Going Digital: The Fintech Transformation

Technology is transforming the customer-retailer relationship. It’s helping to reduce transaction cost, increase transparency, improve the quality of services and increase transaction agility. But these advancements don’t benefit just e-commerce retailers. They’re also enabling banking institutions to expand their customer base and enhance relationships.

But technology is also exposing these same businesses — and their customers — to an increased risk of fraud. The increase in transmitting sensitive personal and financial information online means that as they make their digital transformation, financial institutions must also implement the fraud protection strategies that will safeguard both data and relationships.

Fintechs: Going Digital to Improve Relationships

SMS. Bank customers have grown increasingly frustrated with their financial institutions — the lengthy phone calls needed to solve problems, pushy employees promoting insurance and investments, long lines, and decreasing numbers of physical locations.

Not surprisingly, customers are turning to remote banking to avoid these hassles. In Brazil, for example, the number of financial transactions by traditional channels had abruptly decreased (based on February 2017 data) and currently represented only 40% of the total volume, while digital transactions operations (like internet and mobile banking) had increased to approximately 60%. As more customers begin accessing their financial accounts online — and it becomes cheaper and easier for even the smallest banks to develop online apps for customers to do so — it’s predicted that within three years, smartphones will be a customer’s primary means of communication with banks.

As a result of this switch to digital, financial technology (fintech) is calling for a new market-oriented approach that can help resolve consumers’ pain points and foster better relationships. But financing this new approach remains a major concern for many businesses. And even if they do invest in digital solutions, fintechs’ lean structure often prevents them from expertly staffing important departments, like legal counsel, customer service and the data security — doing little to improve relationships.

So while it may seem that traditional banking is on its way out, there will always be a need for brick-and-mortar financial institutions. But to survive (and thrive), they must not only embrace the digital transformation but also change their internal culture. They must refocus on developing a positive, strong customer relationship; emerging technology offers them the opportunity to do just that.

Combating Increased Fraud in the Digital Age

Because of the high liquidity the financial services segment provides fraudsters, fraud levels have been on the increase. Banks, retailers and online operators are suffering heavily from the cost of online fraud, but customers are at risk, too.

Because fraudsters are routinely creating new forms of attack, it’s hard for the industry to stay one step ahead of them. Here are some examples of how fraudsters are circumventing the latest fraud protection strategies.

• Captcha images. Optical character recognition software can read and enter the requested information.
• One-time passwords. Malware can collect the passwords or prompt the user to report them.
• Virtual keyboards or phrase passwords. Screen or mouse loggers capture the customer’s keystrokes.
• Positive information. Information the user provides is used in social networks, search services on the Internet and social engineering;
• SMS. The fraudster changes the user's registration data and transfers it to another mobile number.

Preventing Fraud While Improving the Customer Relationship

So how can fintechs leverage technology to combat fraud in the banking system? One of the most powerful weapons in preventing fraud and false declines is using a combination of fraud prevention technologies.

Another defense is the access fintechs have to a wealth of customer information, like identity data, purchase behavior, and transaction history. As fraudsters get more savvy and create new customer identities, a robust fraud protection program can effectively use this data to validate customers and analyze transactions.

Customers — and their satisfaction — should be the main focus of any business. ClearSale can help your business improve the user experience and protect you against the rising threat of fraud. Contact a ClearSale credit card fraud analyst today to learn how our multilayered approach can help merchants in any build trust, increase revenue and develop lasting customer relationships.