4 Ways a Nuanced Account Risk Assessment Strategy Can Help Banks Reduce Fraud and Spur Business Growth

4 Ways a Nuanced Account Risk Assessment Strategy Can Help Banks Reduce Fraud and Spur Business Growth

New account openings are skyrocketing. Digital banking processes are becoming the norm. And application fraud is wreaking havoc on banks and credit unions.

As the industry landscape continues to shift, fraudsters are successfully exploiting weaknesses in traditional bank account risk assessment processes. According to AiteNovarica, the growth of application fraud ballooned over the past couple years and is expected to continue or even increase in the coming years1and fraud tactics are continuing to evolve.


For banks and credit unions, application fraud is an urgent concern.

a blue and grey column chart rising to the right illustrates the growth of DDA application fraud losses from $753 million in 2020 to an estimated $939 million in 2023.

DDA application fraud losses due to first and third-party fraud are expected to reach $939 million by 2023, up from $753 million in 20202.

With 23 billion records breached since 20173, fraudsters have access to enormous amounts of personally identifiable information. And they’ve been using that data to create highly sophisticated synthetic and manipulated identities that are very difficult to detect.

To effectively combat application fraud, financial institutions (FIs) must be able to verify that an applicant is who they say they are and confidently assess fraud risk—at the point of account opening.


Traditional account risk assessment strategies can hinder a bank’s growth.


As FIs bolster their loss prevention strategies to address evolving fraud tactics, they must be careful not to inadvertently add friction to the risk assessment process.

Consumers expect convenient digital banking experiences. If they encounter friction during account opening, they’ll often move on to a competing institution. The potential for application abandonment increases to as much as 60 percent if the process takes more than just five minutes to complete4.

But friction for consumers isn’t the only impediment to business growth during a bank’s account risk assessment process.

FIs must also be careful not to exclude potentially valuable applicants due to rigid “yes” or “no” decisioning rules. To grow market share—and support financial inclusion—FIs must be able to make more nuanced approval decisions by assessing an applicant’s risk in greater context.

A two-bar linear chart compares how more accounts can be opened with a nuanced risk assessment strategy vs. a binary yes-or-no approach. Declines are illustrated in red, opens in green, and opens with tailored privileges - indicating the additional accounts that can be opened - are in yellow.

To achieve this level of insight and control over account openings, FIs need access to broad and deep data, from across an individual’s banking history.


A nuanced account risk assessment strategy gives banks a competitive edge.


Banks and credit unions that adopt a nuanced approach to risk assessment can make more informed account approval decisions—and confidently grow their markets. They can:

  1. Open more accounts: Insight into a consumer’s deposit account history gives FIs the perspective they need to approve more applications—tailoring account privileges to align with the institution’s risk threshold.
  2. Protect against new account losses: Deep data intelligence (e.g., predictive scores; insights into applicant’s account history and behavior) helps FIs better understand the risk of default due to first-party fraud or account mismanagement.
  3. Balance risk, efficiency and compliance: A more flexible approach allows FIs to use risk insight data in a manner that aligns with their objectives for risk mitigation, operational efficiency and regulatory compliance.
  4. Improve financial inclusion: Behavioral insights add context to risk scores, allowing FIs to open their doors to a wider population of historically underserved consumers.

Early Warning’s Predict New Account Risk solution, for example, draws on broad deposit performance data to provide FIs with the intelligence they need to answer questions like:

  • What account services and privileges can I offer the applicant?
  • How likely are they to default on the account due to mismanagement?
  • Can I do business with this person?
  • How likely are they to commit first-party fraud?


    Bank-contributed data is a powerful tool in the fight against fraud.


    Early Warning is the Trusted Custodian® of the National Shared DatabaseSM Resource—which contains participant and scored account data on nearly 656 million5 deposit accounts—as well as billions of transactional records contributed by thousands of financial institutions.

    With access to comprehensive account performance data, FIs can adopt a nuanced risk assessment strategy that promotes bank growth while reducing fraud losses.


    Learn more about how Early Warning can help you confidently expand your customer base. 

    Learn More

    1Market Trends in Fraud for 2022 and Beyond.Aite Novarica, Feb.2022
    2Application Fraud: TrendAnalysis and Mitigation Challenges.AiteNovarica, Nov.2020
    3Application Fraud: Trend Analysis and Mitigation Challenges.AiteNovarica, Nov.2020
    4Digital Banking Report Research. The Financial Brand, Aug.2020
    5National Shared DatabaseReport, June 2022
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