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Empowering bank customers in the fight against fraud

Empowering bank customers
in the fight against fraud

Julien Gabillet


The banking environment is evolving rapidly and banks are facing multiple challenges from different sources. Among these sources are regulations and, in particular, European regulations such as the PSD2. Indeed, last December, the EBA published its official guidelines on the security measures for operational and security risks of payment services under the PSD2 and these guidelines went into effect on January 13th of this year. Banks are required to be compliant with these new complex stronger security measures. These guidelines are a direct answer to market trends, such as digitization and growing online fraud, which are also challenging for banks.

Digitization has, undeniably, changed the relationship between customers and their banks. Indeed, customers now expect to get information in real-time, to be provided with more services, to have more control and to be able to interact more regularly with their bank through their mobile, their tablet or their computer. Consequently, in this context, more sensitive information is also being shared with them online hence the need for strong security measures, as required by the PSD2. This necessary increased level of security can be directly linked to the rampant growth of online fraud. According to a study we conducted with banks in Germany, 80% of the fraud they are witnessing happens in the e-commerce channel. When it comes to fraud, its real cost is not just about losses, it includes operational costs, dispute management, revenue leakage, customers impacts and brand image deterioration, and some of these, if not all, impact banks as well.


A goldmine of opportunities rather than a web of challenges

The PSD2 is more than just a constraint for banks; it is a goldmine of opportunities. Indeed, they can leverage this regulation to provide innovative services to their customers. Banks could, for example, empower their customers to contribute to fraud prevention by giving them more control. Here are a few scenarios of how this could take place, based on 2016 fraud statistics from German banks (source: equensWorldline):

Since fraud is mostly committed online, banks could let their customers block payments on this channel, and unblock them when necessary, in real-time. (as required by Guideline 9.3)

Since 18 % of fraud occurs overnight (between midnight and 06:00AM), banks could let their customers block payments during this time period (since they are most likely asleep anyways). (as required by Guideline 9.3)

Since 45 % of fraud targets payments above 500 Euros, banks could let their customers block payments equal to or greater than this amount. (as required by Guideline 9.4)

In the long run, actively involving their customers in the fight against fraud would have positive impacts on fraud rates.

Additionally, banks can improve the relationship with their customers by enhancing their digital experience and interactions, while at the same time reducing call center costs linked to card management, disputes and customer requests, for example.


Rethinking payment services

Nowadays, most of what you can buy can be customized to your liking. The same cannot be said for bank and payment services, which is why banks need to rethink their payment services. As discussed before, customers want to be in control and handing them this control over their payment means would help fraud prevention. This is why banks should provide their customers with:

Tools to control their card’s payment settings (amount limits, control usage based on geolocation and in specific payment channels, such as e-commerce, Point-of-Sale or ATM for example) and the ability to use these tools on their mobiles and on a dedicated web portal.

Notifications on their card usage (through text messages, app alerts or emails). (as required by Guideline 9.5)

But rethinking their services does not stop there. Banks need to primarily focus on the customer relationship rather than on the technology that enhances it. This is why they should outsource their technology needs to companies who are experts in this field, such as Worldline.


WL Payment Modulator

Worldline supports its clients not only in terms of regulation compliancy but also in their offering of new innovative services. In the current context, Worldline can do both for banks with WL Payment Modulator, a turnkey solution that provides the above-mentioned payment control features, strong security, digitized interactions and more. It is delivered in Saas mode and is easily integrable with the banks’ issuing configurations and into their mobile apps. Moreover, this solution is card scheme (Visa, MasterCard, JCB, private scheme…) and card type (consumer, corporate, business…) agnostic, meaning that it will work with all types of cards and all schemes.