By John Watkins, Industry Consultant: Fraud Strategy and Intelligence Division at SAS
Customer identity is a precious asset and a highly prized commodity. As the financial services industry has become more digitised down the years, customers’ digital identity decides what they can do and what online services they have access to.
This has been revolutionary for the customer experience. So long as the service provider is happy that customers are who they claim to be, they can access their account, make a transaction or take out a loan anywhere and at any time they want. Indeed, the speed and ease of this process has become a point of competition, with organisations vying to provide the most seamless and frictionless online experience possible.
However, in the rush for greater convenience, the industry can’t afford to forget about proper identity verification. The threats from identity theft and cyberfraud are growing more sophisticated and pernicious. Organisations must guard against this, but in a way that doesn’t penalise the innocent customer.
A global identity crisis
Digital identity is a convenient means of authentication, but the lines are starting to blur. The industry has woken up to the fact that online identities are malleable and spoofable. Impersonating customers online to commit fraud and gain access to their financial assets has become big business for cybercriminals. In 2017, identity fraud peaked in the UK with 174,523 cases reported by Cifas, with eight out of 10 fraudulent applications made online.
What’s more, these hackers are constantly innovating and adopting new technologies to stay ahead of security measures. Even popular, tried and tested measures like two-factor authentication have been compromised.
Cybercrime is fundamentally adversarial. A lone wolf or criminal outfit will probe every weakness in your verification system and will stop at nothing to breach your defences. You need to cover all your bases and ensure they have no place to hide.
At the same time, however, you mustn’t go too far in the other direction. You have a duty to protect your customers, but also to provide them with the best experiences – something an endless loop of authentication methods can never deliver.
The 5 senses of security
When you meet someone for the first time, you make use of all your senses to get a first impression of them. The same principle should be applied to online interactions with customers. Why wouldn’t you use all the information channels available to you to find out if the user is being honest?
The problem is that credit, fraud and risk managers and their staff too often make the call based on incomplete insight. This is because they only collect and analyse some of the data that’s on offer.
If you don’t consider every possibility, you’re only leaving blind spots to be exploited. For example, an authentication system may approve a request from cybercriminals simply based on the device they’re using. Yet if the system had checked the device’s location and the customer’s behaviour, the hacker would likely have been exposed.
The main data points to consider are:
- Experiential information: The organisation’s previous interactions with and knowledge of the user based on an existing profile. Has this user been denied access before, and why?
- Channel information: The channel or device the entity is using. Has the user accessed your services with a certain device before?
- User behaviour: The behaviour of users while they’re interfacing with your services. Are they hesitating too long when asked to make decisions? Does their cursor move robotically?
- Public record: Publicly available information on the customer. Are they accessing their services from their registered address? Does their given age match what’s on their driver’s license?
- Group and risk analysis: Wider data from analysis of the market and threat landscape. Is the email address the entity is using part of a known fraud cluster?
Organisations don’t have to implement every data type into their verification process. Yet every new segment they do adopt vastly increases their chances of detecting and stopping fraud in progress.
Time waits for no one
However, data alone won’t protect you or your customers. Once you have the data and a process in place for discovery, you have to do something with it. While models do an outstanding job predicting fraud, rules stop it. At the same time, you need to act quickly. Customers won’t wait around if you spend more than 10 seconds weighing up their credentials. The process has to be seamless and instantaneous.
Yet the industry’s approach to authentication has sadly become segmented. There are thousands of point solutions that cover only one part of the verification process. They are rarely joined up and only waste customers’ time and patience. It’s critical that the process begins and ends with the customer experience in mind.
Turning insight into authentication
To turn insight into an authentication decision, organisations should consider an end-to-end solution. When a customer tries to sign-in or access a service, an orchestration platform should be set up to collect all the desired data points before sending them to a decision engine. The solution can then analyse the data and evaluate if entities are the customers they claim to be.
When the process for verification is unified and data-driven, passive authentication becomes a reality. The customer enjoys a real-time, seamless experience – no password required – while the decision engine rapidly confirms identity in the background. This is security and customer satisfaction all in one.
There is no silver bullet that will protect your organisation from cyberfraud in every event. However, when you have access to the right data and the capability to interpret and act on it in real time, you achieve the best of both worlds.
