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This is bonus coverage from “Identifying Fraud” from the March 2016 issue of Credit Union Management magazine.
One sign that security for online account opening is working is the high rate of abandonment—potentially all those bad guys who can’t crack the security and give up. But it’s probably not just the bad eggs who are bailing.
Industry surveys show that 70 percent of members prefer to open accounts remotely, but as many as 80 percent of them don’t complete the process, reports CUES member William A. Raker, president/CEO of $1 billion U.S. Federal Credit Union in Burnsville, Minn.
“It’s complicated enough that most of the crooks, but probably quite a few legitimate prospects, get discouraged,” he notes.
The high rate of abandoned applications suggests that more fraud prevention is not always the best solution if it makes things too difficult for a prospective member, suggests Vincent Hui, senior director with CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz.
Each incomplete application represents a potential new member. Progressive CUs track abandoned applications to determine where people stop and why, he says. What step is most onerous? How essential is it?
“If you’re making online a strategic growth channel,” he observes, “you have to keep refining and improving your account opening process.”
Using challenge or trial deposits is a tactic that illustrates the tradeoff. They work effectively to prevent fraudulent activity around initially funding accounts, but they disrupt a smooth, quick applicant experience, explains Chris Biliouris, senior product sales specialist/digital banking for Bottomline Technologies, Portsmouth, N.H.
Applicants are asked to identify the external account from which they will be transferring funds into the new deposit account. Then the CU makes a couple of very small deposits into that account and asks the applicant to identify precisely the amounts.
“While challenge/trial deposits provide an additional layer of verification, they lead to greater abandonment because requiring applicants to wait while the CU verifies the amounts significantly lengthens the overall application/approval process,” he points out.
“We’ve analyzed the data to see where folks commonly abandon the online application process and changed the order in which data is collected, qualifying the applicant up front and stacking all of the third-party checks later. That has improved conversion/throughput,” and resulted in less abandonment because applicants who have received preliminary approval are more invested in completing the process.
Mobile account opening poses some special security challenges since it’s easier to steal a smartphone than a desktop computer. “My company’s product delivers out-of-band verification codes to the user’s email and mobile phone, which the applicant has to enter to show control of the two channels,” steps that take about 30 seconds, reports Paul Mackowick, chief revenue officer for Gro Solutions, Alpharetta, Ga. A fraudster would also need to know the owner of the smartphone well enough “to be able to answer all of the out-of-wallet questions correctly, have the victim’s ID and possibly a personal check or credit card for the funding.”
The abandonment rate is higher for the mobile channel, typically because financial institutions rely on a desktop experience that isn’t suitable for mobile, he says. To lessen mobile abandonment rates, CUs must deploy a workflow that takes advantage of what a mobile device does well, such as imaging, GPS and integration with cell phone carriers, and minimizes what it doesn’t do well, such as massive amounts of data entry.
The technology, powered by Gro, is offered to credit unions as OpenAnyware from Bluepoint Solutions, Henderson, Nev.
"Through our partnership we offer a SaaS (software as a service) option that is very standardized, very compliant and very efficient, that is proving a popular choice. For credit unions that would like to offer something even more unique, we also offer a customizable, dedicated option," reports Kent Anderson, SVP/business development of Bluepoint Solutions.
Richard H. Gamble is a freelance writer based in Colorado.
