Slowing Mobile Banking Fraud to Reverse the Decline in Active U.S. User Growth

Posted April 27, 2018

Slowing Mobile Banking Fraud to Reverse the Decline in Active U.S. User Growth

U.S. consumers’ fear of mobile banking fraud is a major factor in the declining growth of active users over the past five years. This troubling trend, as well as other emerging threats, could put U.S. banks’ mobile playbooks in jeopardy.

Bank of America, JPMorgan Chase and Wells Fargo have all reported declines in annual growth rates among active U.S. mobile users.

But how can this be possible when adoption of mobile banking in the U.S. has doubled during the same time, and when our Digital Identity Network has seen a 70-percent growth in mobile transactions globally in the financial services industry year over year?

And why isn’t the same thing happening around the globe? By comparison, login traffic for mobile banking users of one UK bank increased 40 percent in 2017 and now represents 70 percent of all login events.

Well, as they say, perception is reality. And it seems there is a perception among U.S. banking customers about the safety of transacting on the mobile channel, despite this channel still being safer than on a desktop.

Maybe it’s time for U.S. banks to change that perception.

One Channel to Rule Them All

It’s hard to overstate just how important the mobile channel has become to banking’s bottom line.

Today, it costs a retail bank more than $4 every time a customer calls or visits a brick-and-mortar branch. The same transaction costs just 10 cents when completed via a mobile app. What’s more, mobile banking has been shown to reduce those branch visits by as much as 33 percent.

With more than 1,700 branches having closed during the past 18 months, it’s little surprise that banks are racing to roll out enticing new mobile services they can use to onboard existing customers and attract prospects.

Among the features consumers rank highest: P2P payments, transaction monitoring, mobile account opening and Remote Deposit Capture (RDC).

Yet given current trends, simply launching these and other services may no longer be enough. In a saturated market, savvy banks won’t settle for a war of attrition. Instead, they may seek to overcome the threats hobbling mobile banking’s growth potential—and turn them to their competitive advantage.

Sensing Insecurity

The fact is, security and fear of fraud are the top two concerns about using mobile banking for up to 55 percent of consumers, according to Javelin Research.

And it’s no wonder. Today, 60 percent of digital banking fraud now originates from the mobile channel, according to RSA. This mobile banking fraud almost always involves thieves using RDC to deposit fraudulent checks, or cybercriminals using stolen identity credentials to hijack consumer bank accounts.

The past year alone has seen a 60-percent increase in the number of detected mobile banking Trojans designed to fool users into revealing login credentials. All too often, the same identity information is accessible on the dark web.

This kind of identity theft now leads to 62 percent of all fraud losses, at an average cost of $50 million. Three-quarters of banks in a recent study cited identity verification and authentication as their toughest challenge.

That’s because the greatest fraud risk around mobile is the initial registration of the device, so focusing fraud risk mitigation at this touch point is key. Even the best biometrics or the most secure mobile app will not help solve this problem, meaning that behavioral monitoring, push notifications to other devices and risk-based registration step ups have increasing importance.

As a result, there’s growing evidence banks may need to pivot toward digital identity-based authentication technologies that use dynamic, online and offline data analysis, device-level threat detection and advanced behavioral analysis to detect and block mobile banking fraud.

Showing CX Appeal

Then there’s the experience itself. According to recent Harris Poll, only 54 percent of consumers who’ve adopted mobile banking use it weekly—most do so far less frequently, if ever.

Of those who use such services, 68 percent report having been frustrated by the experience. And as many as 32 percent say they’d ditch their current bank if a competitor offered options that were easier to use.

The simple fact is, the likes of Facebook, Amazon, Netflix and Google have set the standard for today’s mobile consumer – delivering fast, convenient, user-friendly mobile experiences. That means, your banking app better do the same. If not, nearly 30 percent of customers would be happy to just keep making those costly branch visits.

Most of the friction within mobile banking occurs during the authentication process. And 20 percent of users have abandoned mobile banking activities because of it. With pressure mounting to accelerate these processes, more financial institutions could seek access to the kind of global identity intelligence and advanced analytics required to instantly recognize and assess new and returning users in real time.

Which is no small feat. But it’s no small matter, either. According to Bain & Company, businesses that excel in customer experience grow revenue 4 to 8 percent above the average for their market by attracting new customers, earning stronger customer loyalty and boosting lifetime values.

Which means mobile banking’s battle for active users could be entering a critical new phase. After all, when 40 percent of Americans haven’t stepped foot in a bank branch in six months thanks to the convenience of mobile channels, it’s a safe bet some of their banks want to keep it that way.

Learn how digital identity-based user verification and authentication can help reduce friction for mobile customers in an exclusive Case Study.

Mike Nathan

Mike Nathan

Senior Director - Solutions Consulting EMEA , ThreatMetrix

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