By John Winstel
Financial institutions withstand the worst of rising card fraud and data breach costs. As part of a highly regulated industry, FIs must reimburse direct cardholder losses, absorb the indirect costs of time and resources spent on responding to breaches, and fund never-ending and ongoing compliance expenses. All told, financial institutions take an average hit of $141 per record lost or stolen and spend roughly $4 million per data breach.
But banks and credit unions do have several weapons at their disposal with which to fight the growing fraud threat. Here are five:
1. Use mobile to alert your cardholders of potential fraud: Today, 59 percent of U.S. cardholders prefer receiving fraud alerts on their mobile device over any other method of communication. (1) This is great news for FIs, since the mobile channel is a quick and efficient way to reach your cardholders. Make sure you have an airtight process for capturing cell numbers at account opening, and follow up regularly to ensure your cardholders’ contact info is up to date.
2. Encourage active use of card controls: Card controls are a simple way for cardholders to self-monitor their purchase activities. Cardholders can set parameters based on location, merchant types, and high-dollar thresholds customized to their individual spending habits, to protect against high-risk transactions. Additionally, users can choose to receive transaction notifications on their preferred mobile devices, allowing them to view card activity in real time.
By encouraging your cardholders to activate these practical measures, you place control in their hands and help instill confidence and trust in your institution. These smart precautions can also dramatically reduce fraud resolution time and costs for your institution. Most importantly, your card will move to the top of your cardholders’ wallets, helping to increase both usage and retention.
3. Educate your cardholders on how to protect themselves: One of the most effective ways to prevent fraud is through a program of regular and continuing cardholder education. Sprinkle simple, practical security tips throughout your regular cardholder communication channels, including email, newsletters, and in-branch signage. Here are some nuggets to help you get started:
- Review card and bank statements regularly.
- Shred all sensitive paperwork.
- Tread carefully with public Wi-Fi.
- Beware of card skimmers and “shimmers” at ATMs.
- Password-protect your smartphone.
4. Partner with the right processor: Is your current card processing vendor laser-focused on combatting fraud? Leading processors take a multi-pronged approach toward fraud mitigation, and rely on advanced methods such as predictive analytics to detect fraud quickly and reliably.
Also, review whether your current processor supports emerging payment platforms, such as person-to-person (P2P) payments, mobile wallets, and EMV chip cards.
Consider whether you have too many cooks in the kitchen.If your FI has contracted with multiple vendors to provide credit, debit, and ATM services to your cardholders, it’s time to look at consolidating these relationships. By partnering with a single vendor with expertise across all major payments platforms, banks and credit unions have realized significant cost savings, along with fraud loss reductions of 50 percent or greater.
5. Promote what your FI does to prevent fraud: If you are committed to preventing card fraud, let your cardholders know you’ve got their back. They may not realize your FI has an in-house card security team dedicated to protecting them from fraud 24/7, or that you have partnered with a world-class processing vendor that employs advanced data analytics and fraud detection models.
Toot your own horn in your newsletter, email blasts, and on your website. Consider offering educational sessions to inform your cardholders of everything you do to protect them every day, and how they can help support these efforts. In other words, make your cardholders part of your security team.
Combating fraud presents a daunting challenge for financial institutions, one that won’t retreat any time soon. However, the situation is far from dire. By taking a few practical action steps, banks and credit unions can aggressively battle this trend and develop stronger, more trusted relationships with their cardholders.
1. Global Consumer Survey: Consumer Trust and Security Perceptions, February 2017. Aite Group.