Global studies reveal how companies balance fraud and the customer experience
As we know, fraud is a pervasive, ever-evolving and extremely costly problem that affects nearly every industry worldwide. But what does that actually mean in regard to keeping customers happy while also mitigating fraud and protecting bottom lines?
TransUnion commissioned Forrester Consulting to conduct a series of studies asking 465 fraud detection and prevention professionals in the financial services, insurance and property management industries1 about their most pressing fraud challenges. And while some nuances may differ amongst the three segments, we believe that the sentiments are fairly consistent across the board.
Fighting newfangled fraud
While all companies reported an increase in fraud — which comes as no surprise — we heard the real challenge lies in detecting new and constantly changing types of fraud. As companies catch on to fraudsters’ tactics and schemes, these clever criminals are continuously developing more innovative ways of wreaking havoc and fooling systems. It’s critical to be proactive and agile to thwart, and more so, stay ahead of evolving fraud.
In the Forrester studies, the following increases were relayed in financial services:
- 68% in loan stacking
- 64% in identity theft/new account fraud
- 60% in synthetic identity fraud
Increases in insurance:
- 62% in soft fraud
- 57% in identity fraud
- 34% in hard fraud
Rental companies noted that unfortunately fraud is typically caught later in their processes:
- 73% of fraud activity detected after move-in
- 52% at the time of application
- 36% at the time of move-in
These numbers translate to lost dollars and time spent rectifying damage. Most businesses can’t afford either!
Identifying deception without sacrificing the customer experience
These companies also admit that while their current fraud detection processes do weed out fraudsters, they can also prove burdensome to good customers. And in this consumer-first era — it’s no secret that businesses need to cater to consumer demands, protect data and provide a seamless experience all at once. Otherwise, companies risk growing rates of abandonment and attrition.
Up to 71% of financial firms said that customer expectations have a significant influence on fraud detection methods. Sixty-five percent of insurers said current tactics can have a negative impact on good customers. A hefty 85% of property managers consider ease-of-use by applicants an important element for a fraud technology solution. So the awareness is definitely there, it’s just a matter of finding the right balance.
When time is of the essence
Companies across the globe need to fight fraud in real time, but most lack the flexibility to adjust on the fly. That can not only mean missing fraudulent transactions, it can complicate the verification process and again result in a poor customer experience — both of which can severely impact your profits and reputation.
Nearly half of financial services companies said they don’t have access to real-time or actionable insights on fraud. Sixty-six percent of insurers relayed that fraudsters are always a step ahead. And 54% of property managers spend excessive time comparing applications to find discrepancies. All this adds up to ineffectiveness and inefficiency in fast-paced world where every minute matters.
The best defense is a good offense
The bottom line is that fraud is a worldwide challenge that must be dealt with head on. Fraudsters will not cease devising new, more sophisticated means of permeating the digital landscape to perpetrate their costly crimes. Companies in every industry need to be well-poised to identify fraud as quickly and accurately as possible. You need solid strategies and powerful solutions that can immediately analyze devices and behaviors and authenticate identities — allowing you to stop fraudsters in their tracks while seamlessly pushing good customers through. Fraud will never go away, but you can certainly arm yourself with the best tools to recognize and hopefully prevent the bulk of fraud.
To learn more about the research and access your industry-specific study, visit transunion.com/fraud-study.
1 TransUnion commissioned Forrester Consulting to conduct three studies: Fraud Detection and ID Verification in Financial Services (August 2018), Insurers: Strike The Right Balance Between Fighting Fraud and CX (September 2018), and Misunderstanding and Inconsistency: The State Of Fraud in the Rental Housing Industry (August 2018).