today, banks and credit unions of all sizes, from coast to coast, have effectively leveraged a growing FinTech ecosystem of tools, technology and partners.”
As traditional financial players and tech upstarts have banded together to embark on digital transformation, they have kept as top of mind a set of mobile strategies that have focused on the evolving needs of digital-first, digital-centric and, ultimately, digital-only customers in the years to come.
“Mobile strategies are no longer limited to checking your balance online or sending a payment to another member on your phone. These strategies … need to include the entire customer life cycle,” he told PYMNTS.
Among the keys to a successful customer life cycle is the act of opening an account — and a smooth experience can make or break a relationship at inception. An online customer experience is the key metric that drives new customer acquisition and retention.
“We have seen this play out with account opening — that first interaction with the brand. Good customers expect a frictionless, fast application experience that allows immediate access to funds and bank services upon account creation,” said Priestley.
However, along with the desire to create as frictionless an experience as possible for customers, it’s important to balance that endeavor against the need to protect them from the ever-evolving, complex fraud schemes gaining ground in an increasingly digital world.
“Many banks’ first reaction to a fraud attack is to create more hoops for applicants to jump through, or create more barriers to entry, thinking this will keep the bad guys out, without necessarily understanding what happened,” he said. However, “all applicants are not the same, so why should their application processes be? Banks can better ensure higher customer satisfaction with tailored experiences that allow them to automatically expedite low-risk applications, while only requiring step-up authentication when needed.”
He continued, “An effective fraud prevention strategy also allows banks to more aggressively acquire new customers who would otherwise be considered too risky.”
The Application Continuum
For financial services firms, noted Priestley, promoting a frictionless online experience should recognize and solve for gaps in current offerings.
“For example,” he said, “most applicants would prefer to submit an online application without having to go into a branch, but not even half of banks that offer online applications support the entire account application online.”
Instead, online applicants may be directed to a physical branch to complete identity verification, or provide other required documentation.
“The process does not need to be this cumbersome or tedious,” he said, adding that if a bank’s processes stay the same or are unwieldy to navigate, customers will continue to abandon the application altogether and take their business elsewhere.
The Friction Within
Friction is not limited to the customer. It’s also a huge problem for the banks themselves, as operational efficiency is less than optimal at many firms, Priestley explained.
“With outdated account opening solutions, banks are spending too much valuable time, and too many resources, [on] manually reviewing countless applications, simply because their solutions are not advanced enough to automatically recognize a legitimate or fraudulent application,” he said.
Finding solutions that can increase auto-acceptances and reduce manual reviews is imperative, he added.
“Now, more than ever, banks need to provide analysts with explainability and data visualization capabilities, to provide a more granular understanding of the key drivers of a decision,” he said. “Why was a certain risk score associated with the application? What connections can you see between the applicant and other entities linked to fraud? These are important questions that your fraud prevention solution should be able to answer — quickly.”
He noted that technology is constantly evolving, and there are continuously new ways to verify applicants (such as watch lists, credit bureau information, email reputation, IP intelligence, device ID, etc.) and acquire more customers.
“Advanced fraud prevention is really about being able to attack fraud from multiple angles,” he said. “For example, setting up a rule, where you can automatically send an application to manual review if verification information (bureau information or a credit score) does not match applicant information, is a great starting point.”
However, he cautioned against complacency. Relying on only a few fraud prevention efforts means “you’re still vulnerable to larger, more complex fraud attacks, and, therefore, still vulnerable to massive fraud losses,” he said. It’s important for banks to use solutions that can scale and adapt to modernize rigid and outdated platforms and processes.
For example, if there are large numbers of people opening multiple fake accounts from a certain ZIP code, banks’ models can learn to associate that ZIP code with risk, and flag applications containing it as suspicious activity. Robust visualization engines can actually show links between a SSN and multiple individuals if more than one name is associated with that SSN.
In addition, having a single view of all enrichment data — verification from third parties, such as know your customer (KYC) information or credit bureau details, a bank’s customer relationship management (CRM) data and cross-industry consortium data — allows for a complete view so better, more informed decisions can be made, and so fraud can be attacked from multiple angles.
“Real fraud prevention should be a multi-layered approach,” Priestley said. “In addition to rules, advanced machine learning models that learn through an automated feedback loop is critical.”