With the accelerated transition to digital banking driven by the pandemic and national lockdowns, security teams have experienced a surge in cybercrime. There has been an upward trend in security concerns for some years, but since 2011, financial-related crimes have tripled, exceeding £25 million in 2020 and are forecast to exceed £30 billion in 2027.
Innovative data and analytics are one option to detect and prevent fraud and significantly enhance the performance of a business. By examining fraud data, financial companies can gain a clearer understanding of risk profiles and utilise this information to create new and targeted products. These aren’t necessarily new ideas, yet many fail to recognise how critical customer-related data is and that it represents some of the most comprehensive information for performing detailed fraud checks. Social, location, and mobile activity data presents many opportunities for a business and can improve overall analytics and support the delivery of more targeted campaigns.
Any personalisation of services comes with its challenges. Financial firms must consider a fair balance between customer services and data security when experiencing a digital transformation. The key is ensuring suitable security measures are in the process without hindering the overall customer experience. If done correctly, financial services companies can shift the rise in financial fraud into an opportunity to enhance the customer experience and win more trust and confidence in your business.
Customising the experience is dependent on how much data marketing and fraud teams collect. The more data available, the better the results will generally be. Information could include aggregated data such as search queries and product views to more user-specific data such as product or category views.
A secondary option is applying AI and machine learning-focused algorithms to generate targeted results. For example, sharing a range of best-selling products available for a new customer with limited information is more appropriate. Long-term customers may prefer a more personalised service based on their previous activities. These could be products based on their purchased or viewed items. With innovative technology, finance businesses can create a more personalised service that caters for each customer and deliver the products at the right time.
For example, recommending growth funds when a customer is looking to make a significant saving.
The more in-house information a business can gather on a customer, the more successful services and loyalty schemes will be. Retrieving this data can, however, be relatively challenging. While finance businesses may contain a large pool of fraud data, many struggle to tackle the issue of data unification. Unravelling this data enables businesses to create a highly detailed picture of each customer and then create services that each customer needs.
According to a report from data analytics business FICO, the impact of the pandemic on fraud and financial crime, finance businesses have been impacted by using fragmented technology to manage fraud and finance disruption. Despite a large proportion of similarities in the functions of fraud prevention and AML software being the same, the systems tend to be separate, and generally, the teams work separately. In the FICO study, nearly 50% of respondents suggested that the negative impact of using multiple software systems for fraud management is one technological challenge. Many finance businesses are beginning to understand the benefits of taking a more integrated approach to fraud analytics and using a single data management platform.
The most effective method of combining fraud and marketing information within finance is developing what many refer to as a ‘digital brain’. In theory, a digital brain gathers relevant customer information from a business, combined with other data and storing this information in a real-time platform and using AI/ML techniques to gather a deeper understanding of each customer. Balancing fraud prevention with delivering personalised services is dependent on establishing an internal digital brain. The core of any digital brain is data and lots of it. Many finance businesses consider their data assets separately and contain them in fragmented systems. The key to developing a digital brain is enabling data to move throughout a company and gathering information from multiple sources.
Balancing customer service with fraud prevention
As finance businesses integrate new data digital measures to enhance the customer experience, they will experience the challenge of balancing customer service with data privacy and security. With increased competition and evolving customer expectations, finance businesses are under further pressure to improve ways to engage and interact with people. At the same time, the pressure from added regulations and protecting customer data is rising. The numerous and complicated data regulations complicate data management and how to use this information to improve customer services.
Creating a smooth and efficient customer experience is critical to achieving strong customer confidence. However, the quicker the process and fewer barriers implemented, the higher the possibility of financial fraud and data privacy are. Prioritising customer experience could create potential weaknesses in systems. However, if security measures are too complex, the customer experience will decline and lower retention levels. Marketing teams will generally highlight that a quick and efficient customer journey is essential to winning and retaining new business. In contrast, compliance and fraud teams prefer a more risk-averse plan, ensuring customer data is secure. The challenge, therefore, is balancing fraud prevention and ensuring the customer experience remains consistent.
Unifying siloed fraud and marketing information can allow finance businesses to create a solid defence system and generate a holistic view of their customers. The key to data analytics is ensuring all teams within sales and marketing and aligned with finance and compliance when focusing on financial crime detection and creating an ideal customer experience.
