How fraud teams can help banks solve the digital identity crisis

By Glenn Smith, EMEA Head of AML & Head of Fraud UK&I, SAS.

During the pandemic, millions of people have made the leap to digital banking. Identity analytics can help banks provide a delightful customer experience while keeping fraudsters out in the cold.

Fraud is often seen as a cost centre for banks, but there’s an opportunity for fraud teams to become a driver of better customer experience (CX) – and here’s how.

The COVID-19 pandemic has dramatically accelerated customer adoption of digital banking services, which is a dream come true for digital transformation teams. However, as a huge number of customers try online services for the first time, there’s bound to be friction.

Balancing fraud prevention and CX

When customers are less digitally savvy, it’s easier for fraudsters to take advantage of their inexperience. If there’s a significant uptick in fraud and regulators take the view that banks haven’t taken reasonable steps to prevent it, senior executives could be held directly responsible under the Senior Managers and Certification Regime (SMCR).

But fraud prevention isn’t just a regulatory issue – it’s a CX issue too. If banks don’t protect new and potentially vulnerable users of online services from fraudsters, they could see digital adoption regress to pre-pandemic levels, and set digital transformation initiatives back by a decade.

The problem with playing it safe

On the other hand, if banks take an overly cautious approach and decide that it’s not safe to allow customers to use certain services online, that also affects CX. Digital natives resent being told to visit a branch to change their address or marital status, for example – yet several banks still require this.

Requiring customers to jump through multiple hoops to establish their identity online is not a good option either. For customers who are comfortable online, the need to juggle usernames, passwords, and two-factor authentication codes is a major cause of annoyance – especially if it leads to failed logins or locked accounts. Meanwhile, for people who are less digitally able, even getting past the login screen can feel like an insurmountable obstacle.

How fraud teams can help
Fraud teams can help by providing identity risk scores that other lines of business can easily embed into their own processes. This enables the bank to assess how confident it should be that the person on the other end of the Internet connection is a genuine customer, not a fraudster.

These identity risk scores can be calculated from a wealth of information that the bank holds internally, alongside data sourced from specialist third-party identity providers. By bringing together these data sources and applying the right algorithms, fraud teams can help the business detect red flags (such as a user logging in from an unknown device with an IP address that they have never used before) and take appropriate action (for example, asking additional security questions or aborting the transaction).

Why aren’t more banks doing this?
The challenge is that orchestrating all these data streams from different identity providers is a complex task. Most banks end up with a hodgepodge of point solutions from multiple vendors. Each of these may be best-in-class for assessing a single risk vector, but none of them can provide the holistic view needed to detect sophisticated fraud attempts with high accuracy.

What’s needed is a technology platform that can handle the data integration and orchestration automatically, bringing together device data, behavioural information, and biometrics, and applying machine learning-based anomaly detection to generate risk scores on demand.

From cost centre to CX champion
At SAS, we’ve seen risk teams adopt this centralised, integrated approach with great success. For example, we recently helped one of our clients, a loan provider, switch to a cloud-based identity analytics solution. As a result, its fraud team gained the ability to identify trends in real time, reduce false positives, and cut third-party fraud by more than 80 percent – saving millions of pounds.

More importantly, this sophisticated approach to fraud analytics helps to craft smoother, safer customer journeys – giving genuine customers a warm welcome to their online banking experience, while keeping fraudsters locked out in the cold. It also means the risk team can raise its profile within the organisation from regulatory cost centre to a key partner in improving CX.

By Glenn Smith, EMEA Head of AML & Head of Fraud UK&I, SAS.

During the pandemic, millions of people have made the leap to digital banking. Identity analytics can help banks provide a delightful customer experience while keeping fraudsters out in the cold.

Fraud is often seen as a cost centre for banks, but there’s an opportunity for fraud teams to become a driver of better customer experience (CX) – and here’s how.

The COVID-19 pandemic has dramatically accelerated customer adoption of digital banking services, which is a dream come true for digital transformation teams. However, as a huge number of customers try online services for the first time, there’s bound to be friction.

Balancing fraud prevention and CX

When customers are less digitally savvy, it’s easier for fraudsters to take advantage of their inexperience. If there’s a significant uptick in fraud and regulators take the view that banks haven’t taken reasonable steps to prevent it, senior executives could be held directly responsible under the Senior Managers and Certification Regime (SMCR).

But fraud prevention isn’t just a regulatory issue – it’s a CX issue too. If banks don’t protect new and potentially vulnerable users of online services from fraudsters, they could see digital adoption regress to pre-pandemic levels, and set digital transformation initiatives back by a decade.

The problem with playing it safe

On the other hand, if banks take an overly cautious approach and decide that it’s not safe to allow customers to use certain services online, that also affects CX. Digital natives resent being told to visit a branch to change their address or marital status, for example – yet several banks still require this.

Requiring customers to jump through multiple hoops to establish their identity online is not a good option either. For customers who are comfortable online, the need to juggle usernames, passwords, and two-factor authentication codes is a major cause of annoyance – especially if it leads to failed logins or locked accounts. Meanwhile, for people who are less digitally able, even getting past the login screen can feel like an insurmountable obstacle.

How fraud teams can help
Fraud teams can help by providing identity risk scores that other lines of business can easily embed into their own processes. This enables the bank to assess how confident it should be that the person on the other end of the Internet connection is a genuine customer, not a fraudster.

These identity risk scores can be calculated from a wealth of information that the bank holds internally, alongside data sourced from specialist third-party identity providers. By bringing together these data sources and applying the right algorithms, fraud teams can help the business detect red flags (such as a user logging in from an unknown device with an IP address that they have never used before) and take appropriate action (for example, asking additional security questions or aborting the transaction).

Why aren’t more banks doing this?
The challenge is that orchestrating all these data streams from different identity providers is a complex task. Most banks end up with a hodgepodge of point solutions from multiple vendors. Each of these may be best-in-class for assessing a single risk vector, but none of them can provide the holistic view needed to detect sophisticated fraud attempts with high accuracy.

What’s needed is a technology platform that can handle the data integration and orchestration automatically, bringing together device data, behavioural information, and biometrics, and applying machine learning-based anomaly detection to generate risk scores on demand.

From cost centre to CX champion
At SAS, we’ve seen risk teams adopt this centralised, integrated approach with great success. For example, we recently helped one of our clients, a loan provider, switch to a cloud-based identity analytics solution. As a result, its fraud team gained the ability to identify trends in real time, reduce false positives, and cut third-party fraud by more than 80 percent – saving millions of pounds.

More importantly, this sophisticated approach to fraud analytics helps to craft smoother, safer customer journeys – giving genuine customers a warm welcome to their online banking experience, while keeping fraudsters locked out in the cold. It also means the risk team can raise its profile within the organisation from regulatory cost centre to a key partner in improving CX.