THE FUTURE OF CUSTOMER EXPERIENCE IN DIGITAL BANKING
By Richard Billington, Chief Technology Officer, Netcall
Over the past five years, the digital banking revolution has had a seismic impact on the relationship between customers and the institutions that handle their money. Since digital banking established itself as the new norm for consumers, there is now a growing expectation for enhanced levels of convenience and security. Recent proof of the evolution has come from Lloyds Banking Group, which recently announced the closure of 56 branches, as an increasing number of customers ditched branch-based banking in favour of online platforms.
Banks are trying to adapt to rapidly changing behaviours by integrating their services seamlessly into their customers’ daily lives. However, whilst offering new opportunities for banks to reach and respond to customer needs, the digital realm also presents an increasingly competitive playing field, with challenger banks constantly entering the market. We are continually hearing of new banking brands offering cash incentives to encourage customers to switch banks. This tug of war is putting increased pressure on banks to outdo one another, in order to retain customers and foster long-term loyalty.
Short-term cash incentives, however, will be spent in vain if a company’s long-term digital experience is not up to scratch. Lost customers mean lost revenue, a negative impact on brand reputation, and market share attrition. In order to gain and maintain a competitive edge, banks must understand what consumers expect online, and then meet those expectations.
Getting ready to compete with the Amazon Effect
Whilst it is clear that ‘digital’ is the direction in which the industry is heading, traditional bank brands have a long way to go to satisfy consumers who want to manage their money on their phones and tablets. Today, the so-called ‘Amazon Effect’ is impacting more and more areas of our lives, and digital banking is no exception. Modern customers require instant gratification. They want to see where their package is at any stage of their delivery and, in the same vein, become frustrated if they can’t see how things are progressing with their finances in real-time.
Customers want to stay up to date with changes on their bank accounts. They want to apply for an ISA, mortgage or credit card without hassle. They want to be able to understand where they are in the process. And, most importantly, they want an experience that is unique, personalised, and available at a time convenient to them. Today the onus is on banks to deliver these experiences – ensuring interactions and processes are quick, convenient and streamlined. Those who don’t live up to these expectations risk failure in a highly competitive marketplace.
Failing to connect the dots
Despite the changing customer needs and demands when banking online, all too often customers are faced with a series of disjointed communications, leaving them dissatisfied, confused and frustrated. To solve this, many banks invest in customer-facing departments – marketing, sales and service – but the reality is their customer experience doesn’t just depend on the people dealing with customers every day. It is heavily influenced by processes and technology, the people behind the scenes – the IT team.
For many banks, there’s a huge gap between customer facing departments and IT – what we refer to as the ‘customer experience disconnect’. This means that when someone in the contact centre flags a broken process that only technology can fix, their request often gets ignored. That’s not because IT doesn’t care; it’s because they have a thousand and one other things to do. Realistically, they can’t drop everything to solve one small problem.
But when it comes to customer experience, small problems add up. If a customer can’t apply for a mortgage because an app is broken, that’s annoying. When they can’t get through to customer services because the lines are busy, that’s infuriating. And when they don’t receive a response via email, that’s… well, that may very well be the end of the relationship.
Enhancing customer engagement online
Digital transformation in financial services goes beyond just providing an online or mobile account-opening solution. Banks should build a process that connects with the customer before an account is even opened and continues throughout the entire online journey. This includes enabling tailored communication at optimal times on preferred device(s). Every customer touch point should collect insights that the bank can leverage for future communications, to foster brand loyalty and make it harder for businesses to be undermined by competitors.
Done well, digital engagement should not just represent a great communications process, but also reflect changes in the back office that simplify all stages of engagement. Most importantly, these stages should connect seamlessly across communication channels, eliminating the need to visit a branch and enabling consumers to switch between channels, such as telephone, email, social media and in-branch banking, when desired.
As the UK continues to move further towards a cashless society, which is now expected by 2030, getting digital banking right is only going to become more important in order for banks to remain competitive. And to ease the transition to digital banking while maintaining customer loyalty in the digital realm, banks must overcome customer experience disconnects and enhance digital engagement.
Creating an effective digital banking experience
At the moment, departments within banks are operating in silos. This needs to stop if businesses want to create a successful digital banking experience. In order to build trust, long-term relationships and help solve any digital experience problems, it’s important that banks start by bringing customer-facing and IT teams together.
