Getting the Balance Right: Financial Services and the Fight Against Fraud and Friction
Posted November 14, 2016
7 Strategic Insights For Digital Transformation That You (and Your Customers) Can Bank On
Are your digital transformation efforts all sizzle and no steak?
For banking and financial services brands, efforts designed to streamline and enhance operations through digital transformation can mean the difference between feeding growth—or watching competitors take a bite out of your market share.
To do it right, institutions must get smarter at reducing friction that can hamper the user experience. But they have to do that while balancing the need to fight fraud and keep the processes and applications they migrate to the digital world safe and secure.
At least, that’s the message from cyber-security experts who participated in a panel discussion I moderated at last month’s Digital Identity Summit.
Digital transformation, of course, is the term used to describe efforts by banks and others to leverage disruptive technologies to meet changing customer expectations and new business realities in an anywhere, all-the-time world.
An organization with a more elegant customer experience and transparent identity verification that doesn’t require two-factor authentication, for instance, will automatically have an edge. Customer defections are costly. And when it comes to cross-border financial services, the risks from fraud and failure to meet strict regulatory compliance mandates are extreme.
The consensus view from our panelists: Finding the right balance in battling both fraud and friction takes careful consideration. Among their key insights:
- Brand and security go hand-in-hand: Building brand awareness for convenient new mobile and online services also makes you higher-profile target. As panelist Rob Davis, director of security services for investment giant TIAA, puts it: “As we become more visible to potential customers, we’re also more visible to fraudsters.” Speed and convenience: Awesome. But ultimately, your brand reputation lives and dies by security.
- Authentication must be front-and-center: “Credentials and identities get stolen and fabricated so quickly these days, things like email addresses, passwords and secret questions are no longer nearly enough,” says Sanjay Nandrajog, head of retail risk operations at Standard Chartered Bank. This can be especially true in emerging markets such as much of Asia, where citizens often don’t have national identity numbers, and up to 20% of bank customers lack physical addresses. As a result, shared, contextual data from outside sources must be leveraged to validate identity in real time, without slowing down the experience.
- Turn things inside out: Transformation shouldn’t be exclusively customer-focused. It’s about “digitizing the back of the bank instead of just the front,” says Andy Renshaw, head of fraud and security for Lloyds Banking Group. Having employees use the same digital interfaces as customers, so both are looking at the same system, benefits every part of the customer interaction.
- Keep your eyes on the road ahead: You have to future-proof your transformations so as systems become obsolete, the customer pathway to new services doesn’t cause frustration. “You need to have an exit strategy once a solution doesn’t work anymore,” says Greta Clark, CEO of Saviium Technology Solutions. “You want to minimize pain when you’ve trained users in one experience, and now you have to migrate to another.”
- Divided, you fail: To be most effective, transformation efforts shouldn’t consist of splintered strategies and silo-bound implementations led by separate lines of business. Ideally, they should be led by a Chief Digital Officer and managed through a centralized operation. That can take the form of a Center of Excellence, or a dedicated business unit responsible for driving such initiatives horizontally through the organization.
- Partner up: “It’s not enough to have the right people with the right skillsets—it’s how they’re being used,” says Clark. “The danger of completely building solutions [on your own] is that threats and attacks change so rapidly, the expertise to react to them is beyond what just one institution can own,” adds TIAA’s Davis. “Partnering with providers with the right frameworks and systems is absolutely critical.”
- Track metrics—and ignore them: Smart institutions don’t rely solely on hard data and metrics. They survey customers on the experience and security to collect so-called “soft metrics” that can help shape decisions. Sometimes, that can mean stopping activities that don’t feel right to customers, even when hard numbers don’t always back those perceptions up, says Lloyds’ Renshaw. “Tracking that [sentiment] in addition to real numbers is magic.”
No deposit, no return
The truth is, digital transformation is hard in any industry. It takes strategic investments in people, processes, tools and technologies that can help delight customers, even while keeping their assets and applications safe from fraudsters.
Get it right, and reap major dividends. Get it wrong, and don’t be surprised if customers (and fraudsters) take the money—and run.