Anyone following the takeover of Twitter by the world’s richest man can take one piece of advice from his experience.
Always take quality over quantity. Elon Musk’s consternation over the platform’s billions of fake accounts and the inevitable devaluation of its worth is a lesson to any businesses built on user numbers – not least within financial services. Today’s banks and FinTechs know that to become profitable and resilient in the long-term and weather the current economic storm, they move from a strategy focused purely on growth to one that addresses the needs of their key demographics and builds loyalty
This was a key theme at this year’s Money 20/20 show. The convergence of customer experience, loyalty, digital transformation and fraud suggested a new paradigm for strategic success: slower growth and increased quality. For example, neobanks like Starling articulated its strategic focus on attracting and retaining those in its key demographics to achieve profitability instead of chasing numbers of accounts.
That’s a wise move since, according to BankInfo Security, 85% of new account opening applications are subject to fraud. The old days of valuations in terms of number of users are disappearing fast. It is clear that when banks solely chase large numbers of account openings, criminals are happy to oblige and systems may not be of the highest cybersecurity standard, meaning they open fake accounts to support their criminal enterprises. Indeed, FinTechs see three times more fraud than traditional banks for exactly these reasons.
For most growing companies soaring account openings are cause for celebration, illustrating strong user adoption and brand recognition. Criminals see growing companies looking to quickly on-board new customers as a ripe opportunity. For example, one bank’s promotion for high-income prospects to obtain immediate approval for a deposit account and a credit card with a single application resulted in a subset of criminal applications. These were later tied to down-the-line credit fraud losses and exploitation of mule accounts.
Similarly, while digital and automated account processes have helped banks provide faster services to customers, they are also susceptible to cybercriminals who can use stolen or synthetic identities to create new accounts. This can generate millions of dollars in fraud losses for individual institutions and erode trust.
Undetected fraudulent account openings are a clear path to failure. Success and long-term viability are proved by building genuine customer loyalty – which requires a holistic approach that incorporates the latest digital technologies, seamless customer experiences and more robust fraud detection and prevention.
A recipe for long-term loyalty
Regarding customer loyalty, two critical ingredients for banks are providing a seamless customer experience (both on and offline) and ensuring utmost fraud protection and prevention. Battling fraud to protect customers is essential – but at the same time, customers want a fast and seamless digital experience they expect from consumer-style apps.
This is the great challenge for banks, traditional and new. They need to ensure that application and transfer processes are consumer-friendly while also ensuring stringent fraud checks. Banks must continue to deliver a frictionless experience to loyal customers while working hard to protect them as they engage with more and more services. Adding layers and layers of identity authentication can alienate customers and lead to genuine application abandonment, while increasingly complex criminal networks can still easily sidetrack many current fraud protection programs and processes. Banks cannot keep up with how hackers are overcoming each new layer, from passwords to device IDs, one-time passcodes, and various authentication tools.
From social engineering to credential stuffing, criminals are adept at using digital trickery to break down prevention barriers. However, they cannot fake the genuine behaviours of a valid customer. In the fight against fraud and toward safe, streamlined customer experiences, behavioural biometrics is taking a stand on the front line.
Turning the tables on criminal behaviour
Behavioural biometrics leverages machine learning to analyse users’ physical and cognitive behaviour to distinguish between genuine users and criminals, detecting fraud and identity theft while simultaneously improving customer experiences. It does this by analysing real-time physical interactions such as keystrokes, mouse movements, swipes, and taps, profiling user activity on both the user and population levels to identify behavioural anomalies and patterns associated with genuine and fraudulent activity.
Like poker players always have their ‘tell’, cybercriminals cannot mask the subtle behaviours that set them apart from genuine customers. For example, legitimate users tap into their long-term memory when continuously entering personal information, knowing their details well, while cybercriminals often pause to reference information or use copy and paste functions as they input unfamiliar information. Another example looks at age-related behaviour, how a senior citizen enters data is different from that of younger users, which can signal when a cybercriminal is trying to take over the account.
Even if the profile seems to represent a known legitimate user’s physical traits and preferences, micro-behaviours can even give away the user’s emotional state. For example, cognitive analysis can uncover even the most advanced social engineering scams by determining whether a user acts with purpose or exhibits signs of duress. Some of today’s most sophisticated attacks can be detected only when fraud protection solutions continuously monitor throughout a session for the most subtle deviations in user behaviour.
In short, from account opening to long-term loyalty, countering fraud is foundational to today’s financial services success. In a large population of legitimate users, patterns associated with criminal behaviour stand out – it takes the latest technology to uncover them, but they cannot hide. Adopting behavioural biometrics means true customers enjoy fraud protection and seamless experiences just by being themselves. Frictionless services and assured protection is fundamental to today’s digitally transformed financial industry. Harnessing powerful AI and machine learning we can now use criminals’ behaviour against them while providing an even better experience to loyal customers.
About the Author
Iain Swaine is Head of Cyber Strategy EMEA at BioCatch. BioCatch is the leader in Behavioral Biometrics which analyzes an online user’s physical and cognitive digital behavior to protect individuals and their assets. Our mission is to unlock the power of behavior and deliver actionable insights to create a digital world where identity, trust and ease seamlessly co-exist. Leading financial institutions around the globe use BioCatch to more effectively fight fraud, drive digital transformation and accelerate business growth. With over a decade of analyzing data, over 60 patents and unparalleled experience, BioCatch continues to innovate to solve tomorrow’s problems.