“Everyone’s at risk — and everyone’s a target.”
To that end, Mark Luber, chief product officer at Equifax, told Karen Webster that in an increasingly digital world, lenders being targeted by fraudsters need better methods of identifying security gaps — before the bad actors breach their defenses.
The discussion came against the backdrop where enterprises across all verticals prioritize identity verification and authentication improvements — especially in the auto sector.
But regardless of the vertical, firms are increasingly cognizant that there tends to be a trade-off between security and the customer experience.
In fact, nearly 80 percent of survey respondents to joint PYMNTS/Equifax queries overall say they prefer to increase the security of digital transactions even if it means acquiring fewer new customers. The mindset here is that more friction at the front end, and perhaps a smaller customer base, keeps a company from “paying” on the back end for a less-vetted consumer base (and the potential fraud to which the firm is exposed).
But a number of roadblocks to eliminating that trade-off exist internally — namely, a lack of coordination between fraud and risk teams and customer-facing teams.
That gap is most apparent in younger firms — which may buck the conventional wisdom that tech-savvy, digital upstarts with less in the way of legacy infrastructure are better equipped to wrap up fraud prevention and customer service into a neat package. The data shows that 45 percent of firms that have been in business for at least three decades have tightly coordinated their internal operations, outpacing the 21 percent of firms with less than a 10-year existence.
But as Luber told Webster, the gap is closing.
“Increasingly those [internal] teams are one and the same. You have a customer experience team that is responsible for protecting that customer experience, not just accelerating consumers through a sales process,” he said.
That collaboration within companies is urgent, said Luber, as the waves of transaction volumes continue to spike, especially online. At the same time, customer expectations are changing — they want to make all manner of transactions (small value and large value) online without being challenged.
Smaller firms do not have the staff or capital resources on hand to winnow down good consumers from bad, to create the funnels that will authenticate users at the point of onboarding (through biometrics and other advanced technologies), matching the experience offered by their larger brethren — and thus must bring third parties into the mix.
Many small, growth-oriented companies are focused on the customer experience and growing revenue, customers and creating that network effect.
“Fraud detection and prevention is not their experience. That’s not going to be their strategic advantage,” he said.
The Auto Industry
A microcosm of the challenges and opportunities faced by firms as they face rising sales volumes, increasingly creative fraudsters and a shift in consumer tastes in how they want to pay can be seen with the auto industry.
The vehicle buying process, of course, had shifted online during the pandemic — a sea change from a traditionally “in-person” experience conducted at dealers’ lots. Post pandemic, we’re moving toward more of a “hybrid” experience, where consumers may browse online and then come to the lot and then make the purchase on a mobile device.
The digitization of the auto buying experience across channels, and its points of friction, has been illustrated in PYMNTS research that shows 55 percent of auto dealers planning to invest in identity verification and authentication improvements. Consumers and the auto dealers themselves feel the reveal that their digital processes take too long — and it’s a concern expressed by only 42 percent of banks and credit unions and 39 percent of peer-to-peer (P2P) lenders.
“The auto industry is pretty complex,” explained Luber, “and it’s one where you have lots of small, very small dealerships who themselves are effectively merchants.” Many of those dealers have been venturing online for the very first time, he said, and have pivoted to enlist the aid of third-party providers. He pointed to Equifax’s own efforts to work with partners and manufacturers across the industry to create digital checkout experiences, offering financing as customers interact digitally with their dealers — but because of the high-ticket value of the purchase itself, fraudsters lurk in the wings.
“There’s a whole loan experience to develop online,” he said. “But we’re putting fraud checks in as part of that experience.” There’s also an opportunity for the dealer to offer additional services at the point of checkout that adds value for the customer as they roll off the lot — and cement loyalty to that dealer.
Many industries, said Luber, are still catching up to consumers’ demands. Increasingly, we’ll see the sorts of transactions online that we’d never imagined being fully digital to cross that Rubicon. We’ll see the continued emergence of digital identities, and customers will have to be transparent about what data they hold and how they are securing that data. There will be a handful of major players that allow enterprises to outsource security functions to use digital passports across a broad swath of eCommerce experiences. Companies will collect only the data they need to enable those interactions and transactions (consumers, of course, will have the right to revoke access to that data should they so wish). And with a little bit of education, consumers will be increasingly more comfortable with biometrics and other lines of defense.
“There will brand new experiences,” he predicted, “and within those experiences will be customization and personalization — these attributes will grow dramatically.” The consumer venturing into a department store will encounter clerks in the aisles and promotions on their phones that know an individuals’ preferences — but with the right level of security.
As he told Webster, “Shining a light on security is the way forward.”