Galileo: Banks Need to Predict Customer Experience to Combat Fraud

Forget everything you knew about fraud and fraudsters.

Financial institutions must grapple with the dual challenge of countering increasingly sophisticated fraud attacks as fraudsters harness artificial intelligence and machine learning technologies. The flip side is ensuring that the customer experience is seamless through the entire journey with the bank.

Max Spivakovsky, senior director of strategy and operations, global payments risk management and onboarding at Galileo, told PYMNTS in an interview that banks walk a tightrope as they deliver digital services and payments choices to their end customers while guarding against scammers and cybercriminals.

That balancing act mandates that FIs use both proactive and reactive approaches, and technological tools, as they defend themselves while creating a personalized, convenient customer experience, he said.

“The legacy solutions just don’t work anymore,” he told PYMNTS. “Leveraging a single tool used to be the ‘paramount’ strategy of fraud mitigation years ago, but now it’s just not applicable … the FIs must think about fighting fraud with a holistic perspective.”

The holistic perspective can pay dividends while protecting the FI from financial losses and reputational risk, he said.

“The client experience drives the engagement, and utilization of [banking] apps and programs,” he said.

Increased engagement translates into longer-lived, stickier relationships, more deposits at the bank and willingness to try new services and products.

Asked what a proactive strategy might entail, Spivakovsky said banks should ideally be able to predict the customer experience and shifts in customer spending patterns so they can tailor new offers in context. Reactive approaches contend with fraud that has already happened and include the need to inform customers in real time, through in-app notifications and other outreach efforts, of the steps they must take to protect themselves.

No Need to Go It Alone

All of this costs time and money, especially if banks try to do it in-house.

But “financial institutions don’t have to build or manage these tools alone,” said Spivakovsky. “There’s always support.”

The financial services industry is moving away from the days when banks took charge of everything, keeping all data and processes on-premises. Now the shift is toward relying on FinTechs and other providers to get real-time fraud prevention in place and to identify emerging fraud and scam patterns before they wind up hurting banks and their customers while improving the customer experience, he said.

Each side of the equation — the bank and the FinTech/solution provider — can bring their respective strengths to the relationship. For FinTechs, banks bring knowledge of exactly who their customers are and how they want to tailor a given customer relationship. The FinTechs, in turn, can and do offer platforms that can be adjusted for any client and improve the payments experience so that card transactions, ACH and faster payments are all enabled in an omnichannel fashion.

Taking the example of card payments, Spivakovsky noted that platforms serving banks must be able to tackle real-time decisioning and signals that can determine if plastic or virtual cards can (or even should) be issued to would-be customers across individual and commercial use cases. FIs seeking to protect clients and safely take new clients on board have been turning to FinTechs and consortiums to take care of the know your customer (KYC) and know your business (KYB) processes that happen in the background and battle the rising tide of synthetic fraud.

“AI, machine learning, large language modeling will help us better combat fraud by making fraud detection more precise, while at the same time proving more adaptive to the new threats,” he told PYMNTS. “Understanding the client experiences and what exactly the clients are trying to achieve will help us to be much more proactive in the ways we would like to engage the customer within their digital journey.”