FinTechs: How to build loyalty through experience and fraud prevention

Anyone following the takeover of Twitter by the world’s richest man can take a piece of advice from his experience.

Always go for quality over quantity. Elon Musk’s dismay at the platform’s billions of fake accounts and the inevitable depreciation is a lesson for all businesses that rely on user numbers — not least in the financial services space. Today’s banks and fintechs know that in order to become profitable and resilient over the long term and weather the current economic storm, they are moving from a pure growth strategy 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 trade show. The convergence of customer experience, loyalty, digital transformation and fraud suggested a new paradigm for strategic success: slower growth and higher quality. For example, neo-banks like Starling have placed their strategic focus on attracting and retaining those in their key demographics to drive profitability, rather than chasing account numbers.

It’s a smart move as, according to BankInfo Security, 85% of new account applications are fraudulent. The old days of ratings based on the number of users are quickly disappearing. It is clear that when banks are just chasing large numbers of account openings, criminals are happy to give in and the systems may not have the highest cybersecurity standard, meaning they open fake accounts to support their criminal enterprises. In fact, FinTechs see three times more fraud than traditional banks for exactly these reasons.

For most growing businesses, increasing account openings are cause for celebration, demonstrating strong user adoption and brand awareness. Criminals see growing businesses looking to quickly onboard new customers as a good opportunity. For example, a bank’s solicitation of high-income prospects for instant approval for a deposit account and credit card with a single application resulted in a subset of criminal applications. These were later linked to losses from loan fraud and mule account exploitation.

While digital and automated account processes have helped banks provide faster services to customers, they are also vulnerable to cybercriminals who can use stolen or synthetic identities to create new accounts. This can cause 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 profitability are proven by building genuine customer loyalty – which requires a holistic approach that encompasses the latest digital technologies, seamless customer experiences, and more robust fraud detection and prevention.

A recipe for long-term loyalty

When it comes to customer loyalty, two crucial ingredients for banks are providing a seamless customer experience (both online and offline) and ensuring the highest level of fraud protection and prevention. Fighting fraud is essential to protecting customers – but at the same time, customers want the fast and seamless digital experience they’ve come to expect from consumer-style apps.

This is the big challenge for banks, traditional and new. They need to ensure application and transfer processes are consumer-friendly while maintaining strict fraud controls. Banks must continue to offer loyal customers a seamless experience while working hard to protect them as they continue to consume more services. Adding layers and layers of identity authentication can alienate customers and actually lead to applications being abandoned, while increasingly complex criminal networks can still easily sidetrack many current anti-fraud programs and processes. Banks can’t keep up as hackers break through each new layer, from passwords to device IDs, one-time passcodes to various authentication tools.

From social engineering to credential stuffing, criminals are adept at using digital tricks to break down prevention barriers. However, they cannot mimic the real behavior of a valid customer. Behavioral biometrics is at the forefront in the fight against fraud and for safe, optimized customer experiences.

Turning the tables on criminal behavior

Behavioral biometrics uses machine learning to analyze users’ physical and cognitive behavior to differentiate between real users and criminals, detect fraud and identity theft, while improving the customer experience. It does this by analyzing physical interactions such as keystrokes, mouse movements, swipes, and taps in real-time, and profiling user activity at both the user and population levels to identify behavioral anomalies and patterns associated with genuine and fraudulent activity.

Just as poker players always have their “tell,” cybercriminals can’t hide the subtle behaviors that set them apart from real customers. For example, legitimate users draw on their long-term memory when continuously entering personal information and know their details well, while cyber criminals often pause to reference information or use copy-paste functions when entering unknown information. Another example looks at age-related behavior, how a senior enters data and younger users, which can signal when a cybercriminal is trying to take over the account.

Even if the profile appears to represent the physical traits and preferences of a known legitimate user, microbehaviors can even reveal the user’s emotional state. For example, cognitive analysis can uncover even the most advanced social engineering scams by determining whether a user is acting intentionally or showing signs of coercion. Some of today’s most sophisticated attacks can only be detected when fraud protection solutions continuously monitor for the most subtle deviations in user behavior throughout a session.

In short, from account opening to long-term loyalty, fraud prevention is the foundation of financial services success today. Among a large population of legitimate users, patterns related to criminal behavior stand out—it takes the latest technology to uncover them, but they can’t hide. The introduction of behavioral biometrics means real customers enjoy fraud protection and seamless experiences simply by being themselves. Seamless services and secure protection are fundamental to today’s digitally transformed finance industry. By leveraging powerful AI and machine learning, we can now turn criminal behavior against them while delivering an even better experience to loyal customers.

About the author

Iain Swaine is Head of Cyber ​​Strategy EMEA at BioCatch. BioCatch is a 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 unleash the power of behavior and deliver actionable insights to create a digital world where identity, trust and ease coexist seamlessly. Leading financial institutions around the world use BioCatch to fight fraud more effectively, drive digital transformation, and accelerate business growth. With over a decade of data analysis, over 60 patents and unparalleled experience, BioCatch continues to innovate to solve tomorrow’s problems.

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