Money laundering scandals would make UK consumers switch banks

By Puja Sharma

A FICO survey reveals that British consumers would leave their bank in the wake of a money-laundering scandal, pinpointing the importance of customer relationships. The research from global analytics software provider FICO suggests that UK banks could face a potentially catastrophic customer defection event in the wake of a money-laundering scandal.

Around 56% of UK respondents said they would switch banks if theirs were reported to be involved in such a scandal. The younger age groups would be most eager to swap their financial service provider in the aftermath of a money-laundering scandal: 64% of 18 to 24 year-olds would switch, as would 68% of 25 to 34 year-olds.

“There have been several high-profile money laundering scandals in the last few years, and consumers have had enough,” said Matt Cox, vice president, and general manager, EMEA, FICO. “This raises the stakes for banks and means that powerful controls are more crucial than ever.”

Ways to improve fraud response efforts

The survey also showed that some work may need to be done by banks to improve how consumers perceive the support offered in fraud cases.

While over half of survey respondents think it’s fair how banks deal with customers who have been victims of fraud on their credit or debit cards, this still leaves 16 million cardholders who don’t know whether current measures are fair or believe they are unfair. This suggests there could be a strong marketing opportunity for those institutions that want to highlight how well they look after fraud victims.

Those in the Millennials generation – aged 25-34 – appear to be the least impressed with banks’ current approaches to fraud. When asked about account takeover, 19% thought banks were not fair. And when considering cases of customers being tricked into sending money to fraudsters, 21% of them thought measures were not fair.

Curiously, respondents were not as worried about being tricked into sending payments to criminals as they were about other types of fraud. Only 6% of all those surveyed were most worried about being scammed, even though £355.3m was lost to these scams in the first half of 2021.

“The rise of scams during the pandemic has been truly frightening,” said Cox. “This is creating a challenge for banks, which need to walk the line between stopping scams and enabling a smooth customer experience during financial transactions.”

“Whilst a relatively low number of customers in our survey said they thought banks’ management of fraud cases was unfair, a much higher proportion did not know if banks were fair. This may signal an opportunity for some positive marketing by those institutions that are already investing in the latest analytics to detect scams.” Cox added.

Key highlights

• More than half of Brits would switch account providers if it was involved in a money-laundering scandal.
• Over 20% of 25 to 34-year-olds do not believe banks are fair when customers have been tricked by fraudsters.
• Approx 15% of cardholders believe current measures taken by banks on credit or debit card fraud are not fair, but 32% don’t know if banks are fair.
• Around 15% of UK consumers do not believe banks are fair when dealing with customers who have been victims of account take-over.