Uniting Fraud Prevention and Customer Experience

By Caroline Hermon, Head of Fraud Solutions at SAS UK & Ireland

Keeping customers happy is the cornerstone of many competitive organisations’ strategies. Designing systems around what the customer wants and needs is a sure-fire way to build up that much-coveted brand loyalty. Within the financial-services industry, banks and card providers want to ensure that their customers’ journeys through their systems are as smooth and worry-free as possible. So, when it comes to approving loans or validating purchases, financial-services providers will find that erasing unnecessary obstacles and validations can significantly improve customer satisfaction and retain loyalty in the future.

But approving everything isn’t always the wisest approach. It increases risk, not only when it comes to making good financial decisions but in the realm of cybersecurity, too. Criminals actively target banking systems and exploit any vulnerabilities in their security postures for their own gain. By spoofing locations or personal details, and assuming the identities of real customers, fraudsters make money from the very systems that genuine customers must also use for making purchases and transactions.

If banks are too relaxed, the fraudsters will reap the benefits. But overly stringent security systems can have an adverse effect as well. Ultimately, customers want a quick, easy and secure banking service.

Striking the right balance

Investing in fraud detection and investigation is vital to avoid serious losses and meet regulatory scrutiny. A weak stance on fraud can also lead to reputational damage and customer churn. Even in cases in which customers are legally protected from financial losses, the stress and inconvenience of being involved in fraud investigations can dent their confidence in a business.

On the other hand, an overly draconian approach to fraud prevention can be almost as damaging as a permissive one. According to the Anti-Fraud Technology Benchmarking Reportⁱ, a recent survey conducted by the Association of Certified Fraud Examiners (ACFE) and SAS, 55 percent of organisations cite excessive false positives as a challenge when implementing new anti-fraud technology.

This concern about false positives is understandable because it’s rooted in sound business sense. Every time a firm incorrectly blocks a card payment, rejects a loan application or refuses a claim, it loses revenue, turns down new business and encourages customers to go to its competitors.

Making decisions quickly is vital.

Making the right decisions is critical—but in today’s world, it’s not enough. Speed is of the essence, too. This truth is visible across the board when it comes to customer service. When customers are buying a cup of coffee at Starbucks, they don’t expect to wait more than a few seconds for their card to be approved. And when they’re ordering clothing online, they expect an equally speedy transaction. A streamlined customer journey through the entire site, including the checkout area, has become an important distinction between brands that are successful in the age of e-commerce and those that are not.

These principles from the world of retail are testaments to modern customer expectations around speed and seamlessness, something upon which brands across all industries should be fixed. If a customer is in the market for a loan or even a mortgage, banks will compete to offer him a decision in minutes, not days. And if his insurer takes weeks to settle a claim after his car gets bumped, he’ll probably look elsewhere when it’s time to renew. The truth is that a slow decision is almost as bad as an incorrect decision. In both cases, a customer is likely to vote with his feet.

Teams must see eye-to-eye to maximise customer experience.

In a commoditised world in which companies can increasingly differentiate themselves only through the customer experiences they offer, friction during the customer journey must be avoided at all costs. So sales, marketing and customer-service teams all favour a light-touch, minimalist approach to fraud management. On the other hand, finance, compliance and operations teams are much more likely to support a safety-first strategy; from their perspective, where fraud is concerned, prevention is much better than cure.

These divergent perspectives set the organisation at loggerheads with itself because they frame customer experience and fraud prevention as competing priorities. The prevailing wisdom is that you can optimise for one or the other but not both.

Is this true? Perhaps it was—once; but today, technology can provide the solution. We can build sophisticated fraud-detection models and use them to check millions of transactions in milliseconds. We can connect data on customer behaviour, credit history and dozens of other factors to help reduce false positives and accelerate decision-making. And we can automate a high percentage of fraud-management processes while providing complete transparency and auditability to satisfy regulators.

Getting it right can help millions of customers.

Businesses across the world are implementing data-driven technologies to help them protect customer experience whilst making crucial decisions in the ongoing battle against fraud. Two of the best examples are The Very Group and HSBC.

Although it trades as a retailer, The Very Group also provides customers with financial options at checkout: new, flexible ways to pay. These help to strengthen its offering to the customer and, at the same time, provide new security measures to prevent fraudsters from breaking in. The Very Group’s solution was to understand what a genuine customer acts like when browsing the site. By having a grasp of customer behaviour, and studying this in conjunction with data concerning purchasing habits, The Very Group was able to make faster decisions about risk, whilst minimising the number of false positives when it came to identifying fraudsters.

Similarly, HSBC has been working with SAS since 2007 to create an analytics platform that makes customer journeys seamless, whilst reaching more accurate decisions in detecting fraud. The industry-leading fraud-management platform, which SAS constructed, was originally developed as a solution for the banking giant’s business in the United States. However, its success at securing transactions has seen it expand to many other markets across Europe and Asia. This means that millions of HSBC customers across the world are now not only fully protected when making card transactions but can use the platform with confidence that any threat of infiltration by fraudsters has been minimised.

Working together to deliver the best results

The key to resolving the tension between customer experience and fraud prevention is to ensure that the entire company is united in this goal. This means that all departments, whether customer-facing or not, should be singing from the same song sheet. To do this, businesses should deploy technologies that enable the building of repeatable and transparent processes for fraud detection. These should be governed appropriately and be explainable when necessary. Ultimately, both the business and its customers will benefit in the long term from the effective eradication of fraudsters. Implementing systems that responsibly enable seamless, frictionless customer journeys will not only protect against fraud but will stand alone as quality systems that keep customers happy now and long into the future.

(If you’re looking to discover more about preventing fraud whilst maintaining and boosting customer loyalty, take a look at our research into customer-friendly fraud preventionⁱⁱ.)

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