3 ways financial institutions can combat fraud without sacrificing customer experience

By Nishith Sarda and Mike Orlic 

Fraud has long been a major concern for financial institutions, but these days it can seem nearly impossible to stay on top of the problem. Criminals are becoming smarter, savvier, and wreaking more havoc more quickly than ever before. 

In 2021 alone, there were 298 fraud cases before U.K. courts in which victims lost more than £100,000 each, according to Seon – a 66% spike from the 180 cases brought to court in 2020. And those numbers only take into account cases that escalated to court; they don’t include numerous other cases that occurred.

Even prior to the pandemic, unauthorised fraud impacting U.K. banks totaled £824.8 million in 2019, and the pandemic only made online and card fraud more prevalent. 

Fraud can be incredibly damaging to financial institutions’ bottom lines and reputations. In this competitive landscape, where just one bad experience can turn a customer off your business, you need to be vigilant in fighting fraud. This can be particularly challenging for fintechs and fast-growing firms, but it’s critical to protecting brand reputation and growing customer loyalty. 

There are several ways financial institutions can fight fraud while keep customer experience (CX) top of mind. 

Make sure humans are part of your fraud strategy

There’s no denying that technology plays a crucial role in preventing and detecting fraud. Fraud detection filters, algorithms, and knowledge management databases can power tech options that have unmatched agility.

But technology alone isn’t enough. Even the best technology can’t identify every potentially suspicious activity with 100% confidence. AI, for all its advancements and power, just isn’t there yet. A bot, for instance, could mistakenly flag legitimate transactions as suspicious activity, starting a frustrating and costly chain reaction of events.

A comprehensive anti-fraud strategy must include human investigators if it’s going to be successful, and those investigators need to be highly trained subject matter experts.

Fraudsters are innovating incredibly quickly. Scams are evolving from month to month and year to year. With so much continual change in how fraud is happening, there are times when human investigators will catch fraud earlier than a machine learning model can. They have a powerful ability to think like fraudsters and to build and interpret narratives driven by human motives, which helps them detect evolving fraud that AI might miss.

In addition to the back-end benefits they bring, people also should play an important role in your customer-facing fraud work. If customers do become victims of fraud and need to contact your brand, they often want and need the reassurance of speaking to a human as they try to resolve the issue. Delivering empathic support is critical.

To get the most from your anti-fraud strategy, there needs to be a true partnership and constant collaboration between technology and humans. Technology should help enable the investigators, and the insights investigators glean should then be used to inform your machine learning model going forward. 

Working in silos, neither tech nor investigators will deliver the results you need – but when blended smartly together, they have huge potential to stop fraudsters in their tracks.

Optimise workflows for maximum efficiency

For humans and technology to work together seamlessly, you need the right processes and workflows in place. There’s no time to waste when it comes to preventing fraud or stopping it once it’s started, so your systems must be able to communicate easily and act quickly. 

To stay ahead of fraudsters, financial institutions need to think like them. Get into the mindset of fraudsters so you can identify gaps in your anti-fraud strategy and improve your investigation techniques when needed. 

It’s also important to continually monitor how fraud evolves on your platform. Machine learning is important to this process but can’t do it all alone; human investigators should be monitoring things on a daily basis as well. 

A big part of combatting fraud is having systems in place that can interpret a huge volume of signals the platform encounters every day. “Good” signals show certain activities and users are legitimate, while “bad” signals offer clues that someone or something is suspicious or fraudulent. How well your organisation tackles fraud depends hugely on your ability to interpret these signals, and it’s not an easy undertaking – especially since a financial institution could have millions of signals to interpret on a daily basis. 

It’s important to set (and continually revisit) benchmarks for these signals. At what point will “bad” signals trigger you to block users or shut off an account? To decide, you need systems in place that efficiently collect and interpret signals, and a way to turn that data into actionable insights to guide you.

Work with an expert trust and safety partner

It’s imperative to stay vigilant in the fight against fraud, but you can’t sacrifice customer experience along the way. If you make customers undergo too many steps to verify their identity, for instance, you risk frustrating them to the point where they leave you for a competitor.

This is where working with an expert partner can help. Outsourcing fraud work to an experienced provider that also specialises in CX gives you access to the expertise, technology, people, and processes you need and make sure you’re still delighting your customers.

At most banks and fintechs, striking this careful balance of anti-fraud work and customer experience isn’t typically a core competency in-house. But you don’t have to do it alone. By tapping into expert help where you need it, you can shift some of this work into expert hands, improving outcomes and freeing up your financial institution to focus on what it does best. 

That’s how a global online marketplace for short-term homestays and experiences cracked down on repeated fraud. TTEC fraud investigators were able to recover thousands of accounts that had been taken over, while improving the quality score, exceeding the client’s benchmark.