Unpacking the 2019 Financial Services Fraud and Consumer Trust Report: A Conversation with iovation

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This episode was recorded at the Money 20/20 event in 2019. On this episode, PaymentsJournal’s editor-in-chief, Ryan McEndarfer, sat down with Molly Hetz, Product Marketing Manager at iovation.

PaymentsJournal:

Molly, thank you so much for joining me on today’s episode.
So, iovation recently released a 2019 Financial Services Fraud and Consumer
Trust Report. Would you mind giving our audience an overview of the findings
from that report?

Molly Hetz:

Yeah, thanks so much for having me on the show with you
today, Ryan. For the 2019 Financial Services Fraud and Consumer Trust Report,
we really wanted to focus on looking at our data and seeing what kind of trends
we’ve seen with financial institutions over the past year. We also wanted to
speak with direct consumers by conducting an actual survey with them. What we
really found was that fraudsters are targeting financial institutions. We’ve
seen mobile go up by 50% of the time, meaning that they’re targeting mobile
devices 50% of the time. We’ve seen mobile fraud really increase over this past
year. We saw it go up significantly. In the report, the analysis that we did
was over tens of billions of global online financial services transactions. And
like I mentioned before, we went ahead and surveyed 1,604 consumers across the
UK and the US. It was a really conclusive study that ranged across two
different and really interesting markets when you think about financial
services.

PaymentsJournal:

Certainly very interesting. Now, you pointed out there that
fraudsters are going or attacking more mobile. I think you pointed out that 50%
of the time it’s there, and I think that that’s very interesting. I would have
to then make the assumption that consumers are using mobile more now because
that’s where fraudsters are going, because usually the two are related on that.
From the report, are you seeing that consumers are using mobile devices more in
financial services?

Hetz:

Most definitely. 61% of traffic is actually coming from
mobile, which is an increase from 2014, when it was just 28%. So we’ve seen an
increase from 28% in 2014 to 61% so far in 2019. That’s a huge increase. This
is mobile device usage, but when we look to mobile app usage during that same
period of time, we see that it grew at twice the rate of mobile web usage. That
not only shows you that consumers are using mobile apps, but also that
financial institutions need to continue building out mobile apps. We saw that
the mobile app usage went from 15% in 2014 to 39% in 2019, which is a huge
increase in in a very short period of time when you think about it.

PaymentsJournal:

Yeah, I think that’s very interesting and that all makes
sense, right? I think in particular, Google for web developers has really been
beating the drum of your sites and landing pages really need to be mobile
first. That’s the way that they are going to be starting to look at a lot of
websites. From just a Webmaster Tools perspective, they’re particularly calling
out in terms of mobile speed, mobile page load on that. They actually have an
individual crawler that’s built to look at just mobile pages on sites or mobile
sites themselves. Everything is falling together in terms of everybody seeming
to be pushing in this mobile direction here. One other thing to note that I
think is very interesting is that we recently released new data from our CMSS,
so Mercator Advisor Group’s CMSS primary data, taking a look at mobile payments
overall. One of the surprise things that came out of that was actually the
increase in mobile payments themselves. I know for a couple of years,
particularly in the US, a lot of people were saying mobile payment adoption
isn’t happening as quickly as the industry may like, but we are starting to
finally see that upward swing, particularly this year from the primary data.
Now, if we could shift gears back here to fraudsters here, from your point of
view, why are fraudsters using mobile devices more?

Hetz:

So, Fraudsters are following the trends of consumers.
They’re looking at what consumers are doing and attempting to emulate it. They
want to hide behind the behavior of good consumers and good transactions. What
we’ve really seen over the past two years, so since 2017, we’ve seen the
percentage of suspected fraudulent transactions, which means any transaction
that has been either been flagged for review or denied in the iovation product
system within our fraud force product, has increased by 138%. That is huge
growth, and that far outpaced the growth overall in mobile transactions, which
only grew in that same time by 30%. What we can deduct from this is that
fraudsters are trying to catch up with consumers. They’ve been trending towards
mobile and now fraudsters are going ahead and attempting to be able to hide
behind good customer behavior and to emulate that so that they can commit fraud
on mobile platforms.

