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Empowering the first line of defence

Losses from fraud remains one of the biggest headaches in the financial industry, and it is very rarely perceived as the customer’s problem in the mainstream press. Fraud prevention also remains a space of rapid innovation, with some genuinely ingenuous methods of securing transactions and other financial vehicles from predators having been developed in the past decade.

One thing that’s less commonly discussed is how financial institutions can use what already exists to lower fraud rates. The customer is still a fantastic first defence in cases of financial fraud and working with them to enable the fulfilment of this - role whilst not impeding service - should be the goal for almost all customer-facing financial institutions.

Let’s examine the case of David Edmundson-Bird, who was a victim of a somewhat classic credit card fraud. Mr Edmundson-Bird had £2,000 stolen from a credit card he barely used over a period of eight months. This was a slow, methodical fraud that roughly mimicked a casual spending pattern and kept the value of each transaction low in order to make it particularly difficult for the bank to detect. £2,000 is a rather large total to reach, but one can certainly see how this accumulates if the customer did not check their statements.

However, rather than dismiss this as the idiosyncrasy of just one customer, there are practical steps that the banks can take to help better protect consumers from fraud. Moreover, these steps will help banks position themselves more positively should their role in prevention be examined.

As difficult as David Edmundson-Bird’s case was to detect, had the card provider been exposed, that provider would surely be examined in fine detail - with an almost guaranteed negative public response as their security measures would be deemed “inadequate” in the court of public opinion. This is seemingly a no-win situation for the bank or financial institution caught in the vice – all systems have flaws, and you cannot blame the customer.

But there’s actually another way out. In order to find it, banks must put themselves in their customers’ shoes and ask them what they need to help manage their accounts for peace of mind. The way that banks distribute statements can mean that customers cannot easily track the fraud. Are online statements always read? Would customers prefer a simple notice to his phone at the end of each day or week? Perhaps a pie chart showing his total spend on food, electricity, consumer goods etc.? The bank needs to know this information from the customer and not just take a guess.

Slow and methodical fraud cases such as this call into question how banks communicate with customers, not how negligent a customer is at monitoring their finances. The latter attitude is a throwback from an old time when there was only one or two reasonable methods of communication. Now there are many, and which channel to use in which situation is a fine art that ultimately boils down to individual preference. However with this new toolset customers can become truly empowered to fight fraud.

Even for those institutions reluctant to make their statements more “Generation Y” friendly, there are options: why couldn’t the banks send out a paper statement if the online version hasn’t been opened for two months? Why couldn’t a customer receive a six-monthly paper statement in addition to the monthly online versions if they so wanted? Being able to show a consistent engagement with a customer, that has adapted to their own behaviour, gives banks a leg to stand on that falls between “the customer is negligent” and “our system has flaws”. More to the point, such a policy would save banks money, if fraud was detected earlier by customers who begin to notice irregularities on transactions that are a day old, instead of a month.

Fraud ultimately relies on the bank not knowing what the customer is doing. By providing regular updates on what the bank has processed in their name, in a way that specific customers can easily access and understand (be that by paper or otherwise), we will have the most reliable form of fraud detection available back on side – the customer themselves.

So, imagine if the bank had adopted a proactive policy towards customer engagement where it mailed out a statement if the customer does not open their e-statement. Maybe, just maybe, this act of fraud could have been prevented, saving the banks time and money and at the same time providing a customer experience that is second to none.  



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