Outflanking fraud and fakers: How biometrics can safeguard online account opening
Thinking of opening a new bank account? If so, chances are the process will be online. The days of going in person to the branch with a handful of paper documents may be all but over. Yet the online experience may not be as fast as you expect—and unlikely to match the ease of interacting with online retailers and other service providers.
The reason? Bots and individuals can use stolen or created personas to open credit and deposit accounts—and financial institutions must clearly guard against this. In 2018, losses due to account takeover totaled $4.0 billion, and new account fraud losses totaled $3.4 billion, according to Javelin’s 2019 Identity Fraud Study. And 55 percent of businesses had seen an increase in online fraud-related losses over the past 12 months, mainly due to account origination and account takeover attacks, according to Experian’s 2019 Global Identity and Fraud Report, based on survey responses from 10,000 consumers in 21 countries.
What’s more, synthetic fraud has become an issue that banks struggle to deal with—because the identities committing fraud don’t exist in the flesh. TransUnion estimates that a fraudster’s initial investment of $79.99 can create a fake person that steals $107,269.63 on average. That’s more than 1,300 times the initial cash outlay.
At the same time, financial institutions must try not to deter legitimate customers. This is easier said than done: a recent FICO blog says that 47 percent of Americans are sick of “endless” security questions in customer service calls, and 80 percent don’t see the need for what they consider unnecessary procedures. These findings were based on independent survey of 2,000 U.S. adults. More than 80 percent of those surveyed had at least one online bank account and when they opened an account, 74 percent expected to have access the same day.
BAI Banking Outlook research also reveals that online account opening has become the method of choice among consumers. Six in ten respondents prefer it for deposit accounts and nearly half for loans; among millennials this preference is even stronger.
How biometrics bolster a bank’s defense
A combination of innovative technologies hold promise in preventing fraud linked to accelerated account opening by offering multiple layers of defense. Two-factor authentication—which helps prove identity but is burdensome—creates a poor customer experience and tends to increase dropout rates. Biometrics, which utilizes fingerprint scanning, facial recognition or voice pattern detection to confirm identity, has emerged as a preferred replacement.
Approaches that utilize physical attributes prove the live presence of the person opening the account. It provides highly reliable detection of attempts to open accounts with fraudulent identities; a fake person, after all, doesn’t have a real fingerprint.
Behavioral biometrics uses multi-point device inspection and verification to determine whether bots are being used to open an account. Telltale signs of bot use include devices always being held at the same angle; a battery always fully charged; and fields completed with rapid cut-and-paste rather than typing. In addition, multi-point devices can match entries to prior online behaviors by a prospect or returning customer; determining whether they resemble navigation patterns through the website; and whether keystrokes reflect a similar cadence or speed.
Another plus: Biometric security measures reassure consumers. According to the 2019 Global Identity and Fraud Report, 77 percent of consumers reported feeling somewhat or much more confident about their financial institution during online banking interactions that involve physical biometrics. Also, 71 percent felt somewhat or much more confident when behavioral biometrics were used.
Parting thoughts: Safety—and customers—first
Looking ahead, financial institutions should consider enlisting a partner with proven expertise in using physical and behavioral biometrics. As the technology is still relatively new, the path to adoption may not appear obvious or easy. But creating a learning loop to refine and improve models helps, as this approach has potential to reduce or even eliminate fraudulent account opening. And as fraud disappears, banks come closer to the essential goal of ensuring legitimate customers a satisfactory experience.
Criminals will always look for ways to beat the system. Whether backed by foreign governments or flying solo, hackers and fraudsters are relentless in their efforts. But if banks build a defense they can’t crack, then they can give customers the best of all worlds, as biometrics replace the fear of fraud with seamless safety.
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Scott Gregory, financial services partner at Liberty Advisor Group financial services. He can be reached at [email protected].