The right outfit. A firm handshake. A beaming smile. In life, first impressions matter. While studies don’t agree on the exact number, you have roughly 30 seconds to impress someone you’ve just met. You may have a little more than a few seconds in banking, but probably not much more. Maybe a few minutes. But who’s counting?
Your prospective clients are.
That’s why, when it comes to banking, I’m passionate about talking about solutions used right at the start of the client relationship. For years, this process has been painful. We all know it. Lots of paperwork. Lengthy fraud checks. At best, institutions would welcome thousands of new clients each month. At worst we’d add friction to the application process, which turned off prospective clients, while exposing our institutions to fraud. A double whammy.
For decades, Early Warning has been helping financial institutions implement solutions for new client onboarding. No one here knows the space better than my friend and product line leader for our identity solutions, Jim Mortensen.
Jim’s team delivers solutions that can provide confidence around the true identity of potential customer while also predicting the likelihood a potential applicant will commit first-party fraud or default after opening a new account. This information helps our FI customers to make informed decisions on individuals and businesses for whom they are considering doing business with, and the level of risk that the individual presents. At the end of the day, these solutions help our customers welcome millions of new clients each year.
Ian: Thanks for joining us today Jim. Why are FIs moving away from legacy identity verification solutions?
Jim: A few reasons, Ian. Recent data breach headlines have really put a spotlight on the risk of relying on a single source of information to validate a potential customer’s identity. Most legacy solutions fall into this category. The latest solutions, including those from Early Warning, use a variety of data sources and data models to verify identity and assess the risk threshold of an applicant – all in real-time.
Ian: Why is this important?
FIs need a more holistic view of the consumer. They can use predictive insights to uncover what kind of customer a person will be; they can do this by looking at a broad set of attributes and consumer banking behaviors – including both negative and positive behaviors. For example, maybe a consumer was late on his credit card payments years ago. It is one piece of data. If you look at him through a variety of data points, they will show you a bigger picture and indicate the likelihood that he will default on his checking or saving accounts. Knowing the customer made that mistake, an FI can tailor an account and its privileges for that person and still open an account for them.
Ian: When Aite Group recently surveyed FI’s, they found that the majority of them indicated that their top three pain points linked to application fraud were: first-party fraud (76%), followed by data breaches (56%) and social engineering in contact centers (52%). These models can also help fight these types of fraud. Tell us more.
Jim: Unfortunately, because of some of the data breaches, fraudsters may have access to consumers’ personally identifiable information, and are also gaining access to the consumer’s account through phishing and other techniques, all with the intent to commit fraud.
The bad guys likely know typical knowledge-based authentication questions like mother’s maiden name, model of first car, favorite food, etc., which are commonly used to try to deter this type of fraud. As a result, they are using all this information to commit identity crimes, such as creating synthetic identities for application fraud purposes. This raises the questions of how financial institutions balance a solid customer experience without introducing too much friction. Our Early Warning solution, New Account Scores, offers an identity model that includes cross-institution data and sophisticated analytics that go beyond rules-based solutions to better enable FIs with data intelligence to improve new account opening decisions while reducing fraud.
Ian: The same study points out that FIs need to protect a variety of banking channels, but still offer a smooth application experience. How do you balance the two?
Jim: We live in a fast-paced, “I need it now” type of world. Consumers expect the same one-click service from FIs as they do from online providers and retailers. They demand speed but they also expect to know that their money—and their identities—are safe. Channels represent different types of risk so you need to have the right layers of authentication and the right tools to validate the device that aren’t cumbersome to the process.
Early Warning has tools that offer layers of security that happen behind the scenes, unknown to the customer, to help create a smoother authentication experience. These solutions can help validate a consumer’s identity during the application process, along with securing online banking enrollments and future account logins and transactions.
You need to have multi-layers of security and check points to verify identifies. Early Warning is able to leverage mobile network operator data that can associate the mobile number and device hardware, for example the SIM card, directly with the mobile carrier. This not only helps detect future account takeover attempts, but reduces friction for your true customers.
Ian: Ok, so an FI’s confirmed the person, it is equally important to validate the opening deposit funds not just to reduce risk but to help the consumer access their funds for whatever needs they may have. What do you recommend?
Jim: You’re right, Ian. Making funds available fast can improve the customer experience, but making the wrong funds available can place the FI at risk. FIs need to ensure that the customer is funding their new account opening deposit with good funds, and from an account which they have the authority to transact. Tools should be used to predict the risk associated with the opening deposit, whether in the branch with a teller or through mobile capture, since they can all be linked to new account fraud. These types of solutions are equally important for future deposits into the account as well. We know that fraudsters don’t take a break once the new account is opened.
Ian: Well Jim, thank you so much for taking the time to provide your expertise on streamlining and securing the new account onboarding process. And for any of my readers, if you want to take a deeper dive into the topics we touched on in this interview, American Banker recently hosted a webinar on this very subject featuring remarks from Jim, alongside Shirley Inscoe from Aite Group. They talked more around strategies your FI can deploy to mitigate application fraud while keeping the focus on the customer experience. You can catch it on-demand through the link below. Thanks again, Jim!
 Application Fraud: Fighting an Uphill Battle, Aite Group, November 2018.