Banks have done more than most industries to safeguard their customers and need to be congratulated for the huge investment and effort that has gone into protecting their customers’ deposits from a range of attacks. The fraud outbreaks are both internal and external, ranging from an individual lone trader to tech syndicates dreaming up the latest scam to extract the life savings from vulnerable customers. And of course we all know about the cyber threat, which is hugely documented and commented upon. The challenge is to find a way of keeping ahead of these ingenious individuals, or at least running at the same pace.
On the whole, the consumer media is very quick to jump on the banking sector. Hardly a day goes past without a bank’s reputation being paraded across the column inches, making crisis PR an unexpected and necessary new skill set for any senior banking official. Firstly it’s hard to even imagine the threats that are likely to occur, which makes training to combat them publicly even harder.
Add to this the pressure banks are under to retain their customers, their biggest commodity, in the face of £100 bonuses for switching current accounts. The push for individuals to vote with their feet in terms of banking preference has been hugely successful. For instance, not-for-profit consumer organisation Move Your Money reports that 2.4 million individuals have already switched, and it’s running a hard-hitting campaign to increase that number: ‘It’s Payback Time’ reads the tagline and banks are ranked by metrics such as honesty, customer service, and ethics. With such intense scrutiny from all sides, is there any good news to offer financial institutions these days?
The banking world is at the cutting edge of applying new technologies: mobile, internet, trading and international have witnessed a seismic shift. Recent research by the British Bankers Association shows that the number of payments made through banking applications on mobile phones has doubled in the last 12 months, with 1,800 transactions being conducted every minute. In many instances, adoption of new technologies has been in response to customer demand, but at the same time banks must advance with the correct security procedures in place. Although these can be deeply frustrating for the honest consumer, such measures reduce the odds of customers losing their money and all the hassle that accompanies resolving those issues.
A new analytical technology has been developed that addresses security and customer service issues in one fell swoop: an intelligent method of tracking customer behaviour through data to tackle fraud, called Adaptive Behavioural Analytics. The result is accurate fraud detection that significantly reduces false positives, and by doing so reduces the frustration of legitimate customers who are incorrectly blocked for fraud or constantly asked to go through complicated security procedures.
Unlike rules-based systems which rely on arbitrary thresholds to trigger alerts for potential fraud, Adaptive Behavioural Analytics allows banks to make the most of the data they have by cleverly combining customer information to create a behavioural profile at an individual level. This allows a clear picture of a customer to be developed, and any deviations from typical behaviour are spotted in real time. For example, a traveller who makes frequent overseas purchases for meals, hotels, and other business expenses is always at risk of becoming victimised by fraud. Rather than rely on rules to determine which purchases are genuine, banks can know this customer as an individual. The legitimate last-minute airline ticket wouldn’t be flagged as fraud, causing delays and frustrations, because a bank would recognise that this traveller is making a genuine purchase in line with normal customer behaviour, despite the high price or foreign origin of the purchase.
Similarly, daily spending limits set on cards could be removed, as banks could confidently know the purchasing habits of customers and trust that legitimate purchases--like a large car repair bill--are sensibly accepted.
While the inconvenience of getting wrongfully declined for fraud may only make the news when it happens to hundreds or thousands of customers at a time, the real news is that customers are declined unnecessarily every day, due to the use of outdated, imperfect technology. The embarrassment and frustration that accompanies this is endured daily by thousands of bank customers. With all the new payment channels that have appeared in the past few years, it’s no wonder that banks want to do right by their customers to protect them—but the key is to implement protection that also improves customer experience.
Adaptive behavioural analytics provides what financial institutions need the most to address both fraud and customer service issues: a single customer view. Using behavioural modelling to learn about how individuals pay and interact with banks means that the guesswork of rules-based systems is removed. What’s more, this approach is adaptive and automated—it learns as it goes, in real time, so customer profiles are always up-to-date. This is crucial, as customers’ relationships with their banks evolve over time with the needs of their lives. From financing college to purchasing a first car or house, from life insurance to planning for vacations, the life triggers that influence how individuals interact with banks are there in the data just waiting to be understood. Knowing when to offer support at the right moment is key to a great relationship—the sort of intelligent, personalised relationship that customers are demanding.
There are still those who disbelieve that such insights can actually be extracted from data without writing rules to interpret information. Luckily, adaptive behavioural analytics technology allows banks to understand the moment that change occurs in customer profile: this is not only a far clever way to spot fraud, but enables us to learn more about the individual. For example, one of the challenges we are asked to consider on a daily basis is how to use technology to address the shifting fraud and payment landscape.
There must be a way to identify new attacks and catch them at the moment they occur. Many of the fraud approaches in the market have been around for a long time and have built considerable confidence, especially when handling card fraud, but what about all the new ways to pay? Can financial institutions expect legacy fraud systems to keep pace with the agile, consumer-controlled channels that have recently appeared? In the past 12 months, consumers have crossed the threshold into a cashless future and the ‘digital wallet’ is rapidly supplementing cash and cards—and may eventually replace them altogether.
According to Ofcom, 62% of UK adults now use a smartphone, so the new mobile payments ecosystems are undoubtedly a boon to costumer convenience and connectedness. Unfortunately they can also be an enormous headache for banks, as yet another channel in need of sophisticated fraud protection. By shifting from batch analysis to the sort of real-time behavioural processing, financial institutions can be confident that they are protected on all sides. Learning individual behaviour through data and spotting the exact moment of change provides 360 degree fraud protection: everything from insider threat to rogue trading can be spotted as it occurs.
The heat is really on the banking sector, but luckily banks have the data to do something about it. The emphasis on new technology adoption is reinforced by a recent Gartner report showing that currently only 8% of large global organisations use data analytics as part of their security monitoring. This number is expected to triple by 2016 as more companies embrace new technologies in the fight against fraud. And for the first time, the analytics technology exists to simultaneously provide excellent fraud protection and an intuitive, individualised customer experience. As banks embrace the new consumer technologies, they can now embrace new approaches to customer protection and satisfaction.
By Martina King, CEO at Featurespace