WHY TACKLING OMNI-CHANNEL FRAUD IS KEY TO ENHANCING CUSTOMER EXPERIENCE
Christen Kirchner
Senior Solutions Expert, Fraud & AML at SAS Northern Europe
Over a decade after it emerged as a concept, providing a ‘good omni-channel experience’ has become a necessity for all customer facing industries.
As the financial service sector has become increasingly digitised, a growing number of customer touch-points have emerged. In fact, banks now interact with customers via online banking apps, SMS messages, email, face-to-face interactions, traditional paper-based methods, ATMs and even social media.
In light of this, many are focusing their attention on creating a seamless omni-channel experience for their customers, using data analytics and artificial intelligence (AI) capabilities to do so.
However, as the industry has seen time and time again, with new innovation comes new opportunities for fraudsters. As such, omni-channel fraud is becoming an increasing problem for banks.
The need to act
Omni-channel fraud is a type of fraud that occurs across multiple channels and can only be detected and prevented with multiple, advanced layers of protection.
A recent report by TransUnion confirmed that fraudsters are using every available digital channel to access consumer accounts. Between September and December 2022, 52% of consumers said they were targeted with online, email, phone call or text messaging fraud attempts.
As we’ve seen, fraudsters are ready to exploit any opportunity to make money from unsuspecting victims. During the COVID-19 pandemic, scammers called home phones and sent text messages pretending to be the government or NHS.
More recently, fraudsters impersonating Royal Mail have targeted unsuspecting shoppers with phoney delivery texts, or have turned to social media to find victims.
With fraudsters’ schemes becoming more sophisticated as customers use a greater number of channels, the onus is on banks to analyse all customer interactions together to stop fraudsters gaining access to their accounts, through detecting the risk of each transaction and flagging any anomalies.
For example, if there is an unsuccessful attempt to access a customer account from a foreign country, this should be immediately considered against any other suspicious transactions and activity, in case the fraudster has more luck through a different channel.
To get a comprehensive overview of fraud risk, banks need to take into consideration non-monetary actions, such as a client changing their address or requesting different cards. One of these activities alone may not be suspicious, however if this occurs after an attempt to access an account, it should set alarm bells ringing.
Prioritising the customer experience
It may seem obvious, but at the centre of providing an exceptional service to customers is the ability to keep them safe from fraud. If a bank fails to update their systems to protect against the rising instances of omni-channel fraud, they risk losing out to competitors.
Equally important is the ability to detect - and then avoid contacting a customer – where an alert turns out to be a false positive. If an individual cannot complete a purchase after their bank mistakenly flags their legitimate transaction as fraudulent, or they have to spend time out of their day to rectify the issue, they will quickly become frustrated.
Currently, there is a limited ability to adapt business rules as soon as a new type of scam emerges - leading to a high number of false positives and disgruntled customers. Accuracy is key here - and advanced technology is paving the way forward.
Facilitating the solution
It is no longer good enough to view each customer touch-point as an isolated form of interaction. Banks need to focus on uniting their response, rather than leaving valuable data residing in separate silos.
AI and machine learning (ML) can help companies to tackle omni-channel fraud in real-time. This technology can constantly check for red flags and anomalies across multiple sources - providing banks with the means for a speedy, accurate response.
Within this, layered analytic methods can help reduce false positives, avoiding the need to unnecessarily bother the customer. With surges in identity fraud proving a particular concern for banks in the last few years, this technology also grants banks the ability to detect and adapt to new identity fraud trends.
As banks compete for the best clients and aim to consolidate themselves as a leader in customer service, the way forward is to understand developing fraud trends like omni-channel fraud - and act fast to protect customers.
Óscar Hernández has spent the last 11 years working in the Forensic department of Deloitte. His current position is Director, with a primary focus on financial fraud investigations and the preparation of expert witness reports, as well as the defence of the expert report in the Court (during the judgement).Here, Óscar talks to Finance Monthly about financial crime in Spain, recent changes to the criminal justice system and offers advice for companies on how they can protect themselves from fraud.
Financial crime is becoming more and more prevalent - what legal remedies are available to businesses that fall victim to financial crime, especially fraud?
In Spain both the legislation and the sensitivity of companies, especially some financial institutions, despite the improvements, are still very far from those in other neighboring countries, such as the United Kingdom, Germany or Switzerland. There is still no developed fraud prevention culture in Spain, which is why companies tend to act only reactively. In order for the damage suffered to be mitigated as far as possible, from the instant the fraud is identified, the company must put itself in the hands of its legal advisors. From a forensic point of view, it is essential to preserve the evidence of the possible crime in order to face possible legal proceedings that could be initiated and aimi to mitigate as much of the economic damage suffered by the company as possible.
How has the criminal justice system changed in recent years to combat the increased sophistication of fraud? What have been the significant changes?
The Criminal Code has been modified in recent years in order to provide judges and prosecutors with more powerful tools for the fight against corporate fraud and organized crime. Among other reforms, the assignment of criminal liability for legal persons, modified penalties for fraud and revised punishment for corruption in business (payment of bribes to politicians and officials) stand out. Although there is a social environment that is very sensitive to the many cases of political corruption that affect many institutions, there still exists some tolerance and permissiveness in relation to the submerged economy. These newly introduced reforms are on the right track, but still not enough.
What are the trends in Spain, in terms of the types of financial crimes that are being committed? What factors drive crime in certain sectors, for example the financial sector?
The most relevant fraud cases in Spain are closely related to political corruption. This corruption is intimately linked to corporate corruption and bribery, with the ultimate goal of achieving public work awards circumventing the legal awarding procedures based on quality and price. With regards to the financial sector, since the beginning of the financial crisis almost ten years ago, there have been a number of financial scandals related to the management of Savings Banks. Many of those entities have disappeared as a result of the crisis itself, but also due to ruinous investments made by the former management, payment of millionaire pensions and unjustified expenses.
What precautionary measures can companies take to protect themselves against fraud?
The reform of the Criminal Code and the attribution of criminal responsibility to legal persons have led to greater awareness of the companies’ Boards of Directors against financial crime. A greater development of proactive fraud prevention policies is being noted, especially in large companies, with the proliferation of Ethical Codes, Whistleblower channels and action protocols for fraud situations.
What are the complexities and challenges of investigating accounting irregularities?
Most of the fraud investigations related to accounting manipulation in Spain are mainly aimed at the upward manipulation of revenues, with different objectives such as achieving budgeted results or EBITDA, that are linked to the variable compensation of the Management, the makeup of the results for the possible sale of the company, etc. The investigation of these irregularities is very thorough and is based, most of the times, on the use of technological tools focused on communications review and data analytics.
What are the specific challenges that you are typically faced with when working on financial crime cases?
In recent years, fraud investigations have become increasingly complex. The fraudsters are getting more and more “professional”, which on many occasions forces us to adapt the investigation strategy on the fly and introduce even more technology in the investigations. It is becoming more necessary to have an open-minded attitude in order to be able to put ourselves in the fraudster’s shoes.
