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Identity theft and other types of fraud will become more prevalent in 2023.
According to a recent report released by the Identity Theft Resource Center (ITRC), payment app fraud is predicted to become more prevalent in the coming year. Incidents of identity criminals using impersonation techniques to open new financial accounts and hack social media accounts are also expected.
Money laundering is nothing new to the banking industry. But coupled with consumers’ growing need for convenience, the expected upheaval represents an urgent need for financial institutions (FIs) to balance security and a positive customer experience. Many FIs are looking at innovative strategies to deal with this challenge. PYMNTS research shows that intelligent use of data and other digital innovations can fit the bill.
Fraud is almost always a concern for FinTechs, and for good reason: the industry-wide numbers are staggering. The average fintech gives away 1.7% of its revenue to fraud each year, which is roughly $51 million. Fighting these crimes often leads FIs to conflict with account holders. Fintechs that see the cost of fraud as a major concern create twice as much friction with account holders as those that don’t. This can lead to a cycle of poor user experience, especially when it comes to authentication conflicts.
Download the report: Ripple effect of fintech fraud
However, even if customers express frustration with conflicts, banks are ready to switch if they feel their FI is not combating fraud satisfactorily. And PYMNTS found that security is of high importance to 83% of consumers in terms of measuring trust in FIs. 53 percent say consistency across multiple platforms has a strong influence on their trust in FIs.
Advanced ID technology may be one way to strike a balance between fraud and convenience, as 57% of consumers who have used advanced ID technology say they would do it again. Approaches using this strategy could include voice recognition, keyboard logging, presence detection with selfies, and fingerprint scans.
Another individualized approach that other banks are taking is investing in fingerprint technology, which has evolved into biometrics. Biometric payment cards include a fingerprint scanner inside the card, allowing users to make secure transactions without reaching for their phones. Consumers willing or able to use this technology can find a more frictionless, yet more secure, way to shop.
Read the report: Digital ID: Locking down passwords could unlock the $59 billion biometrics market.
Still other FIs and the companies that support them are leveraging the data. In an interview with PYMNTS’s Karen Webster, Alloy CFO Kieran Hebar explained that he sees intelligent use of data as a force to combat fraud.
“In addition, we are working with data partners who have good information from government registration and business registration systems,” he said. “And it will be easier to verify the identity of SMBs and assign the same risk level to the loan products that the bank can offer to the consumer.”
High-tech tools are needed to fight high-tech criminals. In today’s world, banks may want to incorporate advanced identification technology and intelligent data into their overall fraud prevention plan. Successful strategies can be tailored to fit the capabilities of each institution. Depending on the bank’s personal strengths, it can be a single or multifaceted approach to combating fraud and identity theft while delighting customers. The only poor choice is to ignore the issue, which banks may lose the war against these bad actors.
How customers pay with credentials stored online
Convenience drives some consumers to store their payment credentials with merchants, while security concerns keep other customers at bay. For “How We Pay Digitally: Accumulated Testimonials Edition,” in partnership with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze consumer dilemmas and show how merchants can overcome them when they have them.
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