By Glenn Fratangelo
AAmong the most concerning factors shaping bank fraud models today, it’s not just the digital transformation and the pandemic. This is also how scammers have adapted their tactics based on consumers’ unique generational differences.
The techniques villains use to target older age groups are not the same tactics they use to attract younger Gen X and Millennial customers. What’s even more frustrating is that scammers sometimes mimic the generation-targeted marketing programs and product offerings of many financial institutions to take hold of each of these very different consumer groups.
In this environment, customers of all generations are unlikely to return to physical branches at their pre-pandemic level. According to data from NICE Actimize, around 85% of consumers who have used digital platforms for financial services will favor digital forms of post-pandemic interaction. There is a substantial generational shift in purchasing power from older generations to emerging, younger and newly affluent generations, creating market demand for modernized digital offerings and payments.
Fraud exploits generational differences
Fraudsters are always looking to exploit new weaknesses and enjoy the challenge of new technologies and business models. In doing so, the threat of greatest concern to a financial services organization can sometimes be the customer who inadvertently lets in the fraudster. Each generation interacts, understands and uses technology differently. Scammers target customers based on this demographic distinction.
For example, Millennials and Gen Z are the emerging affluent generations and will benefit from the significant wealth created by baby boomers over the next 10 to 15 years. In addition, these generations are the first to adopt online and digital banking services. As they will soon experience significant changes in their lives, including the purchase of homes and cars, banks will want to build early relationships with these customers and offer heightened experiences to retain them.
Conversely, Generation X and baby boomers are well established and are banking on the future. Unlike other generations, they are used to traditional banking interactions but are often open to new ideas. For example, ten years ago it was a novelty for grandparents to text their grandchildren. Today, grandparents post photos on Facebook with their grandchildren. And what was initially assumed to be slowness to embrace and adopt new technologies has been turned out to be wrong by the pandemic. Baby boomer activity has often reflected the younger generations in their adoption of online and digital banking platforms.
Implementing effective fraud prevention in the context of this generational dynamic can sometimes challenge banks’ ability to deliver secure, customer-centric experiences.
Customer education builds trust
So how do banks educate customers to prevent potentially risky behavior and avoid potential fraud? Banks and their customers must share the responsibility for fraud prevention. Education and knowledge of customers are essential pieces of the fraud prevention puzzle.
A WSFS Bank study of millennials and Gen Z consumers released earlier this year points out: “When it comes to financial literacy, 61% of respondents agreed that most of what they learned about financial literacy finance was by osmosis, with 75 percent of men agreeing versus 49 percent of women.
The research also noted that parents top the list of financial education sources at 36 percent, followed by romantic partners (33 percent), grandparents (31 percent), teachers (29 percent). ) and siblings (27 percent), while 23 percent said they learned these skills in school. Only 17 percent listed their bank or financial institution first. These data clearly indicate that there is a lot of room for banks to step in and provide education across generations.
As part of the education process, banks benefit when they are transparent with their customers. They should be clear on how fraud protections can work and indicate how they can experience friction due to activities such as two-factor authentication or adding layers of “captchas” and identifiers. Without building trust and showing the consumer why they are imposing these protections on them, the frustrated digital native consumer, especially with younger generations demonstrating less brand loyalty, will transition to a digital competitor with just a few clicks.
Customized protection prevents customer displacement
Optimizing the digital journey represents a significant market opportunity for banks to acquire and retain members of all generations with high expectations of “digital first” banking services. Methods to empower customers must be integrated into the fraud prevention process, including engaging them through digital tools and new interaction channels. This approach introduces organizational efficiency, customer loyalty, cost optimization and ultimately new opportunities.
Using advanced analytics powered by artificial intelligence that consumes large amounts of data in real time is the cornerstone to securely activate new, faster payment methods that younger generations are embracing. In addition, it also enables banks to refine and accelerate their primarily digital and mobile presence.
While customers need 24/7 access to financial services, they also expect security. Currently, banks are focused on developing specific and segmented strategies that focus on the risk involved. Adding targeted friction allows FSOs to deepen fraud without making authentication difficult for customers, such as random progressive authentication. Customers expect some degree of friction, but they also expect to move forward with minimal disruption.
Basically, fraud is a data problem. To effectively combat fraud and minimize customer impact, it is necessary to personalize approaches at the individual level and use all available data to fully visualize the customer and their risk profile. Second, in order to deliver the best customer experience, banks need to manage silos, fragmented tools, and data sets. And finally, to get this holistic view of customer risk throughout its lifecycle, a fraud team leverages a single fraud management system that unifies data, enables time-smart decisions. real and prevents friction while protecting customers.
Regardless of the generation targeted, the goal is to prevent funds from leaving the bank to be used for illicit purposes. With, of course, the other big priority of preventing the client from turning to a competitor through strong fraud prevention policies and an unwavering relationship of trust with an advisor.
Glenn Fratangelo is the Strategy and Marketing Manager for Fraud Management and Authentication at NICE Actimize.