FICO UK Research Finds Fraud Protection Is a Bank’s Secret Advantage

Rhea-AI Summary

FICO's report on Fraud, Identity, and Digital Banking emphasizes the importance of strong fraud strategies in customer acquisition and retention. While fraud protection is crucial for individuals, lengthy ID checks can deter customers from opening accounts. Key findings include 34% prioritizing good fraud protection when opening new accounts, with biometrics being a popular security choice.

Insights

Market Research Analyst

Strong fraud strategies are increasingly becoming a competitive differentiator in the financial sector. The study highlights that 34% of consumers consider good fraud protection as their primary concern when opening a new account, with a significant 73% ranking it in their top three concerns. This consumer sentiment can influence customer acquisition strategies for financial institutions. A focus on fraud protection can lead to increased customer trust and loyalty, which are key drivers for long-term business growth.

However, there's a balance to be struck. With 18% of potential customers willing to abandon the account opening process if identity checks are cumbersome, financial institutions must optimize their verification processes to be both secure and user-friendly. This presents an opportunity for technology investment in areas such as biometrics, which 68% of respondents preferred, signaling a market shift towards more sophisticated security measures that enhance user experience.

Financial Analyst

The emphasis on fraud protection as a priority for customers can have a direct impact on the bottom line of financial institutions. As security becomes a selling point, companies that invest in advanced fraud detection and prevention technologies could see a positive effect on their market share and profitability. The potential customer attrition due to lengthy or complex ID checks—cited by one in five respondents—serves as a warning. Institutions that fail to streamline their fraud prevention measures may face increased customer acquisition costs and a higher churn rate, which can adversely affect their stock performance.

Cybersecurity Expert

The report underscores the importance of cybersecurity in the financial industry. With identity theft being a primary concern for customers, institutions must deploy robust cybersecurity frameworks to protect customer data. The adoption of biometrics, such as fingerprint recognition preferred by 68% of survey participants, indicates a trend towards more personal and secure authentication methods. This approach not only enhances security but also aligns with consumer preferences, potentially reducing friction in the customer experience. As cybersecurity threats evolve, financial institutions that stay ahead of the curve in protecting customer data can gain a competitive edge.

Report on Fraud, Identity and Digital Banking reveals that good fraud strategies are the secret weapon to win and retain customers – as long as checks don’t take too long

LONDON--(BUSINESS WIRE)-- FICO (NYSE: FICO): A new study of 1,000 UK consumers by global analytics software leader FICO¹ has put the spotlight on the customer acquisition and retention advantages of strong fraud strategies. Once simply viewed as necessary overhead, according to the new research fraud departments are now the secret weapon in winning customers. Fraud protection was cited as the highest priority for individuals when choosing a provider for a new financial account. However, enhanced fraud prevention processes cannot come at any cost. One in five said they would abandon opening an account if ID checks take too long.

More information: https://www.fico.com/en/latest-thinking/ebook/fraud-identity-and-digital-banking-consumer-survey-2023-united-kingdom

Key findings

• 34% rank good fraud protection as their top consideration when opening a new account; 73% had it in their top three
• The type of fraud that worried Brits most is the threat of a fraudster using their identity to open an account, followed by their card being stolen and used
• 18% will abandon opening a current account if identity checks are too difficult or time-consuming
• Biometrics are a favourite security choice, with 68% preferring to use fingerprints

“Financial institutions should use fraud protection as a competitive advantage,” commented James Roche, a principal fraud consultant at FICO. “Customers are looking for providers they can trust, so institutions should shout about the excellent fraud protection they provide. But when it comes to application and onboarding, they must be sure those protections, fraud checks and identity proofing are appropriate, proportionate and time-efficient to reduce the chance of dropouts.”

Whilst 34% said they are more likely to open a financial account digitally than they were a year ago, the expectation for a frictionless experience has also increased. Consumers expect the application process to be fast. Almost one in five will abandon an application if the checks are too difficult or take too long. Two thirds expect to spend less than 30 minutes opening a current account.

“If one place in the onboarding process sees a high proportion of dropouts, FIs should consider altering the order in which checks are made and whether some could happen once the customer has been accepted,” added Roche.

The new report - Fraud, Identity and Digital Banking - reveals how the landscape has changed when it comes to identity verification. Just a few years ago biometrics was an unknown science for consumers. The FICO research shows the shift, as 54% believe fingerprint scans provide essential protection; 52% ranked face scans and 49% iris scans. However, more education is still needed on behavioural biometrics, with just 17% believing these provide excellent protection.

The FICO report also identifies the financial crimes that consumers are most worried about, with identity theft to open a new account the top ranked concern at 30%. Bank account takeover was ranked the crime most feared by 20% of respondents and 16% ranked being tricked into sending money to a fraudster as the top concern. Giving customers confidence that a financial institution is using the best processes to mitigate against these threats is, therefore, critical.

“Aiming for completely frictionless experiences could leave a financial institution over-exposed to fraud,” concluded Roche. “Indeed, appropriate friction can actually help customers feel protected. The reality is, checks must be proportionate and personal to each customer and interaction. Therefore, fraud protection needs to be adaptive, using all streams of customer data for the best outcome for the customer and the institution.”

FICO^® Platform unites core capabilities that aid detection and resolution across the customer lifecycle, including pre- and post-book. API access to third-party providers allows users to add and remove data sources as they see fit, and FICO Platform gives data science teams what they need to get their models into production. FICO models reduce false positives so fewer applicants are subjected to additional fraud checks. Two-way, multi-channel communications keep customers informed and automate information gathering to help resolve cases.

¹ Research conducted online by an independent research company adhering to research industry standards. 1,000 UK adults were surveyed, concluding in November 2023.

Read the full report and find out how FICO can help banks and other financial institutions implement successful fraud protection.

About FICO

FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and other countries, improving risk management, credit access and transparency. Learn more at www.fico.com.

FICO is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240219872099/en/

For further comment on the FICO UK Credit Card activity contact:

FICO UK PR Team

Wendy Harrison/Parm Heer

ficoteam@harrisonsadler.com

0208 977 9132

Source: FICO

FAQ

What did the study by FICO focus on?

The study by FICO focused on the customer acquisition and retention advantages of strong fraud strategies.

What was cited as the highest priority for individuals when choosing a provider for a new financial account?

Fraud protection was cited as the highest priority for individuals when choosing a provider for a new financial account.

What percentage of respondents ranked good fraud protection as their top consideration when opening a new account?

34% of respondents ranked good fraud protection as their top consideration when opening a new account.

What security choice did 68% of respondents prefer to use?

68% of respondents preferred to use fingerprints as a security choice.

What might cause individuals to abandon opening a current account?

18% of individuals might abandon opening a current account if identity checks are too difficult or time-consuming.