Adjusting to the New Normal: Banks Challenged with Balancing User Experience and Fraud Prevention


As Americans re-engage in-person activities, inside and out, one thing is clear: the pace of digitization has changed. While many had already embraced digital-first banking, consumers of all types have taken their interactions digital and aren’t looking back.   According to a recent survey, nearly half of Americans changed their banking approach since the pandemic began. As Mike Mayo, a Wells Fargo security analyst, wrote, “What we’re seeing is the greatest acceleration of digital banking in history.”

In this environment, all banks face escalating digital security concerns as cybercriminals modify their tactics to capitalize on the scope and scale of today’s digital transition. IDology’s eighth annual fraud report found a ubiquitous fraud increase across all sectors, and 80 percent of businesses anticipate more constant and sophisticated efforts as online service trends continue to accelerate. A recent IDology and American Banker webinar poll found that nearly 90 percent of respondents expect to see fraud “increase somewhat” or “increase significantly.” At the same time, 86 percent of respondents viewed identity verification as a “competitive differentiator to reduce friction and deter fraud.” This creates an urgent need for banks to balance member experience with fraud prevention.

Fraud in the Financial Sector

Primed for digital ubiquity and immersive banking experiences, online banking means more than just checking balances or moving money between accounts. Banks will need to provide a complete suite of services, including approving loan applications and validating high-risk transitions.

With more customers using smartphones to complete banking tasks, mobile has become a critical battlefield for fraud deterrence. The latest fraud data shows across-the-board increases in mobile fraud techniques, including:

  • 40% rise in ID spoofing
  • 43% rise in porting
  • 38% rise in device cloning
  • 47% rise in recycling of phone numbers

At the same time, financial institutions face the potential for increases in new account and account takeover fraud, especially as phishing scams become more frequent and sophisticated. Each malicious message puts company and customer data at risk with significant financial and reputational repercussions for failure.

Notably, bank customers want to know that online platforms are keeping their information secure. Eighty-six percent of bank customers identify security as an essential element of the onboarding process. However, these requirements can’t be too demanding. Nearly half of Americans reported abandoning a new account registration because of an overly complicated enrollment process. What’s more, 65 percent are more likely to work with a bank that uses advanced identity verification methods.

Balancing Fraud Detection and Customer Experience

Identifying and analyzing diverse identity attributes behind the scenes are the keys to fraud deterrence without unnecessary friction, allowing bankers to quickly green light legitimate customers and transactions. Here’s how banks can begin pursuing this important priority now.

#1 Analyze diverse data sources.

As consumers turn to mobile banking en masse, banks can harness these platforms and valuable digital signals and attributes to support friction-free identity verification efforts.  Mobile network, device and geolocation data provide valuable metrics for assessing the potential for fraud and streamline onboarding.

In addition, some identity verification platforms provide insight into fraud trends across businesses and industries. With this cross-industry fraud consortium data, banks can optimize fraud detection from the likes of eCommerce firms, insurers and leading tech companies while staying ahead of ever-evolving fraud trends.

#2 Implement Artificial Intelligence (AI) & Machine Learning (ML)

AI and ML technologies support identity verification initiatives by analyzing expansive, disparate data sets to identify anomalies and informing defensive decision-making. These technologies offer bankers a scalable approach to analyzing increasingly robust data sets in real-time, allowing identity verification initiatives to keep up with shifting fraud techniques and strategies.

#3 Include Human expertise

While AI and ML are the present and future of identity verification and fraud detection, their efficacy is being tested in a post-COVID-19 environment. Since these technologies were trained using pre-pandemic data, some may struggle to keep up with the surging user base, shifting data sets and pandemic-influenced trends. In fact, 20 percent of businesses report AI denigration as a result of pandemic driven mass swings in big data, resulting in more false positives and fraud.

In turn, the benefits of AI are best realized alongside a trained professional who can step in if the software rejects a legitimate ID, apply an expert eye, use creativity and intuition to determine which error occurred and teach the computer how to spot the issue in the future. This allows the learning model to improve through constant input and refinement of data with the oversight of a trusted identity expert.

Digital-first, if not digital-only, isn’t a temporary aberration. It’s the new normal, making it imperative to rethink the digital handshake, how trust is established with members and, in light of those priorities, the best ways to deter fraud. By employing transparent, smart, layered identity verification strategies with robust mobile tools to enhance the user experience and deter fraud, banks can successfully decrease fraud risk and losses, onboard a growing number of new customers and strengthen customer engagement for future growth.

Christina Luttrell

About the Author:

Christina Luttrell is the chief executive officer for IDology, a GBG company and leader in multi-layered identity verification and fraud prevention. In her 10 years at IDology, Luttrell has significantly advanced the company’s technology, forged close relationships with IDology customers and driven the development of technology innovations that help organizations stay ahead of constantly shifting fraud tactics without impacting the customer experience. Luttrell has been recognized as one of the Top 100 influencers in identity by One World Identity.