The right business structure is key to balancing risk and user experience

Smart organizations recognize that the faster you can help customers, the happier they will be. This usually goes hand in hand with savings in operational costs. But due to fraud, connecting with customers, the fastest won’t necessarily be the ones gaining a competitive advantage.

There needs to be enough friction to ensure the right customers get access to sensitive information, especially as the risk of bad user authentication has become more costly than ever.

Fraud prevention practices should be considered alongside great customer experiences. Customers may take their business elsewhere if they have to jump through too many hoops to prove their identity (or, conversely, if they think the organization doesn’t take security seriously). In addition, organizations must also consider operational efficiency and revenue generation.

Striking the right balance between these dimensions is difficult and different groups will see the problem differently. For example, security leaders typically value stricter auditing processes, but the amount saved through fraud can be much less than the amount lost through poor user experience. Or sales and customer experience teams may favor decisions that aren’t enough to protect the organization during customer onboarding.

If these decisions occur in isolation, the result is a zero-sum game that is unlikely to reach an optimal balance. However, with the right prioritization and structure, organizations can find the right mix to protect and preserve customer relationships.

Fraud risk and the need for authentication

First, it is important to understand risk. Criminal attempts to obtain and steal personal information to take over accounts, open new fraudulent accounts, and engage in credit card fraud have continued to increase.

According to Javelin Strategy and Research, identity fraud has led to $24 billion in combined U.S. consumer and financial losses in 2021, up 79% from 2020.

Making matters worse is that cross-organizational fraud increases the high financial costs of these efforts. Authentication technology has made great strides in recent years, helping many businesses stay one step ahead of fraudsters.

But organizations often use these tools inconsistently—for example, they integrate analytics from mobile devices for access control to digital channels, but not for call center contacts, or use different systems for different industries—and these isolated systems don’t share associated risk data across the enterprise.

This gives criminals more room to act, and fraudsters like to take advantage of this by using information from one part of the system to gain unauthorized access to another part. Exploiting the same vulnerability multiple times in different business segments leads to exponential costs for enterprises.

System-wide signal sharing

Combating this effectively requires sharing data and risk signals across channels and enabling a holistic view of risk. This creates a complete picture of suspicious behavior associated with a single user. But while large enterprises tout the benefits of breaking down silos and sharing data between business units for strategic purposes, there is a big difference between theory and practice.

The challenges in implementing this vision range from differences in business unit software systems and data formats to busy executives focusing on competing priorities to the fear that centralized processes could limit departmental agility.

Simply creating a database of known fraud numbers is a good starting point, but ideally one orchestrated fraud platform would be deployed across all channels and organizational verticals to ensure fraud intelligence across the enterprise.

Effective omnichannel identity management and authentication tools include a comprehensive digital identity for each user, combining IP address and geolocation attributes with device reputation, consortium data and behavioral analytics. From there, organizations can tie all the pieces together to examine account balances, account activity, used devices, and digital behavior to identify and track anomalous behavior.

The value of an enterprise-level view

While the right authentication platform gives organizations control over key metrics that define their relationships with customers across every channel, there is still work to be done to put processes in place to improve key metrics. It can be challenging to balance the sometimes conflicting interests of fraud prevention, customer experience, operational efficiency and revenue generation.

Stricter fraud practices can result in a poorer customer experience or more false positives representing lost revenue. Fewer manual reviews can lead to operational efficiencies, but will lead to more dollars lost to fraud.

Finding the right mix is ​​possible, but typical corporate structures do not facilitate this. Different groups strive to solve the best for their part of the job and cannot fully appreciate the wider dynamics at play. It gets even more complicated for larger companies where different business units may have different risk tolerances or objectives.

The organizational solution usually requires setting up a team that oversees the dimensions of fraud, UX, operations and monetization with an established C-suite sponsor. This group can unify the mission, communicate issues to be addressed, and identify the right mix of practices to achieve the best results. They can also be a driving force in ensuring that risk signals are shared within each group for the benefit of the entire company.

Make the organizational turnaround

Ultimately, organizations need to be able to investigate all the risk signals they receive from every touchpoint and match them to an account and a user — and then share that information across channels and industries. This enables organizations to accelerate access for legitimate customers, creating positive experiences that lead to customer loyalty and monetization.

Achieving this goal goes beyond systems and tools; it requires the establishment of a corporate focus on identity and fraud, with consistent policies and risk tolerances, and a high-level leader overseeing key aspects of fraud and security across the enterprise. A strong emphasis on orchestration, a comprehensive view of risk and data sharing is needed to ensure that all business units and channels understand potential relationships between risk signals.

Breaking down internal silos is not just about improving collaboration and innovation potential; it is critical to staying competitive in today’s digital landscape.

Shai Cohen leads TransUnion’s global fraud solutions group.