By Venu Dumpala, Banking, Financial Services and Insurance (BFSI) Europe Practice Head at Firstsource
Technology has transformed how banks service and protect their customers but unfortunately they are not the only ones who are tapping into the opportunities provided by digital innovation. Hot on the heels of banking organisations are digitally-savvy fraudsters who are equally invested in technology and finding new ways to con banking customers.
With fraud levels at an all-time high and losses on a par with the UK’s annual defence budget, banks are increasingly turning to digital solutions to combat scammers.
Much like the classic Tom and Jerry cartoon where both sides are forever attempting to outwit each other, fraudsters try to stay two steps ahead of the banks and the enforcement agencies. The banks and enforcement agencies must then identify new solutions to prevent emerging fraud.
Of course, while tech is undoubtedly a significant contributing factor, it is clear that there are many issues to consider when it comes to the rise of fraud within financial services.
The factors fuelling fraud
The ongoing cost of living crisis is taking its toll on households across the UK and fraud is an unwelcome by-product. According to a survey by Citizens Advice, more than 40 million people were targeted by scammers in 2022, with banking customers accounting for 27% of that total.
Meanwhile, a reduction in human-to-human interaction caused by the Covid-19 pandemic has opened the door for fraudsters to take advantage of certain vulnerable banking customers. During the lockdown, bank branches were shut, and customers had to rely on digital channels, creating an opportunity for fraudsters.
However, responsibility not only lies with the banks, who typically have good controls in place but also with global tech companies, as they are often the ones leaking data. Legislators and regulators have not yet constrained this, but there’s no doubt it’s on the agenda.
Legislation and collaboration are key to customer protection
One important area that will soon be covered by new legislation is that of customer protection. From this year, banks will be required to reimburse victims of fraud over and above the £85,000 limit provided by the Financial Services Compensation Scheme (FSCS).
In May 2022, the UK government passed legislation stating that banks need to educate their customers on how to avoid falling prey to fraudsters and that it is the banks’ responsibility to pay back all the money that customers have lost. Cross-industry collaboration is vital in terms of the fight against fraud but there is also an emphasis on individual banks to implement watertight processes and controls to ensure their customers don’t fall victim to fraud.
Banks have said they will identify fraud patterns, share data across the wider industry, and put strong controls in place. Some banks do this diligently, but others are still very weak in managing those controls.
Banks need help in the fight against fraud
Tackling fraud is a complicated and time-consuming objective, so it is hardly surprising that banks often seek external support in the form of business process outsourcing (BPO) partners.
In most cases, a BPO provider’s anti-fraud proposition revolves around a human-centric approach that is underpinned by technology – allowing the bank to maintain high customer satisfaction levels while simultaneously cutting fraud losses.
When it comes to tackling fraud, most banking customers, regardless of age, prefer to have a human to talk to. If an incident occurs when the branches are closed, they need somebody on the phone to understand what is going on.
This is why the front-end aspect of providing human-centric service is critical. However, this doesn’t mean it needs to be universal; it needs to be customised, which is where the technology comes into play.
