Taking a customer-led approach to fraud transformation
Reading Time 6 mins
Both the incident rate and variety of fraudulent activity are increasing. Fraud is becoming more sophisticated and organisations are struggling to deliver timely, coherent and customer focused investigations. As a consequence, we believe there is an opportunity for fraud teams to help differentiate their organisations and lead the way through fraud customer journey design.
In this article, Hervé Mazenod and Jonathan Cowey detail the steps organisations can take to deliver transformative customer experiences for those customers unfortunate enough to be the victim of fraud.
Fraud is a well-known and widely discussed challenge facing financial services organisations, a challenge exacerbated by the ongoing pandemic and increased digital adoption by consumers.
Let’s consider some of the macro level numbers.
UK Finance, which represents more than 250 firms within the UK payments industry, detailed in their H2 2021 half year fraud report that “criminals stole a total of £753.9 million through fraud, an increase of 30 per cent compared to H1 2020,” while consumer watchdog Which? published research for the year to April 2021 that cited incidences of fraud were up by a third, costing consumers more than £2.3bn.
The Financial Ombudsman Service is seeing a similar pattern; their report identified fraud as one of the main drivers of complaints, with their data uncovering:
- A 66% increase in the first quarter of 2021/22 financial year, compared with the same period in 2020/21 (a total of 5,025 cases)
- 60% of fraud and scam complaints upheld by the organisations involved, up from 50% in the previous year
With growing calls for government intervention to help tackle fraud and the Financial Conduct Authority (FCA), in particular, increasing their focus on organisations to protect their customers, it has never been more difficult for fraud teams to stay one step ahead of perpetrators.
Is the traditional approach still fit for purpose?
There is a clear expectation from the FCA that organisations should be set up to support their customers by managing fraud within reasonable timescales, have adequate systems in place, and treat customers fairly during the fraud end-to-end journey. Non-compliance with this expectation can result in fines and continued monitoring by the FCA.
Against this backdrop, it’s interesting to consider the traditional approach to tackling fraud and meeting FCA expectations. There are three drivers that consistently emerge within the fraud functions of organisations, detailed below, but this approach does have limitations:
- Loss prevention: new processes are implemented to help minimise fraud-related losses, adding steps to the customer journey (for valid reasons, such as additional checks when making a payment). These can often prove detrimental to the overall customer experience.
- Reducing operating costs: a cost-focused fraud strategy can drive efficiencies with traditional operational metrics such as average handling time, first call resolution and productivity. However, this can result in a reduced ability to effectively monitor and investigate fraud, and support customers when it matters most.
- Ensuring FCA compliance: Introducing new control frameworks to meet regulatory requirements without fully considering the impact on the customer can, conversely, lead to different pressures from the regulator for not managing customers effectively, especially vulnerable ones.
This established, traditional approach is on “life support” – without a pivot to place the customer at the heart of the fraud strategy, to fully explore and understand their journey, organisations face the real risk of escalating fraud-related operating costs, diminishing customer confidence and incurring damaging losses.
Thinking of the customer first
The traditional approach to tackling fraud often lacks one fundamental element – the customer. Fraud journeys are highly variable. They can also be lengthy, complex and fragmented. The language used can be confusing and lead to unnecessary anxiety, whilst fraud technologies and solutions often operate in single point solutions, creating a disjointed process.
Transforming the fraud customer experience
Fraud teams need to find the optimal balance between delivering a high-quality customer experience, minimising fraud-related losses and keeping operational costs under control. Our challenge is that these outcomes are not mutually exclusive, but too much of the focus often resides in the latter two areas.
To rebalance the scales, organisations should consider leading with the design of an effortless customer experience, should those customers be unfortunate enough to be exposed to fraud.
Our experience proves that applying a customer lens to the traditional fraud prevention approach helps to deliver tangible results.
An effective way to start is by conducting an in-depth customer journey review. It is also important to develop a design which integrates well-known digital approaches including self-service, automation, AI, and Machine Learning, but with a human experience angle. By bringing the customer, the technology, and the human all into the solution, a successful transformation can be delivered.
To provide a recent example, a financial services organisation saw a year-on-year doubling in fraud activity. A rapidly deployed diagnostic team helped to quickly understand the operating model weaknesses within the fraud process, and with a combination of advisor coaching and a new fraud case management way of working, this organisation was able to dramatically reduce the time taken to successfully support customers, and in doing so, significantly improve customer NPS (Net Promoter Score), one of their major customer experience metrics. Crucially, this improvement in experience presented them with the opportunity to position their customer fraud strategy as one of their key differentiators versus their banking sector competitors.
It's time to transform your fraud strategy
Traditional approaches are no longer fit for purpose within an increasingly evolving and challenging environment. A customer journey-led approach should be at the heart of any organisation's fraud transformation strategy in the future. It offers the opportunity to improve customer experience and, as a result, enhance customer loyalty, advocacy, and confidence. With improved customer protection and support, the relationships with the regulators will undoubtedly strengthen.
This article forms part of a wider series on fraud strategy. Our next article will discuss the impact of fraud prevention controls and processes on customer effort and the end-to-end customer experience.
About the authors
Hervé Mazenod is Gobeyond Partners’ Managing Director, Financial Services, and has over twenty years of consulting experience, seventeen of which spent in FS. An engaging leader, Hervé has managed multiple global transformation programmes, helping banking, pensions and insurance organisations solve the most complex of customer journey problems with innovative solutions.
Jonathan Cowey is a Gobeyond Partners Managing Consultant with extensive experience delivering operational and customer journey transformation projects within the retail banking sector, including particular specialisms in leading transformations in fraud and anti-money laundering environments.