In 2020, one thing is for sure, the global pandemic has forced every online merchant to speed up its efforts to create a better customer experience or be left behind.
Digital transformation has brought many things into the 21st century. We can order pizza through our watch, transfer money with a few swipes on our phone, book a flight and rent a weekend chalet simply by asking “Alexa” to handle the details. But what’s at the heart of all this futuristic capability? Data.
There’s an interesting phenomenon happening every day, on almost every FI website looking to onboard new customers, whether it be a loan or line of credit application or an insurance quote. It’s taking place right in front of us, digitally, often going undetected and costing companies billions of dollars in losses and therefore costing customers billions in increased prices and increased regulation. I’m talking about fraud, but not just criminal fraud or 3rd party fraud, fraud in the sense that actual customers are “padding” their salary or assets in an attempt to reduce their risk profile.
You remember the shell game? Three shells with a ball under one, spin them around with some sleight of hand and see if your mark can find the ball. Simple enough, right? Several $20 bets later and you realize that even something as simple as finding the ball, a one-out-of-three chance, is next to impossible.
This is what’s been happening to lenders over the last few months as a result of the government’s stimulus package designed to provide relief for affected consumers. While it may have provided temporary relief to consumers, it has made the job of online lenders more difficult than ever when it comes to determining risk factors of applicants.
If you’re like most FIs, insurance, ecommerce, or other online businesses, you probably have a load of customer data. But it is what’s hidden in that data that can make all the difference in detecting fraud, friction, customer satisfaction and creating a customer journey that makes purchasing from you a great experience.
I don’t usually talk in absolutes, but there are two things that are absolutely clear about the effects of the Covid-19 pandemic. First, there will be more demand for online financial services, from a broader spectrum of consumers (by a large margin) than earlier projected growth rates led us to believe. Second, this mass migration to online services is uncovering several weaknesses in the FI space which will require the industry to step back and consider new ways to meet the demand of their customers.
Our IFI Thought Leaders and Neuro-ID, our partner in translating digital customer behavior into real-time actionable intelligence, explore how to make sense of a market that has been turned upside down and balance supporting consumers in need of lending, while navigating the changing face of fraud and risk.
As we continue to navigate the uncharted waters of the COVID-19 pandemic, risk is taking on a whole new face for financial institutions. What may have been seen as an average credit application a few weeks ago, now could be considered high-risk, or worse...fraud. And, I don’t expect things to change back very quickly.
There is no question, the current economic conditions are uncharted waters for most businesses today, including online lenders. It is ironic that as thousands of households are tightening their belts and looking to unsecured loans as a way to bridge the financial gap, that online lenders are being much more selective in whom they extend credit.