When asked where they learn about finances, the majority of respondents say through osmosis and when pressed further, only 17% of respondents named their banks. The majority of people learn about finances from the people who are the closest to them — their parents, romantic partners, grandparents, teachers, and siblings in that order.
This doesn’t mean, however, that banks are off the hook. The quality of this education, as discussed in best sellers like “Rich Dad Poor Dad” varies drastically based on the financial acumen of the educator. If your customers are relying on their families or friends for financial education, you have no idea what they know or believe.
To ensure your customers have the right education, you need to step in. When you educate your customers, you ensure that they receive the right information, and this is particularly important when dealing with fraud. Consider the following:
Transparency to Build Trust
Be open with customers about your fraud prevention processes. Explain why they need to use dual-factor authentication when signing into bank accounts or initiating certain transactions. When customers understand why these measures are in place, they’re more likely to appreciate your anti-fraud efforts than to get frustrated. In contrast, if they simply see the extra hurdles as a nuisance, they’re more likely to jump ship to look for a financial institution with easier processes.
That said, even if consumers know that certain protections are in place to prevent fraud, they still don’t want to deal with unnecessary roadblocks. Embrace anti-fraud strategies that create targeted friction. For instance, rather than denying transactions based on static-rule sets, employ fraud-prevention strategies that rely on dynamic risk models that take multiple elements into account. Ultimately, you need to strike the right balance between customer ease and customer protection.
Customer Education Strategies
How can you educate your customers about fraud? Ideally, you need to take a multi-prong strategy that targets the unique risks of your unique banking customers. Check out the following ideas:
Follow-Up Notices
After a banking customer has to provide their phone number for dual-factor authentication, verify a purchase, or engage with one of your other anti-fraud strategies, send them a follow-up notice. Thank them for their time and remind them that the service is in place to protect them. This simple gesture increases understanding and helps to build trust.
Customer-Segmented Education
When drafting newsletters or emails to send to customers, customize your content based on the demographics of the recipients. For instance, fraudsters use different types of fraud to target consumers from different generations, and by extension, you need to alert customers about different types of risk based on their age groups.
Similarly, you should also segment educational efforts based on different types of accounts. Your mortgage customers, for example, will face different risks than someone who just has a checking and savings account. Similarly, people with joint accounts may face different risks than someone with a solo account.
By segmenting your efforts, you make your educational outreach more personal. This increases the chances that people will read what you send out. Ultimately, it makes your efforts more effective.
Embedded Warnings
Whenever possible, embed educational warnings into transactions. For instance, before someone sends an instant payment, they should see a notice warning them to be suspicious of strangers or companies demanding instant payments. In that same vein, you should train your tellers to ask your customers questions when they deposit personal checks, money orders, or cashier’s checks to find out if the customer may be the victim of certain types of fraud.
In-Person Fraud Education for Businesses
Consider holding fraud education sessions in your branch, and invite small business owners or municipal customers. When customers are in your branch, they get reminded of all the physical security measures in place to protect them, such as greeters, security cameras, and bullet-resistance glass. Remind customers that these elements aren’t available online or with ACH transactions, and then, outline how they can protect themselves.
Topics you may want to cover include the following: fraud risks for small businesses, how to train employees to resist phishing emails, how to reduce ACH fraud, internal fraud controls, hiring and recruiting to minimize fraud, and the benefits of positive pay for small businesses. Also, let customers know that many fraudsters will pretend to be from the bank, and they may even pose as fraud department employees. To come up with more topics, talk with your customers. Look at the types of fraud that have affected them and use these ideas to shape your sessions.
These types of events train your business and government clients to avoid fraud, helping to reduce losses for your bank. Beyond that, these events position your financial institution as a thought leader. They increase your exposure in the community and potentially create networking opportunities for clients. They can also serve a marketing purpose and potentially help you draw more customers.
Fraud and Data
Fraud is essentially a data problem. To detect fraud, you need to target the right data points. But you need to do so in a way that preserves the customer experience. This requires banks to manage risks in holistic ways. If you’re using fragmented tools and looking at risks in silos, you will experience more fraud while also disrupting the customer experience.
To protect your bank against fraud while also delivering an optimal customer experience, you need a singular fraud detection and prevention solution that combines AI, machine learning, and real-time fraud prevention strategies. You also need to educate your customers about how to minimize their risks.
At SQN Banking Systems, we provide our clients with comprehensive fraud management strategies. We can help you reduce fraud rates and improve the customer experience. Ready to learn more? Then, contact us today. We can start with a conversation and then help you assess your current fraud strategies and identify the best path forward.