Trust in the digital age: turning consumer trust into revenue

Would you say it is true that recent economic uncertainty has led to banks and fintechs investigating new sources of revenue among consumers? 

In addition to serving existing clients, financial institutions and service providers are also looking to acquire new customers, including the underbanked – those without sufficient access to financial institutions. With limited banking or credit history to refer to, these customers often become a blind spot to traditional KYC and credit-driven identity verification practices, which forces financial institutions to remediate with high-friction identity proofing solutions such as document requests or ID card scans. Mastercard’s identity solutions offer low or no friction to prove a new customer is who they say they are while keeping bad actors from opening an account and further engaging on the platform. 

Are there any new or evolving fraud trends emerging in the financial services industry due to the market shift? Can you provide some examples of those trends and how they are impacting the bottom line of banks and fintechs? 

The digital economy is growing rapidly as technology continues to remove borders and barriers. As the digital economy grows, so too does uncertainty and more sophisticated fraud. Sophisticated fraud such as account takeover impacts consumers and businesses alike. The growing threat of synthetic ID fraud is also wreaking havoc across the ecosystem. Using a combination of valid or generated information, fraudsters attempt to open new accounts or even apply for lines of credit. Identity fraud is one of the greatest threats to building a secure, seamless digital economy. In the United States alone, identity thieves steal more than USD 5.8 billion a year with 25% of victims reporting a loss, according to the Federal Trade Commission (FTC). This number is expected to grow, as fraudsters evolve their tactics and people conduct more of their day-to-day lives online.

What do you think trust means to consumers today as they attempt to open new accounts with a specific bank or fintech in this volatile market? 

This is a great question. It is true that today’s consumers place a high value on convenience. At the same time, they expect their financial services and payment providers to keep them and their assets safe. Consumers expect technology to work with limited friction, for their data to be shared safely and securely, and to receive their goods or services quickly. This is not only a point of convenience, but a business imperative for financial institutions. When a customer has a poor experience with a bank, they will seek an account elsewhere. Studies show that nearly half of consumers would take their business elsewhere after just one bad online experience. Financial institutions need smart, secure, reliable tools to verify individuals online and establish trust.

It is no secret that consumers are choosing to open new accounts online, making it a challenge for banks and fintechs to know who their customers are. Friction is a term we hear often when consumers are attempting to open new accounts. What impact do you think friction has on the potential loss of customers and their lifetime value when opening accounts online? 

Consumers are looking for both speed and security in their digital interactions. Financial institutions that achieve the right balance between reducing risk and meeting consumer expectations will see the most benefits across the board. The key is striking the right balance. Approving bad actors cost businesses USD 6.7 billion in losses in 2021 according to one Javelin study. While some estimate the scope of false decline loss to cost merchants a whopping USD 643 billion. Applying too much friction can frustrate the consumer leading to an average form abandonment of nearly 68% based on findings from WPForms. However, intelligent friction prioritises both experience and security. Both are critical to growing a healthy business. Businesses looking to gain more genuine new and retain existing customers will leverage intelligent friction to do so. 

What strategies and tools would you recommend banks and fintechs put in place to help augment their KYC (Know Your Customer) process for a better customer experience? 

At Mastercard, trust is our business, and we are committed to making the global ecosystem seamless, safe, and secure for everyone, every transaction, and every interaction. From opening a new account to logging in, to transacting, we’re protecting all aspects of the consumer’s online journey. 

Our multi-layered approach to security utilises enhanced behavioural biometrics and machine learning and works behind the scenes to create a secure, trusted source of truth. This delivers greater confidence in decisions without sacrificing user experience. Mastercard Identity Check Insights, for example, draws on the safe exchange of identity data leveraging industry standards, machine learning, and fraud prevention programs to help merchants and banks confidently know who their customers are and promote secure digital commerce. Our identity technologies also play a critical role in consumer transactions using technologies like biometrics to help people prove they are who they say they are. 

Are there any other thoughts and recommendations you want to share to help banks and fintechs as they continue to evolve their strategies to service their customers while combating fraud? 

Financial institutions can provide seamless experiences, drive growth, and foster loyalty by adopting a multi-layered approach to security. Tools like Mastercard’s Open Banking for Account Owner Verification service, for example, arm fintechs with the information they need to verify a new customer is who they claim to be while also meeting customers’ needs for security and transparency. 

This helps build the very trust that is needed in an increasingly digital world. Combining behavioural biometrics, identity elements, and data insights helps trust on both sides of a digital interaction. This is central to building a vibrant economy that works for everybody, everywhere.

This editorial was initially published in the Financial Crime and Fraud Report 2023 which dives into the captivating world of fraud management, digital onboarding, and financial crime in the financial services industry. You can download your free copy here.

About Micheal Pettibone

Micheal Pettibone is a technology executive with over 20 years’ experience in Identity & Authentication. He is Senior Vice President, Identity Solutions at Mastercard leading global strategy, innovation & growth. Prior to Mastercard, Micheal spent over a decade in leadership roles at Oracle developing and expanding their Identity & Access Management business. Prior to that, Micheal was at PwC advising organisations on Identity & Security. He received his MBA & MSIS from Baylor University and resides in Dallas, TX.

About Ekata, a Mastercard company

Ekata, a Mastercard company, empowers businesses to enable frictionless experiences and combat fraud worldwide. Our identity verification solutions are powered by the Ekata Identity Engine, which combines sophisticated data science and machine learning to help businesses make quick and accurate risk decisions about their customers. Using Ekata’s solutions, businesses can validate customers’ identities and assess risk seamlessly and securely while preserving privacy. Our solutions empower more than 2,000 businesses and partners to combat cyber fraud and enable an inclusive, frictionless experience for customers in over 230 countries and territories.