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Balancing act: Optimising customer engagement while increasing fraud prevention

Balancing act: Optimising customer engagement while increasing fraud prevention

Banking & FinanceEnterprise SecurityInsightsTop Stories

Every industry must make it a priority to mitigate against fraud, but particularly the banking and finance sector. Mzukisi Rusi, Head of Technology Delivery, Entersekt, tells us why businesses within this sector must build trust and loyalty with their customers in order to remain competitive and to allow the banks to prevent fraud in a way that is tailored to the customer.

In an increasingly competitive industry, consumer banks need to be able to engage with their customers across various digital channels while minimising and mitigating against fraud. While the optimisation of customer engagement and fraud prevention might seem like mutually exclusive challenges, the demand upon resources to meet both simultaneously and effectively can present a real dilemma for banks. According to a recent research report, as many as a third of all businesses are unable to develop digital capabilities because of the time invested in fraud prevention.

With the number of data records breached in 2019 exceeding the four billion mark, it’s unsurprising that fraud prevention and regulatory compliance are highest on the agenda for financial institutions (FIs).  According to a report by Javelin, 52% of consumer banks plan on implementing additional security solutions to keep customers’ accounts secure, and 46% want to invest in better identity verification measures.

While these steps might be necessary for banks, the trade off in allowing customer engagement, digital innovation and user experience to fall by the wayside can prove detrimental to a bank’s capacity to modernise and compete. The same report showed that less than a third (28%) of banks demonstrated an interest in increasing support for new channels.

Not simply a competing demand, the development of customer engagement methods and channels can also pose a new set of risks to banks and their users as adversaries learn to infiltrate new touchpoints and features. These additional costs can pose an even greater strain to a financial institution’s (FIs) dwindling resources. With this in mind, it’s no surprise that more than a third of enterprises perceive fraud as a ‘significant impediment to digital innovation efforts, forcing them to slow the expansion of their features and functionality as they seek ways to mitigate the new risks these innovations attract’.

Fraud prevention on the spot

Companies don’t need to perceive the improvement of fraud prevention and customer engagement as a dilemma. In fact, research has shown that, when done right, the former can actually work alongside – and even catalyse – the latter.

From the consumer’s perspective, they want to receive more information about their transactional activity, in real time, and greater autonomy to authenticate it. Through digital channels, FIs are able meet these demands for more frequent and analytical insight and increased control while upholding the necessary levels of compliance and security. With this in mind, banks and their customers don’t have to suffer from any sort of trade-off.

This can be – and is – encapsulated in the shape of innovative in-app messaging solutions which incorporate instant communication with high levels of security and a frictionless user experience. A customer can be alerted when suspicious activity occurs on their account and with the option of responding immediately by approving or rejecting the transaction before it’s processed. This eliminates frustration and other effects caused by false declines, while putting the customer in control of transactions and fraud prevention.

Optimising user data to personalise their experience

Many banks are beginning to recognise the value of the historical data they possess on their customers. When optimised in a compliant and correct fashion, the insights gained from this data can be used to aide the customer in their decision-making and financial management. Improving the user experience in this way also serves to symbiotically improve the bank itself.

These insights can be utilised to shape something that the modern user has come to expect: a highly relevant and personalised banking experience. If banks aren’t providing this kind of service, it’s likely they’ll look to one of their many competitors to provide it. As a recent report from Capgemini indicates, 63% of consumers are already using a financial product from a big tech company. Those banks that are willing to invest in personalisation, including tailoring advice, giving loyalty offers, and suggesting relevant products to customers based on their profile, will remain competitive and reap the rewards. For one bank, as reported by BCG, the reinvention of its personalisation strategy saw a 20% increase in revenue over just three years.

Engagement builds trust

As well as generating new business and profit in the short-term, banks can use engagements with users to develop trust and understanding in the long-term. This is especially important for the majority of users that use mobile banking apps to check account balances, manage card controls and deposit cheques.

Equally, through peer-to-peer payments, banks are able to engage with customers and develop trust by acting as a mediator between friends, colleagues and organisations. In turn, this increases loyalty and a reliance on banks to conduct transactions safely and swiftly.

However, while the introduction of faster payments services plays a pivotal role in meeting the modern customers’ needs, fraud and security remain absolutely imperative – and potential roadblocks to adoption. Traditionally, banks have used the lapse in payment completion as time to examine transactions and respond to suspicious activity.

Now, the demand for speed has impacted the time available to do so. To overcome this, FIs – if they haven’t already – need to begin implementing a customer-focused omnichannel authentication strategy. This means offering a one-touch in-app authentication experience that engages customers in real time, while eliminating fraud and providing a seamless user experience. The bank can rest assured that it has digitally signed proof of consent of the transaction, while the customer feels secure and in control.

Opportunities moving forward

It is more important than ever for banks to remain competitive and innovative, but it should not come at the cost of customers’ security and increased fraud rates. Preventing fraud and delivering the best in digital security comes down to identifying the customer and engaging with them securely and when and where it matters. Keeping them engaged and building loyalty is a matter of trust, built by offering consistent, relevant experiences regardless of when and where a customer chooses to interact with their bank.

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