The fear factor of fraud and 3 things you can do about it
Most financial institutions today are diligent about protecting their cardholders from fraud, employing both technology and human resources to do so. But the sheer volume of those potentially affected by the recent Equifax breach—early reports indicate as many as 143 million in the U.S. alone—is enough to make any institution revisit their breach and fraud prevention practices with renewed vigor.
Although Equifax is the most widely reported breach of late, the fact is that data compromises are on the rise overall. The Aite Group reports that breaches in the U.S. grew 40 percent from 2015 to 2016. The financial services industry alone has experienced a nearly 60 percent increase in breaches over 2016, with cardholder compromises being the number one source of fraud.
And consumers are taking notice. Forty-five percent are aware of recent merchant data breaches within the past six months, and 70 percent feel they are equally responsible for protecting themselves against credit and debit card fraud as the card companies. Reviewing statements, paying bills online, and notifying their card issuer while traveling are just a few of the proactive measures consumers are taking to protect themselves.
While consumers are taking action, financial institutions must do their part to earn cardholder trust. Those that take a proactive role in fraud protection will be better positioned in an increasingly competitive marketplace.
The effect on financial institutions
When fraud occurs, financial institutions experience both a financial and reputational hit. The cost of fees, fines, resources and staff time as well as cardholder reimbursement can add up quickly. The current total cost per data breach is a whopping $3.6 million, and financial institutions incur an average of $245 per record lost or stolen. Even more damaging, nearly half of consumers report switching their financial institution specifically because of an identity theft experience, according to the Aite Group.
Partnering with your processor to fight fraud
While these statistics are enough to frighten even the most seasoned financial services professional, there is a silver lining. You don’t have to fight fraud on your own; your payment processing provider can be an invaluable partner, if you choose wisely.
Many financial institutions make the mistake of engaging multiple payment vendors to provide cardholder services ranging from credit, debit and ATM. Too many providers often result in undetected vulnerabilities that can lead to data compromises. By consolidating all financial services under a single, experienced vendor, institutions can dramatically reduce fraud occurrences—as well as costs.
3 things to look for
In addition to experience, compatibility with your institution’s systems, and other important considerations, here are three offerings you should look for from a potential payment partner.
1. Fraud alerts
Mobile notification systems let your cardholders know right away if their account is subject to fraudulent activity. And consumers appreciate the information—59 percent prefer to receive fraud alerts from their financial institution via a call, text, or email to their mobile device.
2. Card controls
Card controls give your cardholders a convenient way to manage and monitor their credit and debit cards. By allowing cardholders to set controls that align with their spending habits, financial institutions can reduce the occurrence of fraudulent transactions while increasing cardholder trust, loyalty, and card usage.
3. Support for emerging payment types
As consumers seek more secure payment types, more than half (56 percent) rate chip-enabled cards as the most secure, and nine out of ten Americans use chip cards regularly. Partnering with a provider that supports EMV and makes it easy to issue chip cards will help maintain the cardholder trust you’ve worked hard to earn.
The new normal
While data breaches, fraud, and identity theft have become somewhat of the “new normal,” financial institutions can still take proactive, preventative steps to mitigate the risk to their business and their cardholders. By partnering with a reputable and experienced payment provider like Vantiv, your financial institution can position itself competitively today and into the future. To learn more about options available to your institution, contact us.