6 Things Banks Can Do To Avoid Losing Big Due To Identity Fraud

July 12, 2016

With $35,600 lost every minute due to identity fraud in the past six years, welcoming customers to a secure digital environment where they can enjoy a seamless banking experience is not just a key differentiation element for financial institutions but an imperative to keep their edge over competition.

As identity fraud has nothing but grown in the past six years – Javelin’s latest Identity Fraud Research reveals that in 2015 the number of victims surpassed the 13 million, while the dollar amount stolen reached 15 billion – being ‘identity theft proof’ is quickly becoming a top priority for banks and financial institutions.

This need is especially acute nowadays, when the industry is catering to an ever mobile-dependent and technologically savvy audience. Although the window for opportunity within the mobile channel is rapidly expanding, so does the potential threat of digital fraud, which multiplies almost as fast as technology evolves.

Getting to a point where the customer enjoys a memorable customer experience while her privacy and data are safeguarded can be tricky, but not impossible. There are simple steps you can take to improve the security of the mobile onboarding without compromising the quality of the customer experience.

1. Encourage your customers to feel comfortable with digital banking

A recent study conducted by the National Telecommunications & Information Administration (NTIA) unveils the most frequent concern of Americans when it comes to using the Internet on a daily basis: 63 percent of online households are worried about falling victim of identity theft. Other common concerns included credit card or banking fraud, data collection or tracking by online services, loss of control over personal data, data collection or tracking by government, and threats to personal safety.

2. Educate your customer on the benefits of security measures beyond passwords and life history security questions

The so-called ‘Knowledge-Based Authentication’ measures, AKA passwords and questions such as “What is your mother’s maiden name?” or “Where did you live in 1995?”, are in decline as sophisticated techniques like social scrapping are allowing fraudsters to better answer these question than real people. A recent research conducted by Gartner points out that this knowledge-based authentication is increasingly unreliable and doesn’t quite assess the authenticity of the identity your customer claims to own. In fact, an average or 10% to 15% of legitimate users could not answer the "secret" life history questions that only they are supposed to know the answers to while up to 60% of criminals pass, according to Gartner clients. In parallel, other alternatives ranging from two-factor authentication to biometrics are on the rise. Making it easy for your customers to pick from a selection of different identity authentication measures that resonate with their needs will increase the likelihood of them completing the application funnel. 

3. Suggest your customers to create a financial-only email address

So they can enjoy the convenience of online and mobile banking while protecting their identity. This new email address associated with their bank account won’t be found anywhere else on the Internet, reducing their digital footprint and their exposure to a potential data breach.

4. Join the Omnichannel Movement

And meet your customers where they are: take your onboarding across channels with desktop-to-mobile solutions that fit your target audience’s lifestyle. A study by Forrester points out that for more than the half of decision-makers within the banking and financial services industry in the US have seen 6% of their deals and 11% of their revenue lost due to problems with their current client onboarding process. [1] At the same time, 58% of the surveyed banking executives see value in client interactions, specifically in those that emphasize overall client needs across the entire value stream. Securing omnichannel ecosystem by using solutions such as Mobile Verify™ with desktop-to-mobile capabilities will help you mitigate the risk of application fraud and improve customer acquisition in the mobile channel. “Now in addition to mobile account opening, Mitek enables safe and secure customer acquisition using a desktop computer, providing financial institutions with a truly omnichannel ID document verification experience,” said Sarah Clark, general manager, Identity Business Unit, Mitek.

5. Improve the user experience

One of the most recurrent pain points for new account opening is meeting the Know Your Customer (KYC) requirements. These are often perceived as cumbersome by both banks and their clients, so implementing a user friendly and fast procedure to allow customers identify themselves from wherever they are will give you an edge over competitors. Mitek’s leading ID verification solution combines facial recognition with identity authentication technology to discern if the customer actually is who she says to be, verifying her identity in real time.

6. Be there for your customer if she suffers an identity theft

In 2014, the Federal Trade Commission estimated the average identity theft victim spent more than 200 hours across 18 months resolving their issues with credit-reporting agencies. Lots of companies offer “recovery assistance” in the wake of a stolen-identity event, but their concrete services vary widely. Be there for your customers if they have the misfortune of being victims of identity fraud: work with them to embrace identification measures beyond passwords to avoid this happening again, assist them through the digital identity authentication process and remain reachable to answer their questions.

Given that the status quo of ID verification is “what a person knows” and that this identity verification methodology is becoming ineffective due to the increase of data breaches and social scraping practices, fraudsters are becoming better at answering KBA questions than consumers. On the other hand, many valuable potential customers who cannot be identified are asked to submit an ID document to a physical location or fax one (who still has a fax machine), prompting high abandonment rates.

Remember that all it takes is one fraud incident – namely identity theft, lost or stolen information, ATM skimming or a compromised account - to send those valued millennials packing, according to a recent survey conducted by credit-scoring company FICO. The study showed that 29 percent of millennials will close all accounts with that bank after an incident, compared with about 22 percent of all US consumers.

Mobile Verify™ products are built on “what you have” vs. “what you know.” They can quickly verify the authenticity of ID documents in the mobile channel, helping banks and other financial institutions mitigate risk and increase the ROI of their digital strategies.

[1] Client Onboarding In The Age of The Customer. Forrester Research Craig Le Clair. VP, Principal Analyst