A bank’s ability to deliver convenience and security is a high-stakes balancing act. Consumers value secure applications, but they don’t want the hassle that often accompanies multiple points of authentication. They want easy-to-use applications that facilitate fast and seamless financial transactions.
There has been no shortage of data breaches over the past five years, and criminals are reaping the benefits. Greater access to more critical customer information makes account takeover and card-not-present (CNP) attacks easier and more lucrative.
In response to frequent data breaches, consumers’ expectations for the security of their accounts are ever-increasing. In a recent fraud survey, Featurespace found 59% of consumers expect their banks to notify them of suspected fraud immediately, and 16% want to be notified within an hour. In addition to the continuous jump in data breaches, the shift from card-present transactions to card-not-present is creating more opportunity for fraudulent activity. According to a recent study from Juniper Research, CNP fraud is predicted to cost merchants $130 billion worldwide between 2018 and 2023.
Consumers often fail to play their part in maintaining account security; Featurespace’s fraud survey also found that 20% of consumers put themselves at risk by using the same password for their online bank accounts as other online accounts.
Educating consumers on steps they can take to secure their accounts is a key factor in mitigating fraud risk. Banks also can help consumers better understand the reasons for seemingly cumbersome authentication processes—like multifactor authentication (MFA)—to justify any additional friction in the payments experience. Boosting consumers’ antifraud intelligence should also be coupled with a fraud-prevention strategy that uses machine learning to deliver adaptive behavioral analytics.
Machine learning has been used to detect anomalies for decades, but the technology required to differentiate “good” from “bad” in the context of complex human digital interactions is relatively new. Current analytics can often be too conservative and drive good business away by falsely identifying “fraudulent” behavior. Instead, adaptive behavioral analytics helps banks build complex, individual behavioral profiles of customers so that every account interaction is analyzed for anomalies in real time. This allows for a deeper understanding of the customer to drive better relationships by eliminating friction and develop a stronger fraud-detection system that results in fewer false positives.
Banks should continually strive to balance security and customer convenience. By leveraging the latest technology and analytics combined with proactive consumer education, banks can provide a seamless and secure payments experience while keeping the fraudsters at bay.
Dave Excell is cofounder and chief technology officer at Featurespace, Atlanta.