Technology balances convenience with identity theft
Identity theft and other types of fraud will become even more prevalent in 2023.
That’s according to the latest report released by the Identity Theft Resource Center (ITRC), which predicts that next year will see a greater proliferation of payment app fraud. Incidents of ID criminals using impersonation techniques to open new financial accounts and hijack social media accounts are also expected to increase.
Financial fraud is nothing new to the banking industry. However, coupled with increasing consumer demand for convenience, the expected increase represents an urgent need for financial institutions (FIs) to balance security and a positive customer experience. Many FIs are looking at cutting-edge strategies to meet this challenge. PYMNTS research shows that intelligent computing and other digital innovations can fit the bill.
Fraud is almost always top of mind for FinTechs, and for good reason: the numbers in the industry are staggering. The average FinTech surrenders 1.7% of its revenue to fraud each year, representing approximately $51 million. Fighting these crimes often results in FIs imposing friction on account holders. FinTechs that see the cost of fraud as a central concern inflict friction on account holders twice as often as those that do not. This can potentially lead to a cycle of poor user experience, especially when it comes to authentication friction.
Download the report: The FinTech fraud ripple effect
But while customers cite frustration with friction, they are ready to switch banks if they feel their FI is not satisfactorily combating fraud. And PYMNTS has found that when it comes to measuring trust in FIs, security ranks highly for 83% of consumers. 53 percent say consistency across multiple platforms also has a strong impact on their trust in FIs.
Advanced ID technology may be a method that strikes the balance between fraud and convenience, as 57% of consumers who have used advanced ID technology say they would do so again. Approaches using this strategy may include voice recognition, keyboard logging, liveness detection with selfies, and fingerprint scanning.
Another more individualized approach other banks are taking is investing in fingerprint technology, which has matured into biometrics. Biometric payment cards include a fingerprint scanner in the card, allowing users to make more secure transactions without reaching for their phones. Consumers willing or able to adopt this technology may find it a more frictionless, yet more secure, method of purchase at a point of sale.
Read the report: Digital identity: Ditching passwords could unlock a $59 billion biometrics market
Still other FIs and the companies that support them are leveraging the benefits of data. In an interview with PYMNTS’ Karen Webster, Alloy CFO Kiran Hebbar describes how he sees the intelligent use of data as a driving force behind fighting fraud.
“Increasingly, we are working with data partners who have good information from state registration and business registration systems,” he said. “And it will be easier to verify the identity of SMEs and give them the same level of exposure to credit products that a bank can offer to a consumer.”
High-tech tools are needed to fight high-tech criminals. In today’s world, banks may want to consider incorporating advanced ID technology and intelligent data into their overall fraud prevention plan. Successful strategies can be tailored to fit the capabilities of each institution. It can be a singular or multi-pronged approach to fighting fraud and identity theft while keeping customers happy, depending on the bank’s individual strengths. The only bad choice is to ignore the problem, which could lead to the banks losing the war against these bad actors.