Signature verification tools are critical if you want to reduce forgeries and protect your bank from losses. However, there are challenges with implementing these tools. This post looks at the unique challenges faced by mid-sized banks and credit unions. Take a look at what you should consider and learn how to successfully incorporate signature verification tools in your financial institution.
1. Upfront cost
The banking world is becoming increasingly digital every day. Customers are using more digital payments, and they’re also demanding an increase in digital access to bank accounts and loan applications. However, it’s not just customer-facing products that are going digital. Signature verification is also shifting from a manual back-office to a digital process.
Embracing automated signature verification tools reduces the risk of forgeries and saves time for staff members, but it requires an upfront investment in the right tools. This presents a challenge to all sizes of banks, but it’s even harder for mid-sized banks and credit unions that don’t have the budgets for these types of products.
Tools available on a subscription basis can help these banks offer the same level of fraud detection as their larger counterparts. Hosted solutions can also be a significant boon for banks, as they reduce the hardware costs of implementing these types of products.
2. Conflicts with their current value prop
The central value proposition of small banks tends to be personability. Customers who value in-person connections historically gravitate toward these types of banks. They want to work with bankers who know their names, lenders who can fast-track loans based on relationships, and tellers who don’t need to double-check their signatures.
These legacy customers want their accounts to be safe, but they also don’t want the friction of a false positive. If they sign a check hastily one day, they don’t want to deal with a fraud flag. Instead, they want the check to go through regardless of the small discrepancies in their signature. In their mind, they may imagine a banker going, “Oh, Joe, his signature looks a little weird today, but I know it’s him.”
In reality, however, an automated tool is much more effective at this process than even the best-trained human analyst. Dynamic signature verification tools can collect multiple reference signatures that allow them to account for the expected discrepancies in a customer’s legitimate signatures.
In contrast, while human verification may seem more on brand for the person-first credit union experience, it’s more prone to errors in these situations. When human signature analysts have more than one reference signature, they log a higher error rate when looking for forgeries.
When selling their legacy customer base on the shift to a more digital experience, small banks should emphasize how tech tools enhance the customer experience. They should continue to push a person-first experience while bringing in new technology.
3. Changing expectations of younger banking customers
Mid-size banks and credit unions need to be aware that younger generations want personalization in new ways. They don’t care if they can walk into a branch and be greeted by name. Instead, they want personalized digital experiences.
Small banks need to develop digital tools that prioritize trust and customer satisfaction. They need signature verification tools that allow customers to deposit checks quickly and safely through mobile apps. But they can’t stop there. They also need to offer tools that help their young customers take out loans and make investment decisions based on data-driven dashboards and personalized offers.
This will help these institutions nurture relationships with younger clients. To meet this challenge, many community banks are partnering with fintech companies that can help these banks to develop apps and adopt digital payment channels.
4. Risks of third-party vendors
Whether you’re hiring someone to build an app for your bank or implement signature verification tools, you have to work with an outside vendor. This, of course, presents the added challenge of vetting your third-party purveyors to ensure their security and compliance with banking industry regulations.
To be on the safe side, only work with developers and software providers who have a dedicated history with the banking industry. Make sure they have the right safety protocols and insurance policies in place.
5. The neighborhood branch
During the COVID pandemic, big banks closed neighborhood branches at startling rates. But credit unions and mid-sized banks didn’t necessarily follow this trend. Instead, they largely kept their branches open. In many cases, these banks are in places where the real estate is less expensive than in large cities so they didn’t feel the financial crunch in the same way.
These banks need to be strategic to ensure that maintaining physical branches does not lead to financial losses. They should also be aware that even though Gen Z and Millennials tend to prefer digital banking, they will eventually want in-person services such as investment advice.
These banks should leverage their unique position to draw in customers based on services that big branches are dropping such as safe deposit boxes or customized banking advice. Mid-sized banks and credit unions should also be flexible with in-person offerings. For example, they may want to reduce permanent branches and explore mobile or pop-up branches.
Ironically, shifting to automated signature verification tools helps to make this possible. By shifting from manual to digital processes, you free up physical space in branches for other purposes.
Fraudulent checks cost banks billions every year, and if your bank isn’t protected, you will lose customers as well as money. At SQN Banking Systems, we offer hosted signature verification tools on a subscription basis as well as many other anti-fraud tools and solutions. To learn more, contact us today. We’ll start with a fraud review, and then, we’ll help you customize offerings based on your unique needs and budget.