The way your customers think about fraud can have a significant impact on their relationship with your financial institution. Their fraud education also shapes their risk profile.
In 2022, FICO interviewed 1,000 U.S. banking customers about their experiences with and attitudes toward fraud. While many of their responses were not surprising, others represent a clear difference between consumer perceptions and fraud reality. This discrepancy can increase consumers’ risk of becoming a victim of fraud and disrupt their relationships with their banks.
Here’s a breakdown of the survey results and a look at the implications for banking professionals.
1. The majority of consumers are overconfident about social engineering schemes.
Only 5% of consumers state that they are worried about being tricked into making instant payments to fraudsters. However, this is a growing threat and scam artists use very persuasive techniques to convince victims to send them payments. Here are just a few examples of these types of scams:
- A scam artist pretends to be the victim’s utility company and demands an instant payment to keep the lights, water, or heat on.
- A thief strikes up an online romance with a victim, convinces them to send compromising photos, and then demands a ransom payment not to share the photos.
- A fraudster convinces a victim that they must share their payment details to get a refund from a scam that has already been perpetrated on their account, but of course, the original scam was just a rouse.
The vast majority of consumers think that they are too smart to be tricked by these scams, but the truth of the matter is vastly different. People from all walks of life with a wide range of professional backgrounds have fallen prey to these types of scams. Unfortunately, while confidence is generally a positive personality trait, it can lead to an increased risk of fraud in this situation.
2. Older adults are less worried about fraud.
Both in the United States and globally, adults over the age of 55 are less worried about fraud than their younger counterparts. Only 2.6% of older adults are worried about instant payments fraud — one of the fastest-growing types of fraud right now.
Additionally, based on a global survey of 12,000 respondents, 14% of adults age 55+ say that they are not worried about fraud at all, which is double the rate for younger generations. To put it another way, one in every seven of your older clients thinks that fraud is not a risk.
However, research indicates that elders lose anywhere from $2.9 to $36 billion due to fraud and financial exploitation every year. The reason this range is so absurdly broad is that victims only report a small number of fraud incidents. Additionally, people over age 55 hold about 83% of the wealth in this country, meaning that scam artists have a lot more to gain by targeting people in this age range.
Your customers of all ages need to understand that they may be at risk, and ideally, they should also understand how you’re protecting them.
3. Consumers are unwilling to accept friction from fraud management measures.
Consumers seem to have s solid understanding of what can happen if someone steals their identity. They’re most worried about their stolen identities being used to open an account (28%), take over an existing account (26%), or commit card fraud (22%). The order of their concerns aligns fairly closely with the incident rates of each of these types of fraud.
However, despite being aware of the risks, consumers aren’t willing to bend to protect their identities. The FICO survey indicates that consumers don’t want to accept fraud management practices that put friction into the customer experience. They want to be able to apply for loans, take out new credit cards, or open new accounts easily. If they can’t, they tend to perceive a bank as unhelpful rather than fraud resistant.
Mitigating this perception is critical for financial institutions. If your fraud processes are too cumbersome, you will push customers away. But if you allow fraud to happen, you will almost certainly lose customers.
4. Over a quarter of customers will leave if they have a negative experience post-fraud.
Becoming the victim of fraud can erode a customer’s trust in your bank, but the way your bank responds to the fraud has an even more significant impact on customer retention rates. Over a quarter (28.7%) of respondents say that they will leave their financial institution if a fraud incident is poorly dealt with.
Your financial institution must have fraud prevention processes in place, but it also needs to react to fraud in a way that minimizes losses and safeguards the customer experience. How do you support victims of fraud? Is it easy for them to report fraud? How quickly do you respond to fraud complaints? What are your reimbursement rates? How long does it take you to send out new cards when one has been compromised? Are former victims of fraud satisfied with your services?
5. Most of your customers think you’re doing a good job.
The majority of banking customers (72%) think that banks are doing enough to protect them against fraud. However, 16% of customers believe that banks aren’t doing enough. Are your customers in the majority or the minority for this question?
Do you know what your customers think? Are they happy with your fraud protection efforts? Do they think you should be doing more? Would they recommend you to their friends or business associates?
Your customer satisfaction rates have a significant impact on your profitability and your public image. Take time to find out how your customers perceive your financial institution and use their thoughts to improve your processes.
To get help with fraud prevention and detection, contact us today. At SQN Banking Systems, we focus on fraud so that our clients can focus on other aspects of customer satisfaction. Working together, we can make sure that your customers are happy and safe.