If you run a community bank or another small or medium-size financial institution, you don’t have the budget of a large multi-national bank, but you still have to fight fraud across all your payment channels and products. To fight fraud effectively, you need to balance the cost of fraud prevention and detection with the risk of losses. The following tips are designed to help you manage this balancing act in the face of tight profit margins.
1. Use multi-layered, multi-factor authentication
Multi-factor authentication (MFA) helps to prevent fraudsters from signing into and taking over your customers’ accounts. Beyond securing account sign in, you should also leverage MFA to authorize certain transactions.
For instance, if someone attempts to withdraw more funds than usual from an ATM, you may want to prompt them for a passcode that you text to their cell phone. This additional layer of verification helps to ensure the legitimacy of the transaction.
2. Invest in fraud prevent tools that work across all channels
As a community bank, you may not have all of the payment channels offered by large financial institutions, but you need anti-fraud solutions that protect all of your payment channels. Rather than just focusing on a few high-risk areas, take steps to minimize the risk across all payment methods including checks, cards, ATM transactions, peer-to-peer payments, and anything else you offer.
3. Educate your customers
Banking customers often have more trust for community banks than they do for large financial institutions, but to maintain their trust, you need to keep them as safe as possible from fraud. Unfortunately, your bank’s actions can only take this process so far — Ultimately, your customers need to be invested in avoiding fraud as well.
Get them on board by educating them about the risks of fraud. Include fraud prevention tips in your monthly paper statements or newsletters, and whenever possible, tailor your outreach based on your specific clients. For instance, the tips you give individuals should be different than the ideas you give to businesses.
4. Reconcile business accounts daily
Your business customers are likely to be some of your most valuable clients, but they also face the most significant risk of fraud. Whenever possible, consider reconciling business accounts every day. Then, you’re more likely to pick up fraud as it occurs.
If you wait until your business customers ask for a reversal or reject a transaction, the losses may be significant. Consider using a solution such as Payee Positive Pay to automate this process for you. With Positive Pay, your business account holders provide you with a list of their authorized transactions, and you only accept transactions on the list, minimizing the risk of unauthorized transactions.
5. Remember schemes are always evolving
Scam artists are always finding new and more effective ways to commit fraud, and you need anti-fraud solutions that keep pace with the evolution of crime. Rather than using rule-based fraud detection software, look for solutions that leverage artificial intelligence (AI), algorithms, and machine-learning to spot new and emerging threats.
6. Look for scalable solutions
Effective anti-fraud solutions don’t come in a one-size-fits-all package. Instead, they are scalable to your needs. A scalable solution lets you purchase what you need now and add or subtract services as needed, and this can help your community bank save money while also having the exact level of protection you need.
7. Consider hosted fraud prevention solutions
Anti-fraud software can require a lot of technological infrastructure, but that doesn’t mean that you necessarily need a lot of space or capital resources to invest in new servers and hardware. Instead, you should consider hosted anti-fraud solutions.
With hosted solutions, you get access to powerful fraud fighting tools, but they are hosted on someone else’s servers, allowing you to save money on hardware, IT costs, repairs, physical space, and more.
At SQN Banking Systems, we offer scalable, hosted anti-fraud solutions that use AI and machine-learning to fight fraud across all payment channels. Don’t let fraud hurt your bottom line or your reputation. Regardless of the size of your financial institution, we can help you — to learn more, contact us today.