Four ways analysing digital behaviour can improve account opening fraud detection

Consumer demand for more digital products and services has been the driving force behind the rapid digital transformation for many financial institutions. The growth of digital channels was further propelled by the global pandemic when financial institutions were forced to reckon that digital is not one of many channels, but a necessary requirement for doing business with customers. 

Protecting the account opening process during these unprecedented times has been difficult with fraud attacks so rampant but optimising the experience has been equally challenging. While digital onboarding has been the preferred method, with 37% of consumers, and more than half of millennials, citing digital channels as their preference for opening a new account, application abandonment rates remain high. According to the Digital Banking Report, nearly one in five applications is abandoned online, and the rate increases the longer it takes to complete an application. In the mobile channel, abandonment rates are even higher with only 8% of applications completed successfully from start to finish on a mobile device. These numbers offer a stark reality for financial institutions when digital becomes the only channel.

The role of digital behaviour in fraud detection

Fraud and risk management teams have had to adjust to the new normal and change the way they work. Securing the online customer journey cannot come at the expense of customer experience and vice versa. But the pressing question remains: ‘How do we trust a customer we have never seen before?’

Traditional controls are leaving blind spots when it comes to protecting the account opening process.  These controls typically include Identity proofing methods that require knowledge of personal information and device intelligence. Data breaches and phishing scams have generated a wealth of personal data for sale in the black market, and the ease of searching online public databases and social media profiles have deemed knowledge-based methods ineffective and easy to defeat. Device intelligence offers limited protection during the new account opening process because new customers rarely come from a ‘known’ device and have no digital footprint with the organisation.

Behavioural biometrics takes a fresh approach to provide financial institutions with effective fraud detection in the account opening process, picking up where knowledge and device-based solutions leave off. There are clear digital behaviour patterns associated with genuine and fraudulent activity that manifest within the account opening process that behavioural biometrics can quickly spot with a high degree of accuracy. Some examples include:

• Application process fluency: How familiar is the user with the account application process?
• Low data familiarity: How familiar is the user with personal data?
• Expert behaviour: Does the user display advanced computer skills compared to the general population?
• Age analysis: Does the human-device interaction align with the common behaviour patterns associated with users of a certain age group?

Did you know: 64% of confirmed account opening fraud cases detected with behavioural biometrics showed behaviours indicating lack of familiarity with personal data

How digital behaviour takes fraud prevention a step beyond

Managing fraud risk in the account opening process cannot simply be measured through loss prevention metrics and must go a step beyond. There are three priorities that fraud and risk management leaders must balance in building a trusted environment for digital account opening, and behavioural biometrics is helping them achieve results.

1. How do I manage fraud risk? Yes, the obvious, but fraud risk management is far broader than just loss prevention. Consider mule accounts. When a fraudulent deposit account is opened to serve as a mule account to move money from other compromised accounts, that comes with both regulatory and reputational risks in addition to the financial impact. Behavioural biometrics helped a large bank in Asia detect hundreds of fraudulent account openings in the first four weeks of deployment, with potential fraud savings estimated at over USD 500.000.
2. How do I banish friction? In the context of risk management, eliminating points of friction and reducing abandonment rates in the digital account opening process can be challenging. The experience should be centred on treating new customers like an old friend, but that is difficult in cases where no pre-established relationship exists. A large digital bank undergoing a massive attack deployed behavioural biometrics and was able to detect 70% more fraud in the account opening process without impacting good customers in the process.
3. How do I increase customer acquisition in the digital channel? This is the ultimate risk and reward question. Fraud and risk management leaders must look for solutions that reduce fraud while also allowing more good applicants to be approved with confidence. In one case, a global card issuer leveraging behavioural biometrics was able to reduce false declines gaining an additional USD $1M in otherwise lost annual revenue from genuine customers who had abandoned the application during the high-friction control process.

Today, 85% of financial institutions experience fraud in account opening, a number that makes it all too clear that it is time to move beyond traditional fraud detection alone. Tackling today’s threats requires a layered solution that builds trust with customers, manages risk across digital channels, and limits financial losses from cybercrime. Behavioural biometrics is helping financial institutions deliver a comprehensive fraud management strategy and build an online environment where customers feel safe to interact. 

About Ayelet Biger-Levin

Ayelet is a seasoned professional with over 20 years of experience in the technology and information security industry, with a diverse background in product, R&D, marketing, sales, and professional services. At BioCatch, she is focused on helping financial institutions provide seamless and secure digital experiences to their customers by leveraging the power of behavioural biometrics. Prior to joining BioCatch, Ayelet spent over ten years at RSA Security in various leadership roles across Product Management, Product Marketing and Professional Services in both the Fraud and Identity solution areas. Ayelet also held various roles at IBM, focused on innovation. Ayelet has a MSc. in Information Systems Engineering, with a Thesis in Complex Event Processing and is a CISSP with multiple patents in the infosec and fraud detection spaces.

About BioCatch

BioCatch is a behavioural biometrics provider that was founded in 2011 by experts in neural science, artificial intelligence (AI), machine learning and cyberterrorism. Its AI-driven platform used to passively identify both human and non-human behaviours online is deployed by major banks and other global enterprises to help manage their digital identity challenges. The technology prevents new account fraud, authenticates online users, prevents account takeover fraud, and detects vishing scams, generating impressive returns on investment that come from catching more fraud as well as reducing false positives and unnecessary escalations.