Empowering credit unions: Navigating the digital landscape with advanced fraud prevention strategies
The vast expansion of digital services has transformed the credit union member experience. Unfortunately, this rapid transformation has ushered in a rise of online fraudulent activity and a surge in cybercrime as fraudsters seek to exploit vulnerabilities in an increasingly digital ecosystem.
According to LexisNexis’ report, The True Cost of Fraud, more than half of credit unions report increases in account takeover fraud (63%), synthetic identity fraud (58%) and card-not-present fraud (53%). This has a detrimental impact on credit unions ability to operate efficiently, and perhaps more importantly, maintain member loyalty and trust. It is paramount that credit unions maintain vigilance in detecting and preventing attacks.
Automation is key
Despite considerable advancements in enhancing the overall experience for members through technology investments and digital transformation, many credit unions continue to rely on manual processes for fraud identification and elimination. This approach exposes the credit union to unnecessary risks and heightened vulnerability to future threats and potential losses. To combat this threat, credit unions must prioritize strategies that automate fraud detection, leveraging modern tools and advanced security measures.
Modern fraud solutions are capable of leveraging member behavioral data, transaction history, biometric information and much more to help eliminate false positives and improve the accuracy of fraud detection. Today, machine learning technology is available that can simultaneously stop fraud attacks while providing a seamless member experience. This type of technology is capable of cross-referencing millions of data points to establish an accurate risk score for each transaction, in a matter of seconds.
Striking the right balance
Implementing effective fraud prevention and delivering an excellent member experience often seem to be conflicting goals. Strict fraud filters can cause friction during member transactions, however, relaxing fraud prevention measures leaves the credit union at risk for fraudulent activity. Heavy-handed fraud prevention has often resulted in a less-than-ideal member experience. The key to success is to find the right equilibrium, striking a balance between robust fraud prevention, while maintaining a frictionless, engaging member experience. Effective fraud prevention and great customer experience are not mutually exclusive.
Real-time information must be presented to relevant staff members, with immediate flags for necessary action. The solution lies in transitioning to a model that automatically approves most applications for a quick and seamless experience, while simultaneously flagging any suspicious activity. Leveraging technology with machine learning capabilities becomes paramount, not only reducing the risk of fraudulent activities but also enhancing efficiency and reducing the administrative burden on staff.
The AI-driven nature of this solution allows for continuous improvement in decisioning accuracy with each application. Objective parameters can be set based on institutional preferences and legal guidelines. The adoption of two-factor authentication (2FA) and multi-factor authentication (MFA), including biometric authentication like fingerprint or facial recognition, adds an extra layer of security beyond traditional username and password protocols. Parameters for auto-declining can be established, such as if the applicant is deceased or if the provided address is nonexistent.
The trust a member places in their credit union is invaluable, necessitating safeguarding against digital threats as a top priority. It is time to confront digital fraud head-on.
