Banks and credit unions can boost fraud detection through customer and member centricity
The global pandemic didn’t only disrupt the lives of the general law-abiding population, it also influenced criminals who employ schemes, scams and cybercrime to commit fraud against banks and credit unions. The worldwide lockdown and subsequent business restrictions resulted in some fraudulent activities increasing and others decreasing.
In 2021, banks and credit unions must take a customer and member-centric approach to mitigate fraud risk. Knowing your clients and having access to data sets that benchmark legitimate customer profiles and behavior is key to combating the likes of identity theft, synthetic identity fraud and other scams.
Synthetic identity fraud decreased over 2020, but the hiatus won’t last
According to an article published on Credit Union Times, synthetic identity fraud declined in line with the postponement of payments on loan forbearance programs. In fact, research by TransUnion and Aite Group shows that Q3 2020 levels of synthetic fraud relating to new auto loans and credit cards was at the lowest levels since they began tracking in 2016. Unfortunately, fraud is expected to rebound when those programs end, and payments recommence.
LexisNexis provides the definition of a synthetic identity as: “a combination of fabricated credentials where the implied identity is not associated with a real person”. Criminals open accounts and lines of credit using this synthetic identity, with the intention of committing fraud.
Reasons for the drop in this type of fraud:
- A result of the combination of systems put in place by banks and credit unions to identify and stop fraud
- Other opportunities to commit fraud, as a result of financial interventions
- The drop in sales of credit profile numbers (CPNs)
Synthetic identity fraud is particularly challenging for mid-tier banks and credit unions, because it is far more difficult to detect than identity theft, and fraudsters can bypass traditional authentication processes.
The Federal Trade Commission recorded 2.1 million fraud reports in 2020
While synthetic identity fraud may have been somewhat hampered by loan forbearance programs, other types of financial fraud flourished in 2020.
The Federal Trade Commission (FTC) recorded 2.1 million consumer fraud reports, with criminals employing methods ranging from imposter scams to fraud through online shopping, as well as mobile and communication services in order to steal an estimated $3,3 billion from consumers.
There were 1,4 million identity theft reports in 2020; almost double the 2019 figures, according to the FTCs Consumer Sentinel database.
What should banks and credit unions do to mitigate fraud risk in 2021?
Mitigating the risk of fraud has two primary elements: knowing your customers or members, putting them first and capitalizing on the power of data.
Achieving this not only requires fraud detection systems but a company-wide customer-centric mindset. When banks and credit unions put the customer at the center of strategy, the entire organization is focused on knowing everything there is to know about the customer’s circumstances and behavior.
Customer and member-centricity requires an investment in appropriate tools to gather, manage and analyze data. Having a single view of all customer communication and interaction provides the benchmark of how a legitimate customer engages and behaves.
An all-inclusive CCM platform is the foundation of a customer and member-centric strategy. It provides a central repository and view of customer information that informs decisions and feeds into fraud detection programs.
In addition, technology and partner choices should prioritize security and data privacy, so that both provider and customer can rest assured that personal information is secure while residing or being processed on the bank or credit union’s systems.
Doxim’s CCM platform assists to gather and leverage customer data, enabling banks and credit unions to know the customer/member and more effectively detect fraud threats. Interested to learn more?