COVID-19 & The New Rules for Building Digital Trust
COVID-19 presents an opportunity for banks to build a new level of digital trust with their customers. As the pandemic causes massive disruptions across all elements of everyday life, the banks, FinTechs, and financial institutions (FIs) that can quickly adjust to the realities of the “new normal” will ultimately be better-positioned to come out ahead in the crowded financial services market.
What does the “new normal” mean? At the household level, it has meant a rapid transition into the digital age with kids connecting to their schools via teleconference, workers connecting to their offices through Zoom, and consumers connecting to nearby grocery stores using platforms like Instacart and Postmates. Financial service customers, not surprisingly, are increasingly connecting to their banks via online and mobile channels now that physically visiting bank branches and ATMs has become riskier behavior.
As they welcome new users to their digital operations, banks and FIs must also be cautious not to extend the same courtesy to bad actors like fraudsters. Acts of fraud were already costly for banks before the onset of the pandemic. The fallout could be even more severe in the COVID-19 era with banks risking customers abandonment to rival FIs if fraudsters compromise their digital channels.
A massive shift to online and mobile banking channels requires FIs to build a new digital trust with their customer base. In these uncertain times, digital trust will be the glue that holds the online banking environment together. The following outlines the rules banks should follow in order to develop a digital trust mindset that puts customers first, keeps fraudsters at bay, and ultimately spurs innovative technological upgrades to their operations.
What Digital Trust Means for Consumers
Many banks were already pushing the expansion of their digital services prior to the pandemic. As social distancing and lockdown guidelines went into effect, these FIs were forced to aggressively move their digital banking initiatives into the fast lane. Data from J.D. Power in early April found 30 percent of surveyed consumers were using mobile banking apps more often while 35 percent were using online banking more often than they were before COVID.
These new banking behaviors appear to be long-term decisions for a significant share of customers. A study by Boston Consulting Group found 24 percent of consumers will either visit bank branches less often or stop visiting them entirely once the pandemic-driven crisis ends. These trends should offer a glimpse of what the “new normal” will mean for banks. Banks and FIs will need to invest heavily in robust digital-first operations in order to meet the needs of customers both during and beyond COVID-related disruptions.
The rapid shift to the “new normal” of serving customers through digital channels creates challenges for FIs on several fronts. The J.D. Power report also found overall customer satisfaction with their retail bank declines as customers shift to digital-only interactions. Banks must realize that many of the customers who recently made the leap into digital channels did so reluctantly. As a result, these customers will most likely hold their banks to higher standards.
A surge of new customers means banks now face increased pressure to raise their own performance bars and make each user’s experience as seamless as possible across their journey. To do this successfully, banks should work to onboard their customers smoothly and continue to passively verify their activities in the background. Quietly analyzing customers’ behaviors helps banks build a more insightful view into their normal banking activities and ensure a smooth experience across all digital channels.
Digital Trust and the Anti-Fraudster Fight
The expansion of the digital customer base in the financial services sector comes with an unintended and inevitable side effect: More opportunities for fraudsters. As banks seek to make their digital channels as smooth as possible for legitimate customers, they must simultaneously work overtime to keep their services fraud-free.
Businesses must realize there are considerably more opportunities for fraudsters to commit crimes during the COVID pandemic. Bad actors have already been reported taking advantage of COVID-related programs, including the CARES Act and unemployment benefits. The latest data from the Federal Trade Commission (FTC) indicates that U.S. consumers have already lost more than $13 million due to COVID-related fraud. As if these reports were not bad enough, fraud is becoming increasingly personal in the COVID era.
The threat of fraud was already significant before the pandemic-related disruption. Today, if an act of fraud is successfully perpetuated it can undermine consumers’ trust in their bank and could prompt them to transfer their assets to a competitor. Banks and FIs that can demonstrate that they take their customers’ finances, assets, and data seriously will be better-positioned to win over customers who are still adjusting to the digital banking ecosystem where safety and trust are essential to the industry’s success.
For banks, this new rule means products and services must be developed with a mindset of trust. Fraudsters are already taking advantage of the chaos brought on by the pandemic, meaning banks and FIs need to be prepared to address a wide range of issues. Banks must ensure that their internal resources – including their customer service departments and call centers – are sufficiently prepared to deal with the needs of customers who are still learning the digital ropes.
Fraudsters are notoriously creative in their efforts and will be ready to take advantage of the next global crisis that emerges once the COVID pandemic passes. Banks must work hard to win their customers’ digital trust by investing in the resources they need to fight off fraudsters.
New opportunities in the ‘new normal’
While the rapid rise in digital transformation and the increased threat of fraud creates significant challenges for businesses, there is also a significant opportunity. Specifically, the rapid surge of digital-first customers presents banks and FIs with a trove of data to enhance their operations.
Each interaction customers have with their bank creates a new datapoint that can be used to craft their banking profile. The more data banks have available from a wide range of customers, the better able they are to deliver more personalized products to customers, detect and react to fraud before it happens, and improve their overall services. In other words, new digital banking customers bring in more data for banks. This translates to new openings to build digital trust through innovation.
Banks can use the newly collected data to develop roadmaps to improve their products and approach to delivering financial services with the help of artificial intelligence and machine learning solutions. By bringing advanced AI and machine learning tools to the market faster, banks can stand apart from their competitors and implement real changes based on actionable intelligence. Banks that can identify and stop fraudulent activity and react swiftly to their consumers’ concerns will be taking a big step toward establishing digital trust in an uncertain time.
Adaptation is key to survival in the new COVID-19 reality. In this unprecedented environment, banks must quickly build digital trust with their customers and work tirelessly to make sure that digital banking newcomers feel confident that their assets and data will be safe. Banks must also be committed to detecting and preventing fraudsters from abusing their systems at the same time. The right AI and machine learning tools can help FIs balance these equally challenging goals.
Businesses that are flexible and are able to quickly respond to the demands of newly onboarded digital customers, able to quickly detect suspicious activity, and make the right investments in technology and partners that can help them navigate these challenges more effectively will be in a stronger position to serve their customers.
Latest posts by Andy Renshaw, VP of Banking Solutions (see all)
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