One of the challenges of managing card fraud is that so much of our response depends on the cardholder. We can put advanced systems in place to fend off the latest attacks, but if a customer doesn’t support the process, it can be all for naught.
Consider one of the most effective means of verification we have: fraud alerts. Our advanced, automated fraud systems help us flag out-of-character activity until our customers can verify that it is a legitimate transaction. It’s a fairly simple process—until a customer declares a fraudulent transaction to be “valid.”
That response tells the bank that the fraud is legitimate, and then the card fraud rule strategies that we’ve put in place are adjusted accordingly. In short, we take the customer’s word for it and work to ensure that we don’t negatively impact card use. In doing that, we unwittingly open the floodgates for fraudsters to push through transactions.
Why customers respond inaccurately
But why do customers respond inaccurately to begin with? Perhaps the alert on a business card went to an accounting lead, and they released the transaction without confirming its veracity so as not to hold up the employee. Or as is the case most often, customers simply aren’t paying attention to the details of the alert, and when questioned, aren’t sure why they responded in the affirmative.
What community banks can do about it
The main issue with inaccurate responses to fraud alerts lies in the fact that customers don’t grasp the full extent of why these alerts matter. But community banks can help by making customers partners in fraud prevention in the following ways:
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Educate customers on the importance of accurate responses. Explain to customers that they are an important part of fraud protection and that the systems you have in place only work in partnership with them. Let them know that if they are unsure how to respond, they should call the bank and speak to the team to explore the right next step.
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Remind customers of the community bank connection. In most cases, large financial institutions won’t be scrutinizing transactions at the level a community bank will. Remind your customers that they’re choosing community banking because they trust community bankers, and you want to do everything in your power to make sure your bank can properly serve them and help protect them against fraud. Fraud alerts help you to do that—but only in partnership with them.
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Set up back-end monitoring to support your systems. While this requires manual intervention, having a fail-safe behind your alert system will support more transaction scrutiny and result in fewer losses. For instance, here at TCM Bank, if one of our cardholders declares validity to something we think is fraud and attempts to clear the alert, it will automatically filter through a back-end manual review queue. Our analyst will see it pop up and determine if it warrants additional outreach. If so, he will send it out to the team, and we seek secondary confirmation from the cardholder. While this adds an additional step and has the potential for some customer friction, we’ve saved many customers from fraud by incorporating this additional layer, protecting the bank in the process, as well.
Sharing best practices
Fraud will always be a chief challenge for community banks, but today’s advanced systems can help. By combining the latest prevention techniques with the relationship-based models community banks excel at maintaining, we can work with our customers to limit successful attacks.
In addition, community bankers need to rely on one another to offer insights into what has worked. Share with peers in ICBA Community about what you’ve done to make your fraud alerts more effective. Talk to other community bankers at conferences about what they have seen and what has been most successful. Reach out to ICBA Payments and TCM Bank for thoughts on best practices on fraud alerts and overall prevention.
As we battle new fraud daily, working together and in concert with our customers is our best defense. Together, we can collectively protect our banks, our customers, and our communities against the ever-present, evolving threats that arise.
And in case your best efforts to prevent fraud fail, make sure you have a back-up plan that includes the ICBA Payments Fraud Loss Protection Plan. FLPP helps your bank recuperate card fraud losses year–round. Learn more at icba.org/flpp.