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Digital Banking

Striking a Balance: Fraud Prevention Versus User Experience in Digital Applications

Patrick Koster
Aug 14, 2023

When it comes to signing up for a new Netflix account, consumers can go from first click to watching movies in minutes.

Opening a new account at your financial institution should be no different. Your accountholders aren’t thinking about the complex security measures that go into protecting their funds. Instead, they’re thinking of the quick and easy process they’ve experienced with their favorite brands.

Of course, opening a new checking account will never truly be as simple as creating a Netflix account. However, it’s your job to make it feel like it is. While a better accountholder experience shouldn’t be at the expense of your safety and soundness, a balance between ease of use and fraud prevention is necessary to lower your account opening abandonment rates.

Insights from our annual Jack HenryTM Strategic Priorities Benchmark Study indicate growing deposits is the top strategic priority over the next two years for bank and credit union CEOs.

Furthermore, growing deposits and accountholder acquisition are perceived to be the two most difficult priorities to achieve, as the average abandonment rate for digital deposit account applications is just over 50%. New accountholders abandon account opening if they find the onboarding process too long or if it requires more information than they’re prepared to give.

For the modern user, having to scroll down a mobile app or webpage, being asked for unnecessary information or excessive documentation, and taking too long, in general, are all reasons to abandon the account opening process and find a different financial institution to sign up with.

To reduce your abandonment rates, you must:

  • Focus on intuitive, responsive designs for both mobile and desktop users to optimize the account opening process
  • Only request information that’s necessary – removing excessive questions from your application
  • Pre-fill form fields whenever possible
  • Avoid asking for information you already have from existing accountholders trying to open secondary accounts

These seemingly small missteps create friction that may be contributing to a higher-than-necessary abandonment rate.

At the same time, you’re also responsible for protecting your accountholders and yourself. The truth is, in today’s advanced technology landscape, more friction does not necessarily equate to reduced fraud. Relying on more form fields or requiring document uploads doesn’t mitigate risk as much as it once did.

Unfortunately, it’s not difficult for fraudsters to forge documents.

With several online services that exist solely for this purpose, bad actors don’t even need design skills or expensive software. In fact, the popular identity decisioning platform, Alloy, found a majority of applicants marked as “possibly fraudulent” will make at least one attempt to upload documents for verification, with many of these documents appearing valid at first glance.

For budget-conscious and resource-constrained community and regional financial institutions, manually reviewing every account application and closely inspecting documents isn’t the best use of your employees’ time or talents. Not only is manual decisioning expensive and time-consuming but your accountholders experience delays while their information is being processed – causing them to abandon their applications and open accounts elsewhere.

Innovative banks and credit unions are turning to partnerships with fintechs that specialize in identity verification and fraud prevention to manage risk while lowering abandonment rates.

In many cases, a tight integration between the fintech and the account opening platform enables automatic declines and flagging of potentially fraudulent applications for manual follow-up while allowing other accounts to open immediately. This combination of advanced technology and human touch enables you to provide a modern-day user experience while maintaining an acceptable level of risk management.

Fraud prevention can’t happen at the expense of experience without risking high abandonment rates.

Thanks to modern technology, it doesn’t have to. Digital account opening isn’t slowing down (in fact, quite the opposite) and you can’t rely on branch visits or manual reviews for account opening processes. Instead, you must offer an experience that rivals that of today’s biggest brands.

Jack Henry can help you provide a full-service, forward-thinking digital experience that leverages the trust and relationships you have built over time.

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