Card fraud is the worst it has ever been. It’s also probably the best it ever will be. It’s no longer a matter of if a hack will occur, but when. Combine that with the mountains of consumer data collected that are at risk of hacking, plus the ability of criminals to stay a step ahead of card fraud protections, and you have a perfect storm of danger.
If issuers want to stem the tide of card fraud, they must enlist their customers to help.
Costs of card fraud are bigger than you may realize
Historically, card fraud is discovered when consumers review their statements, see a transaction they didn’t initiate and alert the bank. Unfortunately, because the money is already in the hands of the retailer where the fraud occurred, the cost to banks and credit unions is high.
And the costs don’t stop there. According to a recent FICO study, 22 percent of consumers – even if satisfied with how their issuer handled the situation – close the account associated with a fraudulent charge. Among millennials, the percentage closing accounts rises to 29 percent and one-quarter of millennials experiencing fraud take their complaint to social media with a negative post. Relationships with consumers also suffer when legitimate transactions are denied at point-of-sale because they fall outside of customers’ usual shopping patterns. Even if the customer keeps the account, top-of-wallet status is at risk.
Teaming with your customers can cut fraud
New fraud-fighting technology makes consumers a part of your team when combating card fraud. Issuers can use mobile applications that push an email, text or phone call, in real-time, to a card user when a transaction falls outside the rules and requires verification. Once the consumer confirms his or her identity, the transaction is approved. If the consumer denies the transaction, the likely fraudulent charge doesn’t occur.
Customers and financial institutions reap benefits from this new technology:
• It empowers customers, which makes them “stickier” and more likely to expand their relationships with their banking provider.
• It decreases the likelihood of a false positive interrupting a genuine transaction and reduces customer embarrassment associated with one’s credit card being turned down.
• It reduces costs associates with card fraud.
• It helps retain top-of-wallet status for the issuer’s card because the customer feels reassured that legitimate transactions will be executed without hassle or embarrassment.
Here are the four steps you need to take if you want to make customers your partners in combating card fraud:
1. Adopt a fraud solution that provides consumers with multiple mobile communication options: text, email and voice.
2. Make alerts free for consumers to use – i.e., no data fees for usage, which is a common barrier to consumer adoption.
3. Ensure that your institution always has up-to-date mobile phone numbers and email addresses for customers.
4. Educate your customers about why immediate responses to emails, texts or phone calls from your institution are so important when they are making purchases.
Fighting fraud demands a layered approach. No single solution is foolproof, but these new tools add a critical layer of protection against increasingly sophisticated fraudsters. By enlisting consumers in the fight against fraud, everybody wins – everybody except the fraudsters.
What is your institution doing to partner with your customers in fighting card fraud?