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How Banks Can Differentiate By Going The Extra Mile - Part 2

In Part 1 of this blog post, we'd compared the realtime SMS alerts for credit card transactions sent out by  two banks, BANK1 and BANK2. In this Part 2, we'll look at these SMS alerts as 'products' and see how well they work for the customer towards detecting and preventing fraudulent credit card transactions.

Both banks permit the following modes of card usage.

  1. Card Present One-Off. This is the most common usage scenario in which the cardholder physically hands over the card to the merchant to pay for product or service. Authorization happens for that specific purchase transaction.
  2. Card Not Present One-Off: In this typical online usage scenario, the cardholder makes a purchase on a website, enters the card details on the merchant's website, and authorizes that specific purchase transaction.
  3. Card Not Present Recurring: The merchant picks up the customer's card details from file and uses them to execute recurring transactions on the basis of a one time authorization issued by the cardholder.

As seen earlier, BANK1's alert is not detailed enough to work for the third usage scenario. As a result, it doesn't really fulfill its purpose of alerting the cardholder to potential fraud, let alone help them prevent it, under all usage scenarios.

We can easily foresee BANK1 defending its product by arguing that the cardholder could visit Internet Banking to find out more details and judge the veracity of the transaction. That argument would fall flat for more than one reason: One, it defeats the basic purpose of using an everywhere-everytime-on channel like mobile phone. Two, it demands more effort from the cardholder. Three, and most importantly, it won't work anyway: While SMS alerts come in realtime, card transactions are posted only a couple of days later on Internet Banking.  A visit to Internet Banking immediately upon receipt of an SMS alert wouldn't reveal the existence of the transaction, let alone its underlying details. 

If BANK1 continued to defend its defective product design by telling the cardholder to remind themselves to go the Internet Banking portal a couple of days later, I imagine that many people - including me - will go to another bank instead.

BANK2 has gone the extra mile and designed its SMS alert product in a more comprehensive manner. By delivering more detailed information, its SMS alert clearly accomplishes the goal of alerting cardholders to potential fraud.

On the face of it, the difference between the two products might appear trivial to a product manager but, to a customer, it makes all the difference between a good and a bad product. We wish there was a better way of putting this, but the plain and simple fact is, BANK2's product works and BANK1's product does not. Worse still, the sloppy design of BANK1's product leads to False-Positives, induces anxiety and asks the customer jump several hoops to derive any actionable intelligence from it.

Now, moving on to the second goal of the product, namely to prevent fraud, let's look at how these two products fare. Supposing a cardholder spots a fraud, what should she do? As per current design, the cardholder has to call the bank's call center to report this transaction. We all know how painful that could be, especially for something as time critical as this.

We wish banks implement 2-way SMS alerts - yes, they're already available  - such that the cardholder can reply with a simple "STOP" message to block a fraudulent transaction.

For banks who think we're perhaps asking for too much, we're not: We admit we could be victims of a common consumer affliction that is so succinctly expressed by the German saying "Waehrend des Essens kommt das Appetit", which translates to "the appetite grows during the meal". At the same time, like most consumers, we recognize that "there is no free lunch" and might be open to paying a nominal charge for the advanced version of this product. This could create an additional revenue stream for banks, which isn't something they would want to sneeze at, especially in this post Dodd-Frank-Durbin era of the tight squeeze exercised by regulators on overdraft, interchange and other traditional sources of fee income.


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