Approximately 70% of Canadian Financial Services Executives Believe Fraudsters are Always One Step Ahead
Independent study commissioned by TransUnion also identifies other challenges facing financial and insurance firms
A new Forrester Consulting study commissioned by TransUnion (NYSE: TRU) revealed that 74% of financial services decision makers in Canada agree that fraudsters are constantly evolving their tactics and are always one step ahead.
The study also found that even though customers expect financial institutions to protect them from fraud, they have limited tolerance for customer experience being compromised through increased security measures. The findings point to an increasing challenge that executives in both the financial services and insurance industries face when balancing fraud prevention and a positive customer experience.
“The constant evolution of patterns, tools and evasion methods from fraudsters have resulted in an ongoing vulnerability for these industries,” said Anne-Marie Kelly, Executive Director of Identity Management and Fraud Solutions for TransUnion Canada. “In this connected world, consumer identity and identity security is contradictory to each other. Consumers struggle to remember an ever-growing number of user names and passwords and organizations struggle to manage them. The result is a constant tug of war between organizations and consumer needs, which provides criminals with a playground of information to use to perpetrate identity crimes.”
The Forrester financial services study found that fraud is a widespread issue in the industry with 96% of Canadian firms experiencing some sort of fraud in the past two years. Furthermore, in the last year, both insurance and financial services executives in Canada have seen an increase in various forms of fraud:
- Two-thirds of financial services respondents (67%) saw an increase in synthetic identity fraud (using a fabricated identity) and 64% have seen an increase in identity theft (or new account fraud).
- More than six in 10 insurance respondents (66%) saw an increase in soft fraud. Soft fraud is also known as rate evasion, where applicants or policyholders alter or omit information to obtain a lower premium or misrepresent the value of a claimed item. Furthermore, more than half (58%) have seen an increase in identity fraud.
This increase in fraud paired with evolving techniques from fraudsters presents sufficient industry challenges. In fact, almost half of participants acknowledged they lack the specialized skills needed to detect increasingly sophisticated fraud schemes (52% of financial services respondents; 45% from the insurance sector).
Fighting Fraud While Keeping Customers Satisfied
In addition to fighting fraud, the study highlighted the importance of providing an exceptional customer experience. Approximately 72% of Canadian financial services decision makers claimed the fraud detection and mitigation processes have either substantial or significant impact on the abandonment of a customer before an acquisition is complete. Nearly eight in 10 Canadian insurance professionals (77%) agree that the end user authentication process is too complicated, resulting in a poor customer experience.
“Consumers have come to expect that every digital interaction, customer service call and application process should be seamless and consistent,” said Kelly. “Despite the proliferation of new fraud schemes in these industries, companies cannot simply prevent fraud by developing an onerous process. They need to access a wide range of variables to highlight the level of fraud risk associated with the identity of the consumer and enable straight-through processing for those consumers who present the lowest risk. We understand the challenge these companies are facing, which is why we’re always thinking about identity management strategies that are effective yet also maintain a frictionless consumer experience.”
Striking this balance has proven to be difficult for many Canadian companies. More than half (56%) of Canadian financial services leaders indicated their current identity verification and fraud detection processes are burdensome on good customers. Furthermore, half of Canadian financial institutions are not satisfied with the capabilities that they currently have in place.
“At TransUnion, we view fraud as the result of poor identity management,” said Kelly. “To develop a seamless fraud prevention and identity management framework, it’s incumbent on business leaders to utilize evolving, overlapping networks of physical and digital risk signals that include an ecosystem of configurable identity validation, identity verification and fraud detection tools. Companies that apply such information into their identity models will not only help prevent fraudsters from causing financial and reputational harm, but also ensure existing and prospective customers will continue to do business with them in the future.”
To learn more about TransUnion’s fraud services click here.
For more details on the study, please click here.
About the study
Forrester study participants included 465 decision makers in the financial services and insurance industries from Canada, the United States and India and was completed within the August/September 2018 timeframe.
About TransUnion (NYSE: TRU)
Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion reaches consumers and businesses in more than 30 countries around the world on five continents. Based in Burlington, Ontario, TransUnion Canada provides local service and support throughout Canada. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide. We call this Information for Good. Visit www.transunion.ca to learn more.
 Fraud Detection And ID Verification In Financial Services, an August 2018 commissioned study conducted by Forrester Consulting on behalf of TransUnion, and Insurers: Strike The Right Balance Between Fighting Fraud And CX, a September 2018 commissioned study conducted by Forrester Consulting on behalf of TransUnion.