How disruptive innovation is changing fraud in the credit union industry

Every day, there is a new story about how innovative technology is altering the landscape of numerous industries, including financial services. These technologies are no longer hidden away in back offices. They permeate our lives, impacting how we interact daily, how we engage with our friends and families, and how we transact.  

One area in particular where disruptive innovation is changing the credit union industry is fraud. While counterfeit card fraud continues to decrease as chip cards have become the standard, it is no surprise that fraudsters have found new ways to thrive. Last year alone, the industry experienced over 15 million identity theft victims. Online, credit union fraud-related losses have increased 26% since 2016. A multi-billion dollar industry, fraud continues to shift across multiple channels, with fraudsters attacking from numerous touchpoints—from phone to online, and at ATMs and points of sale.

So how do credit unions address a multi-billion dollar fraud industry that continues to innovate while also addressing the demands of members for less friction and a great service experience across all channels? By fighting fire with fire. Credit unions must build and deploy their own arsenal of disruptive innovations to fight back. By leveraging innovative technology to disrupt the fraudsters, credit unions can also improve the service experience across all channels.

For example, at PSCU—the nation’s premier payments credit union service organization—we are leveraging the latest in phone printing technology to analyze member calls and assign a phone risk score, stopping millions of dollars in fraud by determining when it’s a fraudster on the line—even when the fraudster has all the right answers to questions.

PSCU’s Linked Analysis uses cross-network analytics to create a 360° view of a member to link events across different platforms, individuals across different institutions, merchants across any card, and all of these points to each other. Leveraging this technology enables PSCU to recognize a similar pattern across multiple credit unions on various channels to put proactive risk strategies in place to stop fraud before it happens. Credit unions must start thinking about all of their channels and map out the variances in the member experience to protect against fraud.

Credit unions should start by reviewing all channels. What is your security process today on each one? How does it vary? What is the experience to enable your members to perform the transactions they demand as part of the service you provide? Every channel and process including phone, online, contact center and in-branch should be reviewed. What is the cost of member attrition due to the experience you created as opposed to your fraud basis point savings? Following this review, develop a holistic strategic plan on how to address fraud and security across all channels.

At PSCU, we believe a focus on member experience must be at the center of any proposed solution to create the right balance. Achieving this balance across all channels may seem overwhelming. However, once the analysis is complete, you might be surprised how much you can leverage innovative technology to help address fraud—while creating a better service experience for your members.

The fraudsters have already started implementing their strategic plans. The time for your credit union to create its own plans to counteract them with disruptive innovation is now.

Jack Lynch

Jack Lynch

Jack Lynch oversees PSCU’s operations service delivery to credit unions including implementations, project management and CU Learning. Jack has over 25 years of leadership experience in delivering operational services, ... Web: Details