As part of Project Finance’s series on fraud, we spoke with Sean Flynn, Senior Director of Credit Unions at TransUnion to get his perspective on fraud in the credit union space. Read on for best practices regarding empowering members to be their own best advocates, upholding customer experience and why credit unions have a unique advantage in the ongoing fight against bad actors.
PF: What are some risks TransUnion has identified in the current digital landscape that credit unions should be concerned about? What technologies/ best practices should credit unions adopt to combat these risks?
TU: Over the years, credit unions have always provided access to banking through a number of channels, but the COVID-19 pandemic accelerated the need for financial institutions across the globe to prioritize creating an intuitive, easy-to-use experience that looks and feels the same across a variety of internet-connected devices.
Credit unions that lack experience in managing multiple digital, self-service channels are vulnerable to attacks from fraudsters and other bad actors. Creating an experience that employs modern data and technology to authenticate consumers – and the devices they use – can help defend against those fraud risks.
PF: How has fraud changed in the credit union space? Where did those changes come from, and what can we do about it? How has the growth of digital banking affected the world of fraud?
TU: Fraud has evolved across the financial services industry over the last several years. Credit unions can be particularly susceptible to synthetic identity fraud, check fraud and credit or debit card fraud. All of these schemes have become more sophisticated and are almost always perpetrated by very skilled fraud rings.
Member migration away from branch banking to digital channels continues to increase. The response to this change in consumer preference for digital access to accounts has also created an environment where fraudsters can effectively operate under a cloak of anonymity.
PF: How does a credit union balance the importance of offering a seamless customer experience while simultaneously keeping those customers safe?
TU: There is certainly a way to strike that balance today. Although fraud schemes have evolved, so have the tools available to credit unions to defend against those schemes. Identity verification, authentication and device risk assessments have proven to not only defend against fraud, but create a consumer-friendly experience at the same time.
Credit unions looking to do both well should use solutions integrated with mobile banking applications, loan origination systems and new account origination systems. There are also a variety of use cases for these tools in both contact center and in-branch applications.
PF: Is fraud in the CU space different from the more traditional banking world? Do credit unions have any advantages working for them when it comes to battling fraud?
TU: Yes and no. While credit unions are exposed to similar types of fraud, they likely handle those risks differently than banks or other institutions. Historically, credit unions have put manual fraud processes in place, which for many has kept fraud losses low. But we all know manual processes can cause delays and thus can create a frustrating experience for consumers, who have more banking options and offers today than ever before.
Credit unions also tend to have a more personal relationship with consumers within their community, so employees can ‘spot’ when things don’t necessarily look right. That is changing, however, as credit unions look to expand or respond to competition and offer more immediate decisions. Luckily, technology allows credit unions to continue to differentiate on service while protecting their members’ assets.
PF: From your experience, are credit unions adequately prepared to combat fraudsters? What immediate steps can a CU take to gauge their level of preparedness? How can they ensure they evolve with the times?
TU: They are better equipped today than they ever have been – but we still have work to do. The majority of mobile banking applications and origination platforms only offer fraud and identity tools, but many of those have not evolved with fraud or consumer expectations. Almost none of them offer any sort of device reputation solution or advanced authentication tools.
Credit unions need to push their partners to collaborate and integrate today’s most sophisticated solutions into their current platform stack. They don’t need to win on technology or experiences alone, but they do need to put data and technology to work – together – for the safety of their members and their communities and the long-term relevance of their institution.
PF: What can credit unions do to best educate members? Similarly, how can they empower members to be their own advocates?
TU: Credit unions can educate and empower members in a number of ways, but one very impactful way would be taking action and sharing the strategy behind that action.
When a credit union rolls out a new identity or fraud prevention solution, they should tell their members about it. Making sure the community and your members know about a change to their experience that will make their transactions safer and protect their hard earned deposits only further establishes trust in a credit union’s brand.
Give your members the access they need and the experience they demand – and do it in a way that defends against today’s most sophisticated threats – and you will be well on your way to building deeper member trust and confidence in your credit union.