Joe DiFonzo, Chief Technology Officer, Syniverse, shares his views on how mobile is assisting financial services’ companies increase customer satisfaction and reduce fraud.
Fraud is a major issue in the financial services industry. Its impact is felt in many ways, from loss of revenue for financial services providers and loss of sales for retailers, to loss of faith and trust among consumers. Nowhere is this more keenly felt than by consumers who fall victim to fraudulent activity with their credit cards, as blocked or failed transactions will inevitably lead to a sense of frustration and mild panic.
According to a Europol study, €1.5 billion is stolen each year through credit card fraud by organised crime groups in the European Union. Undeniably, credit card fraud remains a major issue for the financial services industry and it must be addressed to rebuild trust and satisfaction among consumers and the businesses with which they engage.
And yet the news is not all bad. Financial Fraud Action UK reports annual fraud losses on UK-issued credit cards reached £388 million in 2012, down 36 percent from the £609.9 million recorded in 2008. When it comes to fraud abroad, the progress is even better. After soaring to £230.1 million in 2008, annual fraud losses fell to £101.3 million in 2012, a reduction of more than 50 percent. The financial services industry is clearly doing something right. But the question remains: How can this progress be expanded and accelerated?
The statistics for fraud abroad raise an important issue, given the number of people who travel regularly for business and leisure. What can we do to reduce fraud for those visiting a foreign country? One of the biggest challenges faced is authentication, thus ensuring that the person using the credit card is entitled to do so. Lost or stolen fraud losses on UK-issued credit cards alone reached £55.2 million in 2012.
Just as the majority of us have a credit card, most of us also have a mobile phone – and both of these travel with us wherever we go. Much like it does at home, a mobile phone connects to a network when you travel, which allows that network to be privy to your location. For instance, think of a shopper in a department store buying an expensive handbag. But when she hands her credit card to a sales associate to swipe, the shopper’s bank detects the purchase is for a suspiciously high amount. A request is immediately initiated through the shopper’s mobile service provider to verify the credit card user’s mobile location. This information is in turn shared with the credit card company’s fraud engine and the transaction is processed – all without ever inconveniencing the shopper.
Mobile phones provide a practical solution as a form of secondary identification. In doing so, we’re obviously making an assumption that the mobile phone used is also not stolen; but phones themselves often have innate security features, like passcodes and lock screens, that add an extra level of security for users.
Mobile provides more than just the ability to prevent fraud. These types of location-based services have been available for nearly a decade, but widespread use has only recently started to grow, due to the popularity of smartphone apps that use GPS as a method to determine location. In complement to the GPS embedded in many smart devices, network-based location services provide an additional technique for geolocation.
A new survey Syniverse commissioned, carried out among executives at Fortune 1000 enterprises and conducted by iGR, found that 94 percent of financial services companies have deployed or are planning a location-based services solution to enhance customer service. Financial services companies are way ahead of other sectors – only 46 percent of retail respondents and 47 percent of travel and hospitality respondents said they were undertaking similar campaigns. Respondents from the financial services sector specifically indicated that they were embracing mobile business strategies to retain customers and combat fraud.
Simply put, mobile can be used for marketing efforts and can become a powerful tool in increasing brand, product and service awareness while reinforcing security. Last year, a survey by Text Marketer found that 68 percent of consumers would be open to receiving offers – for instance, alerts for new products or services, or discounts and coupons – via SMS.
Interestingly, 78 percent of financial service respondents in the Syniverse survey believe that customer service and satisfaction are critical benefits that a mobile strategy can deliver. Conversely, less than a third of the respondents are using messaging to offer new services and up-sell existing offers. Clearly there is a ‘gap’ between an understanding of what mobile can offer, and actually implementing mobile strategies. Fundamentally, this disparity suggests the financial services industry is missing out on new revenue opportunities through utilising mobile to its fullest extent.
The mobile revolution is relentless and is influencing many areas of our lives. Syniverse expects that financial services companies will soon be expanding the use of mobile in their business strategies. From combating fraud to increasing customer engagement, mobile presents abundant opportunities to enhance current and new customer relationships, rebuilding vital trust and improving end-user experiences.