It’s easy to say yes to your customers. Whether you’re a bank approving a loan, an insurer processing a claim or a card provider validating a customer’s purchase, you can generally keep your customers happy and loyal just by giving them what they ask for.

But that’s not always a wise move. Criminals are always on the lookout for new ways to exploit any weaknesses in your security posture. And a laissez-faire attitude to fraud prevention will hurt everyone except the fraudsters themselves.

Getting the balance right

Investing in fraud detection and investigation is vital to avoid serious losses and meet regulatory scrutiny. A weak stance on fraud can also lead to reputational damage and customer churn. Even in cases where customers are legally protected from financial losses, the stress and inconvenience of being involved in fraud investigations can dent their confidence in your business.

On the other hand, an overly draconian approach to fraud prevention can be almost as damaging as a permissive one. According to the Anti-Fraud Technology Benchmarking Report, a recent survey conducted by the Association of Certified Fraud Examiners (ACFE) and SAS, 55% of organisations cite excessive false positives as a challenge when implementing new anti-fraud technology.

This concern about false positives is understandable because it’s rooted in sound business sense. Every time you incorrectly block a card payment, reject a loan application or refuse a claim, you are losing revenue, turning down new business and encouraging your customers to go to your competitors.

The need for speed

Making the right decisions is critical – but in today’s world, it’s not enough. Speed is of the essence too. When customers are buying a cup of coffee at Starbucks, they don’t expect to wait more than a few seconds for their card to be approved. If they’re in the market for a loan or even a mortgage, banks will compete to offer them a decision in minutes, not days. And if their insurer takes weeks to settle a claim when their car gets bumped, they’ll probably look elsewhere when it’s time to renew. In short, a slow decision is almost as bad as an incorrect decision. In both cases, your customers are likely to vote with their feet.

Customer service versus fraud prevention

In a commoditised world where companies can increasingly only differentiate themselves through the customer experience they offer, friction during the customer journey must be avoided at all costs. So sales, marketing and customer service teams all favour a light-touch, minimalist approach to fraud management. On the other hand, finance, compliance and operations teams are much more likely to support a safety-first approach; from their perspective, where fraud is concerned, prevention is much better than cure.

These divergent perspectives set the organisation at loggerheads with itself because they frame customer experience and fraud prevention as competing priorities. The prevailing wisdom is that you can optimise for one or the other, but not both.

But is this true? Perhaps it was, once – but today, technology can provide the solution. We can build sophisticated fraud detection models and use them to check millions of transactions in milliseconds. We can connect data on customer behaviour, credit history and dozens of other factors to help reduce false positives and accelerate decision making. And we can automate a high percentage of the fraud management process while providing complete transparency and auditability to satisfy regulators.

Real-world results

Two of the best examples we’ve seen at SAS are The Very Group and HSBC. The Very Group is best known as a retailer, but it also provides financial solutions to give customers new, flexible ways to pay. By monitoring customer behaviour on its websites and combining it with information on purchasing habits, the company can make rapid decisions about credit risk and potential fraud.

Similarly, we’ve been working with HSBC since 2007 to build our industry-leading fraud management platform. We originally developed this solution for the bank’s US business, but have since expanded it. The platform now covers many other markets in Europe and Asia – and protects 100% of credit card transactions in real time for millions of HSBC customers worldwide.

If you can build a repeatable, transparent process with the appropriate governance and the optimal technology, you can resolve the tension between customer experience and fraud prevention and get your whole business singing from the same hymn book. The result is the best of both worlds. You can protect your customers and your business from fraudsters while providing a seamless, low-friction customer journey that will help you stand out from the competition.

How will your modernization journey look?

Every fraud prevention journey can benefit from more good ideas and lessons from best practices. Capgemini and SAS teams will be hosting a panel discussion on Twitter on Friday, 20th November, kicking off at 15hrs CET. Join this panel via the #SASchat hashtag, to hear practitioners share lessons from their experiences. We'll use these questions to trigger discussion:

1. How is the increased adoption of digital channels impacting retailers’ fraud prevention scope?
2. What is the biggest challenge between balancing customer experience and preventing fraud?
3. How have you dealt with data privacy challenges in detecting fraud?
4. What are your experiences with synchronization of surveillance cameras and detection software and other IoT-driven fraud prevention possibilities?
5. How is the culture of continuous review and improvement around the fraud controls evolving?