In the era of the customer, it’s more important than ever to not impact the online customer experience. Financial institutions are on a continual quest to improve online customer experience and to increase customer engagement, customer retention and, ultimately, profitability. Providing exceptional service to the highly valued online banking segment is critical.

Growth of Online and Mobile Banking

Online banking has continued its rapid growth. According to Pew Research Center, 51 percent of U.S. adults, or 61 percent of Internet users, use online banking channels. Additionally, 64 percent of American adults own a smartphone, a stark increase from early 2011, when it was just 35 percent, according to a separate poll from Pew. And of those mobile phone users, 57 percent used online banking on their device. With the growth of online banking and the rise of mobile usage, it’s important to ensure a superior customer experience across all digital channels.

Unfortunately, legacy fraud controls used by many financial institutions degrade the online customer experience. Banks struggle with balancing requirements for fraud mitigation and compliance with improving customers’ online experience and the bank’s profitability.

When evaluating and implementing fraud prevention technologies, many security professionals focus solely on fraud avoidance capabilities, overlooking the adverse impact on customers’ online experience that are typical of many solutions.

Current State of Cyberthreats

Cyberattacks are becoming more sophisticated and even harder to detect and prevent. For example, cybercriminals are increasing the number of attacks they launch directly from legitimate user devices to bypass sophisticated device ID solutions. They’re also using automation to enter transactions to emulate human behavior online and bypass anomaly detection systems. Today’s cybercriminal have an extensive list of tools to obtain everything from passwords to secret questions, token-generated passwords and even bypass two-factor authentication (2FA).

A New Model of Fraud Prevention

In response to new cyberthreats, financial institutions are implementing more controls in hopes of mitigating current and future threats. In some cases, these controls do reduce risks associated with advancing attacks. However, they often degrade the customers’ experience by creating additional barriers. In the rush to improve online protection, most financial institutions simply accept the perceived necessity of negatively affecting the customer experience.

It is clear that the financial services industry needs a better approach for fraud prevention. The current approach does not support the industry’s goal of a superior customer experience. Given the fact that most banks compete on customer experience, it’s all the more critical that the online experience is not negatively impacted.

A successful fraud solution should provide an effective, nonintrusive and integrated layer of protection for customers across both the online and mobile channels. This needs to be easy to implement and operate, require minimal operational support and be adaptable to the evolving threat landscape.

Many financial institutions have additional incentives to rethink their strategy. In the mobile channel, users value convenience above all. This means that banks need to provide their customers with a seamless mobile banking experience if they plan to win the battle for this channel.

The Way Fraud Prevention Should Work

The most effective way to prevent fraud is by not allowing fraud attempts to be initiated. Once they begin, a tremendous amount of technical and human capital is expended to detect, analyze and remediate fraud. Blocking fraud from entering the system is the most effective means of preventing it. If fraud is never initiated, customers will not be inconvenienced by blocked transactions, stepped-up authentication and phone calls for verification. In addition, the bank’s staff will not have to investigate fraud alerts and respond to customers’ inquiries regarding fraudulent transactions.

An evidence-based approach that focuses on identifying malware — the root cause of fraud — will be more accurate and effective than an approach that focuses on legacy controls and identifying the indicators of fraud.

Security and customer experience goals and outcomes can be aligned when effective fraud prevention technologies are utilized. There is no longer a trade-off between strong security and customer experience and operation costs. Strong, effective security can and should enhance customers’ experience across all channels.