By Barley Laing, UK Managing Director, Melissa
The pandemic has helped to fuel an increase in fraudulent activity, with more people engaging and transacting with organisations online. In the banking industry this has been borne out by figures from the Office for National Statistics (ONS) which has found a 68 per cent increase in remote banking fraud in 2020. Research from UK Finance reveals that £479 million was lost to scams in 2020, where people were tricked into making bank transfers to fraudsters. Called ‘authorised push payment’ (APP) fraud, this type of fraud increased five per cent in 2020.
Overall growth in fraud has had a big impact on consumer confidence in the financial institutions that they entrust with their hard-earned money. This makes it imperative that those in financial services take steps to demonstrate they can be trusted, particularly as fraud continues to evolve and surge in the digital age.
Financial institutions, whether a bank, money transfer or trading platform, can build this trust in five ways:
- Deliver best practice AML / KYC screening worldwide
Building trust needs to start the very first time a prospect interacts with your organisation. New customers need to know that you carry out thorough Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, rather than treating the process as a tick box compliance exercise.
To deliver a very high level of KYC and AML compliance, it’s vital that financial institutions have access to billions of consumer records worldwide from reputable data streams. These include government agency, credit agency, and utility records for cross-check and verification purposes against the home, email address, phone number, and date of birth provided by the prospective customer. Additionally, access to up-to-date watch lists, such as politically exposed persons (PEP) data as part of this dataset, is crucial. Obtaining such data will ensure vital proof of identity, as well as help fill-in any gaps in the customer record, such as a missing telephone or email address, which can facilitate improved communications.
To provide a standout customer experience it’s essential that checks leveraging this data take place in real time, to avoid slowing the customer onboarding process.
- Use proven technology to deliver secure, real time online customer onboarding
When onboarding a new customer online and also ensuring fast and secure access to their account on an ongoing basis, use proven technology that has demonstrated its value in abating fraud. For example, machine readable zone (MRZ) and optical character recognition (OCR) technologies readily collect customer ID and obtain crucial information at the onboarding stage. These established tools make sure that the ID is genuine as well as validated in real time. The photo ID embedded in these scanned documents supports biometric ID verification, such as facial recognition, which can also help securely speed up customer engagement. Liveness checks, such as eye movement, must be delivered by biometric technology for proof of life confirmation. This stops fraudsters who are increasingly using creative methods like 2D images and video playback to try to trick facial recognition technology and ‘prove’ they are the person they are impersonating. In fact, biometric processes can support financial services organisations as part of their due diligence reporting related to AML and KYC. These operations demonstrate their compliance when it comes to regulatory checks, and therefore help engender trust amongst prospects and customers.
- Personalise customer communications to build trust
Research by Epsilon reveals that 80 per cent of consumers are more likely to do business with a company that offers personalised experiences. With financial institutions, this figure rises to 89 per cent. Further, research by the Boston Consulting Group highlights that over the next five years, $800 billion in revenue will shift to the top 15 per cent of companies who get personalisation right in financial services, retail, and healthcare.
Personalisation is clearly worth the effort, and is particularly important in the financial services sector. In this highly commoditised world of banking products it’s the customer experience, driven by personalisation, that really sets apart those in financial services. A personalised approach to communications and engagement also helps to build trust with customers, because it demonstrates they are understood, something the digital behemoths like Google and Amazon do very well.
Also, personalisation presents an opportunity to build greater revenue from customers. Financial institutions have access to a huge amount of valuable transactional data on customer spending that they can analyse and use to deliver highly personalised upsell and cross-sell communications. For example, if it appears a customer has booked a holiday, the bank can communicate useful and convenient travel currency or travel insurance offers. Through such communications, organisations can become trusted advisors by alerting customers at the right time that they may need a highly applicable credit or a savings product.
- Multi-level verification for protection and reassurance
To protect transactions made online all those in financial services need to implement a multi-level verification process. For example, customers may be provided with a one-time password (OTP) when transferring funds from one account to another. Since this OTP would be sent to the customer’s registered phone number or email address, it minimises the risk of the transfer being made by an imposter. Similarly, banks may call the customer to verify large-value transactions. This approach adds customer service value, particularly for new users to online payments and banking who need to be reassured adequate checks are in place to protect their money transfers and electronic purchases.
Real-time verification of phone (including Caller ID), type of phone, country of origin, and email mailbox verification are all highly effective in supporting OTP or similar types of verification.
- Use location data to identify possible fraud and protect customers
There is a wealth of data that can be mined from a customer’s interaction with the financial institution’s website or app. One of the most important in preventing fraud is the geographic location of the customer. When a transaction takes place the customer’s real-time location can be compared with data on the locations where they have made purchases in the past. If it does not match, for example the transaction is taking place on a continent the customer may not have visited before, the bank can contact the individual and verify the activity prior to its completion. Additionally, if a customer typically uses the financial institution’s website to make payments and a sudden rush of activity is instead seen on the app, it’s worth confirming the customer’s identity before any transaction is finalised.
In an online world with fraud on an upward trajectory financial services organisations cannot exist without the trust of customers and prospects. Those in this sector need to take a step back and look at ways they can engender trust in the current climate. By adopting a best practice approach to KYC and AML verification, using proven technology at the customer onboarding stage online, and embracing biometrics, these organisations are able to take a giant step forward in generating trust. Personalisation, using technology for multi-level verification and sourcing the geographic location of the customer at the time of transaction will add additional layers of trust. Those in financial services who take these vital steps are well-positioned to generate a valuable, standout service and deliver long-term growth in an increasingly crowded market.