As a financial institution, you already know that digitizing customer experiences improves operational efficiency and retention. But here’s the flip side – fraudsters are increasingly employing sophisticated hacks to exploit the weaknesses in every customer journey stage. From opening accounts and onboarding clients to offering customer support, you must take steps to prevent organized and expensive crimes.
Fraud doesn’t revolve around just one touchpoint anymore, whether you operate in insurance, Fintech, or payments. Criminals can strike at any point in a customer’s entire lifecycle through phishing, account takeover, social engineering, etc. So, it isn’t surprising that fraud triggered a loss of over $12 billion for American consumers recently.
How to fight this rapidly-evolving menace? One-off fraud controls aren’t effective anymore. You need a strategy that’s lifecycle-based and constantly monitors risk, validates identities, and secures customer accounts.
Let’s explore further.
There was a time when efforts to avert fraud were mostly put in action when onboarding customers. And there’s no denying that identity verification still matters substantially. However, fraud risks don’t disappear after account creation. In fact, every year, fraud causes businesses around the world to lose around 5% of their revenue.
Hence, you must target different customer relationship stages:
Trying to spot fraud with a fragmented approach allows criminals to capitalize on blind spots. Instead, you should monitor continuously and evaluate risk for every customer interaction. Here’s what works.
Fraudsters looking to set up fake accounts often target the onboarding process. They might leverage schemes like synthetic identity, stolen credentials, identity theft, or document forgery. So, what to do?
Don’t stick to straightforward document checks only. Also employ biometric, government ID, and address verification. Database validation, liveness detection, and device intelligence are gaining in popularity too. When you verify the identity of a customer via multiple sources that are independent, onboarding fraud is largely reduced.
The level of risk associated with every customer is different. Hence, during onboarding, increase scrutiny for high-risk regions, politically exposed persons (PEPs), high-value accounts, and complicated business structures. This way, you can ensure legitimate customers get a smooth experience while improving fraud detection.
Even after you get a legitimate customer onboard, future fraud risk remains. Account takeover, for instance, is a key threat in this regard. Fraudsters access customer accounts unlawfully with the aid of malware, phishing campaigns, credential stuffing, SIM swapping, or social engineering. As a solution, you can:
Consider implementing adaptive or multi-factor authentication. Controls like device recognition, behavioral biometrics, and risk-based login monitoring can also help spot unfamiliar access attempts.
This is particularly important if a new device is being used, some personal information has changed, risk profile has evolved, or in case of large transactions. Unauthorized account access is less likely to occur when verification is ongoing.
Transactions are an integral aspect of the financial customer lifecycle. This is why fraudsters often target card transactions, wire transfers, peer-to-peer payments, crypto transfers, and ACH payments. For addressing the issue, try:
Adopt systems that can detect suspicious transactions using advanced analytics. Watch out for geographic anomalies, unusual amounts, device changes, velocity checks, and deviations in behavior. Monitoring in real time eases on-time intervention, so fraudulent transactions can’t go through.
Fraud detection systems powered by AI can zero in on patterns that conventional systems might overlook. This translates to multiple perks. Detection accelerates, there are fewer false positives, risk scoring improves, and you identify evolving threats better.
You might not think of customer service channels right away when it comes to fraud prevention. That can be a mistake though as criminals are increasingly targeting such interactions. Attacks associated with social engineering are particularly common.
This means fraudsters pose as legitimate customers when they get in touch with support teams. They might request account changes, pretend to have forgotten passwords, dodge authentication procedures, or want to update contact details. What should you do?
Implement identity verification workflows and authentication alternatives based on knowledge. Using voice biometrics is another smart option. Also ensure your customer service agents go through fraud detection training.
Enhance scrutiny when account modifications seem high-risk. These might include updates in email, address or phone number changes, or alternations associated with beneficiary names. Fraudsters tend to make these moves when they are trying to take over accounts.
Fraud risk is not static, rather dynamic. Customer risk profiles, behavior, and external threats evolve all the time. Hence, embrace these best practices:
Review transaction behavior, geographic exposure, and customer risk ratings regularly. Keep an eye on adverse media findings and sanctions status as well. This way, you can spot emerging threats before they snowball into major losses.
Throughout a customer’s lifecycle, check for their presence on any PEP database, watchlist, or sanctions list. Even if they passed screening during onboarding, it doesn’t mean the status can’t change later. And here’s what a change usually imply – a shift in the customer’s risk level.
Through behavioral monitoring, you can pinpoint activities that aren’t typical. Keeping an eye on transaction patterns, login habits, location behavior, and device usage is especially useful. Sudden deviations might mean fraud attempts or compromised accounts.
Knowing how to prevent fraud at different stages of the customer lifecycle isn’t enough. If you try to get it done with disconnected systems, threat visibility will be fragmented and responses delayed. So, you need a strategy that integrates:
When you extend fraud prevention beyond onboarding, the benefits are many – improved compliance, reduced losses, better responsiveness to threats, and greater customer trust. Just remember to invest in the right tools for validating customer details, verifying identities and addresses, removing duplicate records, matching data, and so on.
Your operations will become more efficient, risk management will be more effective, and you can avert frauds more effectively throughout the customer journey.