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The modern fraud problem is about striking the right balance between fraud prevention and delivering excellent customer experiences

Experts share their views on how to achieve a balanced approach to fraud prevention

The primary aim in managing fraud is to enable businesses to do more business safely and make banking safe for customers, revealed Paul Mathias, Group Head of Fraud Risk Management at Barclays Africa, in his live webinar discussion with Experian’s fraud expert, Chris Thomas.

The discussion focused on how to deliver a balanced approach in order to protect customers from fraud without impacting the customer experience.

Speaking about challenges in his region, parts of which are associated with crime levels within some developing nations, Paul highlighted the significant impact of fraud. As a result, industry-level collaboration is a key feature in the fight against fraud in Africa, he said, to improve banking safety overall, and to eliminate the unhealthy practice of shifting fraud from one bank to another. Paul discussed how vital it is that organisations implement effective fraud controls, since local law enforcement and legislation have struggled to keep pace with more sophisticated crime in certain countries.

The discussion highlighted how the fraud landscape has changed significantly in a short space of time. With the growth in e-commerce, epidemic in stolen data, and explosion in malware, organisations have had to tighten controls to keep ahead of the criminals who are getting smarter and more organised. Experian estimates that 30 legitimate customers are challenged or blocked in order to catch one fraudster[1], so it is clear that consumers are now feeling the impact of this new wave of cybercrime.

Significant investment in technology to manage fraud is needed but equally vital is to ensure effective use of those technologies. Paul highlighted how too many false positives from poorly refined rule sets can impact operational costs. He also spoke of how too many controls can create friction in the customer engagement model, leading to a need for more elegant behind-the-scenes controls.

This led to a discussion on the common theme throughout the webinar: how the modern fraud problem is about striking the right balance between fraud prevention and delivering excellent customer experiences. Organisations today are facing the perfect storm – increasing customer expectations for quick seamless interactions in a digital world where we don’t see our customers has created a cybercrime economy. A balanced approach to fraud is absolutely critical in the digital environment, and measuring the impact on the customer journey is key. Paul spoke of the tension that arises from the need to mitigate fraud without stifling the business and the business need to deliver frictionless experiences.

Paul highlighted how effective fraud management will therefore impact the bottom line by enabling businesses to reduce losses, and simultaneously help to grow the business by providing positive experiences through convenient easy-to-use services that build loyalty and additional sales. Focusing narrowly on losses alone, he said, can lead many fraud strategies astray and stifle business growth. Instead, businesses need to focus on the total cost of fraud – taking into account all operational costs, plus the impact in terms of lost customers and lost revenues created by poor customer experiences.  Paul highlighted that a poor customer experience may not lead to the customer leaving the organisation altogether but will nearly always mean that it is highly unlikely the customer will buy additional products or services. He went on to talk about victim support and that even if the losses are recovered it is vital to retain the customer by looking after them properly.

Paul highlighted the important role that fraud plays in the product development lifecycle, ensuring that whenever we can we build in controls, checks and balances that the customer doesn’t experience overtly because it all happens in the background, things like device profiling, and electronic exchange of bank statements between banks to verify affordability.

Educating the customer is key as they are an important component in stopping fraud. Fraud is a traumatic experience, he said, and fraud awareness is important, making sure that customers understand the risks and allowing them to protect themselves by setting their own risk appetites and opting in/out of higher risk events should they wish to.

Chris concluded by referring to Forrester research that identified that gaps in best practice are seen as the cause of increasing cost and risk, and identified five core capabilities for a balanced approach to fraud.

1. Data

The digital revolution has brought with it huge amounts of data – including digital, transactional, contextual, and behavioural data – that is incredibly valuable to build a broader, more detailed picture of “good” customers and true fraud exposure if you know how to capture, make use of it and understand it.

2. Advanced analytics

Analytics capabilities are key to interpreting all of this data and converting it into insights and actionable intelligence on good and bad customer behaviours.

3. Decisioning

Decisioning support is needed in order to implement strategies that protect the business from fraud while ensuring “good business” is processed automatically and seamlessly.

4. Technology

Customers expect instant decisions and to be able to transact instantly. The latest advanced technologies are therefore absolutely critical in the digital space to enable sub-second decisions about digital customer interactions 24 hours a day, seven days a week, 365 days a year.

5. Expertise

Expertise is needed that can help turn all this into measurable value. Because Experian supports our data, analytics, decisioning, and technologies with a foundation of proven best-practice expertise, clients can apply these capabilities in a manner that helps cut the financial impact of fraud, while reducing the potential for lost business and the related operational expenditures. And then the total cost of fraud can be reduced dramatically.

To view the webinar recording, please visit: http://www.experian.ae/en/winning-in-the-customer-era/fraud.html

[1] Source: Experian Global Fraud Trends Report 2016