Banks have to live in the digital sphere right now. Even small financial institutions that pride themselves on offering personalized services in an impersonal world need digital capabilities. Customers may want personal bankers and loan officers who know their names, but they also want (and need) to be able to manage their accounts online, make deposits remotely, and apply for credit from their computer.
If your fraud prevention strategies are still focused on traditional, paper-based methods, you need to reassess your approach and ensure you’re protecting your customers as they foray into digital banking. Similarly, if your financial institution is holding back on digital acceleration because you’re not ready to deal with the increased fraud risk, it’s time to embrace new risk management strategies.
Ready to accelerate digital but want to ensure you don’t increase your fraud risk? Then, check out these essential tips.
1. Commit to expanding digital offerings.
Your customers want an easy, seamless banking experience, and if they can’t get it from your financial institution, they will go elsewhere. In the past, customers stayed with the same bank for their whole lives. Now, they jump around much more often, even using multiple banks at the same time.
To keep and attract customers, you need to offer digital services that are comprehensive and easy to use. You must prioritize digital expansion if you want to be successful.
2. Choose third-party vendors carefully.
In most cases, you won’t be developing, maintaining, or upgrading your bank’s digital offerings on your own. You’ll be working with developers, software engineers, or other third parties.
Choose your third-party vendors carefully. Look for developers with a history of working with the financial industry safely and successfully. When talking with potential candidates, talk directly with them about how they stay compliant with government and industry regulations and how they minimize fraud risks over and above these standards.
3. Test security gaps.
Hackers improve their approach constantly. As new digital safeguards evolve, they keep pace. To protect your customers, you need to test the security gaps in your digital tools on a regular basis. Where are the weak points? What needs to be improved? You should constantly be asking these types of questions.
Often, you may find that your cybersecurity wish list exceeds your budget. Work with your IT team to prioritize your security projects and upgrades in a way that also prioritizes what your customers need and want.
4. Understand your compliance requirements.
Make sure your digital tools are compliant with government regulations but also with the terms of your cybersecurity insurance plan. Failure to meet the former can lead to fines and regulatory penalties. And if you don’t meet the requirements of your cybersecurity insurance plan, you may not be able to make a claim if you do get breached.
5. Balance the customer experience with customer safety.
In light of the above tips, you may want to put the strictest fraud controls possible in place at your financial institution. But that isn’t always the best option. Consider a bank surrounded by heavily armed security guards. Their presence would probably deter a bank robber from walking in the doors, but they’re also likely to make legitimate customers feel worried and afraid.
The same is true of your digital security methods. They need to be finessed in a way that reduces fraud but doesn’t intimidate or impede your customers.
Striking the right balance between customer safety and the customer experience requires you to move away from rule-based fraud detection and toward dynamic solutions. Your fraud detection and prevention tools need to get to know your customers. They need to be equipped with AI and machine learning that helps them detect fraud without generating false positives that stop legitimate transactions.
6. Protect against data breaches.
All businesses face a risk of fraud, but it’s more prevalent in the financial world where you’re dealing with large sums of money as your core service. In addition to dealing with this risk, banks also need to ensure they protect their data.
A Social Security Number or other personal details may not seem as important as a stack of hundred dollar bills, but if these details are compromised, they can form the key that gives a digital bandit access to the cash. You need to protect your data just as seriously as you do your financial assets.
7. Be transparent about data practices.
Your customers know that you have a lot of their data. They trust you with it. But they also want to know what you’re doing with it. How are you using it? How are you protecting it? But most importantly — why should they trust you?
Addressing the last question can be the most important. Again, you need to constantly reassure customers that your bank will provide them with the security and convenience they need. If you cannot offer both, your reputation will suffer, and you will struggle with customer retention.
8. Review your anti-fraud practices regularly.
Accelerating into the digital world is not a set-it-and-forget-it process. You need to constantly reassess your cybersecurity and fraud-prevention practices on a regular basis. Then, adjust your security posture as needed.
9. Educate your employees about best practices.
Your employees are an important layer of defense when addressing all cyber risks including data breaches and fraudulent behavior. Make sure they understand how to spot the signs of fraud on customer accounts — this can be particularly helpful when trying to detect customers who have been tricked into being mules for scam artists.
Also, ensure they know how to protect your financial institution from data theft attempts. Everyone from the back office to the tellers to the leadership team will play a unique role in this process.
Contact SQN to Talk About Fraud Detection and Prevention
At SQN Banking Systems, we are committed to helping our clients accelerate their digital stance without compromising the security of their financial institutions. We can analyze your current anti-fraud strategies and provide you with the tools and solutions you need to be protected and compliant in the digital world.
To learn more and to take the next step to reduce fraud and cyber risks at your bank, contact us today.