Low-code software solutions can prove invaluable in this instance, helping to accelerate digital customer experiences whilst also enhancing efficiencies within the business. Due to their simplistic nature, these offerings can be integrated across departments and be used by non-experts and developers alike. Well-established banks with bigger IT teams can also benefit, as low-code software solutions work alongside existing systems, significantly helping to improve customer experience quickly and without the need to replace existing infrastructure at a high cost.
In our rapidly expanding digital world, businesses face more pressure than ever to pivot in response to market changes and customer expectations. Therefore, having access to tools that are easy to use whilst enabling innovation will be key to building a better digital customer experience. In addition, analytics tools can also help track performance and offer insights for process improvements and adaptations. Implementing these tools will help empower businesses to remain competitive in today’s rapidly changing banking industry.
BRAVE NEW WORLD: A FUTURISTIC VISION OF PAYMENTS
James Booth, VP, Head of Partnerships in EMEA for PPRO
Over the last ten years, the retail e-commerce ecosystem has undergone a wide-ranging transformation. As recently as 2010, the e-commerce and payments value chain were relatively straightforward: Any eCommerce merchant could integrate a payment processor’s front-end HPP into their checkout or perform a deeper API integration for a customised checkout experience. The customer then enters their card details or other bank details, which were passed on to payment platforms and schemes for processing.
In 2020, we are now well into the era of open banking, and things look very different. The volume of payments has exploded. By 2018, global digital payments were worth US$3,417.39 billion, and are expected to increase to US$7,640 billion by 2024. Using integrated real-time payments systems — which incorporate everything from authentication through settlement to confirmation — consumers send and spend money in the blink of an eye. And the speed and volume of transactions are made possible by the increased use of technology and artificial intelligence to do everything from risk assessment to anti-fraud measures.
But this very visible — and much written about — transformation is not the only way in which the payments and e-commerce landscape has been changing beyond recognition. Because while e-commerce over the last ten years has gone increasingly global, the way people pay online is more than ever local. In some markets, low rates of financial inclusion make cash-voucher schemes the best option. In others, bank-transfer apps are the most popular.
Our research has shown that between 2017 and 2019, the number of UK online transactions paid for using a bank transfer increased by 36%. Driving the use of bank transfer payment methods by UK consumers to now account for 8% of all British online transactions, with cards and e-wallets, including PayPal, leading the race. In fact, card payments account for 56% of transactions, followed by e-wallets (25%), bank transfers (8% ) and lastly cash (7%).
Some markets prefer e-wallets or primarily use locally issued credit cards. In the Nordics, deferred payment methods are becoming the norm. And in countries such as Germany, most online shoppers prefer via direct debit.
The result is a global online and digital payments market that is now incredibly diverse. And even more complicated. Even markets right next door to each other may have very different payment preferences. In Latvia, for instance, 49% of online transactions are paid for using a credit card . In neighbouring Lithuania, it’s just 24%.
Globally, by 2021, only 15% of all transactions will be paid for using the brands of credit cards familiar to most Western merchants. That number is only set to decrease. Today, local payment methods account for 77% of e-commerce spend; by 2024, it is forecast that this share will increase to 82%. There are an estimated 450+ significant local payment methods worldwide, so considering the UK mostly rely on PayPal and card payments, there is a big world of alternative payment methods the British public are yet to realise. To truly go global, merchants don’t just need break down language barriers, but also payment barriers.
Already, Klarna, one of Europe’s most popular bank-transfer and pay later app, processes €53.4 billion in online payments every year. Merchants operating in or entering Europe which doesn’t support Klarna are effectively saying that they’re not interested in any part of that €53.4 billion. And this situation is not unique; it applies to markets throughout the world.
Local payment methods, as they drive financial inclusion, will only proliferate.
When we look forward to the state of e-commerce in 2030, a personalised shopping experience is not a nice-to-have. It is an absolute requirement. Consumer preferences must be noted; if they aren’t, retailers will miss out on sales. Almost half (47%) of UK consumers will end a transaction if their preferred payment method is not available, according to PPRO research, so customising payment options for cross-border shoppers is vital. This is highly important to attract international customer bases beyond a retailer’s local remit. It’s no longer adequate to offer customers one single way of paying – in-store or online. Payments aren’t a one size fits all approach.
The best brands do this already. Those who don’t will struggle to make it to 2030.
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