Consider the limited scope of branches as digital transactions and applications become normalized. Or even digital and embedded lending services or multi-platform customer service options. All of these channels work together to provide a better customer experience, but managing risk becomes more difficult as an FI extends its distribution channels and application capabilities.
Each additional channel, as useful as they are, can become a target for fraudsters. To make matters worse, data and processes remain siloed across channels. As a result, it becomes increasingly difficult for fraud teams to identify threats accurately and in a timely manner.
At the same time, financial fraud continues to grow. Identity fraud in relation to banking scams doubled in 2022, and payment fraud increased by 40%.
Combined with the inefficiencies of manual processes and low-grade automation tools that don’t use machine learning technology, false positives pop up. With almost 90% FIs being impacted by first party fraud, we can’t afford to have siloed, minimally automated, and repetitive tasks work in favor of fraudsters. This wastes time for fraud management and customer services teams, frustrates customers and increases churn.
The fact of the matter is that the way forward isn’t through legacy processes and technology. Credit unions, banks, fintechs, and lenders can speed up their process, onboard more consumers, and accurately identify fraud faster.
Before we get to the omnichannel solution, let’s take a look at common fraud schemes that target omnichannel merchants and communication channels.
6 Omnichannel fraud schemes
There are a number of omnichannel fraud strategies used by both organized crime and lone fraudsters. Some examples of omnichannel fraud cases include:
- Card Not Present (CNP) transactions using stolen card details is a scam that commonly occurs online or over the phone. If these data channels are siloed, it can take time to recognize a stolen card.
- Buying a product online with stolen customer data and then picking it up in-store ensures that the scammer gets the goods while the payment is later flagged as fraud.
- Return fraud, or when an individual orders something and claims it never arrived, is common and has several variations. For example, a scammer might purchase electronic equipment, gut it, and then return the item. More organized fraud efforts may purchase luxury items and then return knock-off brands.
- Authorized payment fraud occurs when a customer is tricked into authorizing a payment. This is especially common with banking transfer apps and digital wallets.
- Identity theft happens when a fraudster has access to a consumer’s ID verification data. Commonly, the thief will call customer support and ask to reset the password or to update their verification methods. Once they have access to the customer’s account, they can drain it.
- Account Takeover Fraud stems from personal data such as usernames and passwords are obtained by fraudsters. And because many people use the identical login details for multiple websites or services, gaining access to many different accounts becomes that much easier.
The problem with this new form of fraud is that omnichannel capabilities are vast, and it’s easy for scammers to manipulate a system where transaction and customer data aren’t centralized. If FIs want to prevent and quickly identify fraud, they must adapt.
Quick adaptation with an omnichannel data strategy
Omnichannel data strategies are essentially about three things:
- Centralizing data
- Real-time verification and alerts
- Streamlined reporting
When looking at the increasing number of platforms and devices FIs use to service their customers, it’s clear that fragmented data is a root cause of fraud oversight. An omnichannel data strategy aims to integrate all use cases, such as a mobile, tablet, desktop, telephone, in-branch offers, partner sites, and more, into one centralized location.
When a risk management team has a comprehensive, in-depth view of all applications, transactions, and account data, effective case management becomes achievable. In fact, it’s possible to identify threats faster and eliminate them with a single, unified solution.
But a true omnichannel strategy doesn’t stop at consolidation.
An omnichannel monitoring solution should also keep data flowing at all times for real-time reporting. Near-immediate alerts and verifications provide ample time for risk analysts to make informed decisions about how to deal with different situations, from suspicious accounts to false positives.
Furthermore, as a byproduct of having both immediate, real-time data and a comprehensive view from all channels, financial institutions can leverage accurate reports for better long-term strategies that affect fraud, compliance, customer onboarding, and more.
Benefits of omnichannel fraud management
The benefits of an omnichannel fraud management tool are growing daily. In particular, such platforms allow risk management teams to:
- Identify fraud fast
- Reduce false positives
- Save more time and money from consolidating data and analytics tracking
- Verify transactions across multiple payment networks, from ACH to Zelle and other P2P platforms
- Optimize customer conversion and acquisition rates no matter where and how they sign up
- Protect customer accounts instantly
- Consolidate data vendors into one single dashboard
- Eliminate bottlenecks in case management
- Collaborate with team members
The right omnichannel fraud management platform should also include the ability to customize your workflow, including adding unique rules for the machine learning algorithm. This ensures that your solution meets the specific CIP/KYC/KYB needs of your organization.
Reducing friction while combating fraud
One of the biggest challenges when it comes to fighting fraud is friction. High-friction activities, such as extensive verification and customer documentation requests, often morph into lower customer acquisition rates.
And if there is no way to effectively track fraud across all channels, many of these steps are compliant but could be costing you customers, without providing protection.
The best omnichannel data strategy factors in the customer journey. Consider these questions:
- What data do you really need to confirm someone’s identity, and what is the easiest way to verify it?
- How can automation speed up the onboarding process on the client-side?
- Is there a way to reduce false positives with an omnichannel strategy?
Using omnichannel risk management is an opportunity not just to reduce fraud and streamline risk mitigation but also to attract new customers. And in a highly competitive marketplace, this risk-based approach to customer acquisition could provide the competitive edge community banks and credit unions need.
Detect Fraud Faster with Effectiv
The fact of the matter is that you can’t create a sound omnichannel fraud prevention strategy without data. A platform that provides end-to-end transaction and customer insight across all channels make it possible to monitor threats effectively.
Effectiv is a sophisticated, no-code platform that allows risk management teams to thoroughly and rapidly review transactions, vendors, account opening data, and more. This comprehensive solution helps smaller FIs compete in a crowded marketplace without sacrificing quality, security, or the customer experience.
For more on how you can revolutionize your fraud management process, get the full story in our whitepaper, Sophisticated Fraud Detection & Prevention Solution at an Economical Cost.