How can banks improve fraud checks to retain customers?

By Puja Sharma

The research from global analytics software company FICO shows a need for banks to strike a balance between fraud checks and a smooth customer journey. It will not take much disruption for consumers to switch providers, with 35% saying they would do so if a legitimate online transaction was blocked three or four times.

FICO surveyed 1,000 UK consumers aged 18 to 85 as part of a global survey in late 2021. The survey also included consumers in Brazil, Canada, Chile, Colombia, Germany, India, Indonesia, Mexico, South Africa, Thailand, and the USA.

One of the biggest irritations UK consumers have with banking security is when they are cycled through different forms of authentication, with 21% stating this as a concern. Consumers are also irritated when their cards are blocked for legitimate purchases (19%); when they never receive messages about fraud and have to call the bank to resolve an issue (7%); or when their time is wasted by delayed fraud messages (8%).

“Our research shows the tightrope banks walk to protect consumers’ funds but also keep them engaged with the security checks that take place along the customer journey,” said Matt Cox, Vice President and General Manager, EMEA, FICO. “Apply too much attention to either side and balance is lost, and either security will drop off, or consumers’ patience for the checks wears thin.

“To mitigate any losses on either side, banks must ensure their fraud systems are up to speed and reduce false positives, so they don’t delay a legitimate consumer’s purchase. Consumers expect instant results when purchasing and safety measures must be streamlined, direct, and effective.”

Consumers overconfident about scams

The most common concerns highlighted in the consumer research were cases when fraudsters would steal identities to open a financial account and when fraudsters use stolen personal information to take control of consumers’ accounts. Both cases were selected by 26% of respondents.

Respondents were not as worried about being tricked into sending payments to fraudsters, also known as authorized push payments fraud. Only 6% were concerned by this, which reveals a potential need for education on the subject, as £355.3 million was lost to these scams in the first half of 2021.

“The confidence consumers have in their own ability to spot and avoid real-time payment scams is misplaced. While it is good to learn that they are aware of these cases of fraud, the level of criminal sophistication does not appear to be appreciated at the moment,” added Cox.

This presents a tricky hurdle for banks. Do they simply push more educational messages and security measures onto their customers? The survey reveals this may not be the best approach.

Key highlights

• Around 35% of customers would switch providers if an online transaction was incorrectly declined three or four times
• With 19% find their biggest irritation with banks is when legitimate purchases are blocked
• Over 63% of people would choose to receive a verification code as a text message
• About 56%  will continue to use digital banking despite in-person options being available again