PaymentsJournal:

Yeah, that’s an extremely interesting statistic there in
terms of a 138% increase. The visual that I always seem to get with this, when
we’re talking about security and fraudsters, you always think about the cat and
mouse here and the last leg of this here is kind of the consumer being the
cheese. You’ve got the mice chasing the cheese and the cats chasing the mice in
this situation. Now, as we stick along with that, obviously financial
institutions’ core values resides around trust and security. A lot of people
throw that out, but I’d really like to get some data behind it. I believe that
the report you just issued shed some light in terms of how actual consumers
feel. From the report, how do trust and security influence which financial
institutions consumers actually use?

Hetz:

A lot. What we found was that consumers have a high level of awareness of fraud techniques, they’re going mobile, they feel a lot more comfortable using online tools for their banking and financial service needs. So they’re there, they are online and they are mobile, but their preference for security protection methods is heavily weighted by the trust and security that they feel from the financial institution. We found that three out of four consumers say that security and privacy are the primary factors in deciding what institution they choose to bank with. Two out of three, so that’s 64%, said they would actually switch financial services companies for one that had more advanced security protocols in place. Two out of five consumers that we interviewed have already closed an account with an online company due to fraud and security concerns.

What’s particularly interesting about the two out of five, the 39%, statistic of actually closing an account already in the past year, is that we all can think about how much work it takes for us to close a financial services account. Especially retail banking – think about how many Bill Pay transactions you have coming out of that account. Think of all the places that you have that card number already saved for auto debits. It’s a laborious thing, and very few of us want to spend our off hours in our banking account, trying to switch over to a new account. So, it’s pretty significant that if consumers don’t feel like they’re being protected, and they don’t feel like the financial institution is really looking out for their security and is letting them know that they’ll be taken care of from a security perspective, then they’re going to leave. The fact that two out of five have already done that really shows us that within the industry, we need to be a lot more aware of what we can do to not only visibly show that we’re securing consumers accounts, such as push notifications when they transact or the ability to do card or block functionality within the app itself, but we also want to make sure that we are protecting them and that they’re not experiencing lots of fraud on their account.

PaymentsJournal:

I think that those are extremely important points there.
I’ll share kind of a personal story that I’ve had in regards to banking and
security. So a bank that I was with quite some time ago, when I was applying
for my mortgage, I unfortunately had a fraudulent issue that was attached to my
debit card. I randomly received a call from an organization that I didn’t even
realize my financial institution was partnering with to monitor that fraud. I
was caught off guard of “okay, you’re telling me there’s fraud; I don’t
know who you are, you’re claiming that you’re from here.” I had no idea
what was going on with it. This was all happening when I was applying for a
mortgage, so there’s added stress on top of that. At the end of the day, I just
said “enough is enough” and decided to change financial institutions.
Even at that point, it makes you sit there and kind of wonder how much of an
issue needs to happen for consumers to actually change because the process of
moving from one financial institution to another is not easy. I’ve always kind
of wondered why it is such a difficult process. Shouldn’t it be easy for me to
just say, “You know what, I’m going to quickly and easily pack up all my
stuff and I’m going over to this particular financial institution?” Or
perhaps that should be a service that’s offered by the financial institution of
them contacting your bank on your behalf and doing all the switching to another
bank. So it’s completely painless, because as you pointed out not a lot of
consumers really want to spend their off hours managing and reconfiguring,
switching over to banks. And I’m curious: do you have any historical data when
it comes to the percentage of consumers that are closing their accounts or
switching to find financial institutions due to security concerns they may
have?

Hetz:

Outside of the city, I don’t really have any kind of
historical data, but it depends on what demographic you’re looking at. I know
from previous work that I’ve done, in terms of direct to consumer quantitative
studies, but also quality, that we see that older consumers are less likely to
leave their financial institution. Once again, this isn’t from this specific
data, just what I’ve seen from previous research I’ve done elsewhere. And
younger consumers the 18 to 34 year olds, are more likely to be apt to change
because they don’t have as much stickiness with the financial institution.
Think about what you just said about your mortgage. In the 18 to 34 year olds,
we only have a percentage who have a mortgage, so their ability to leave a
financial institution like Wells Fargo is a little bit easier because their
life with Wells Fargo isn’t as robust as someone in their late 50s or mid 50s
who has been with institution for years and has a mortgage, maybe investment
accounts, and that kind of stuff. So, I can answer it a little bit more
anecdotally than your specific question, but I definitely think it’s something
that is age dependent. That’s why it was really interesting when we looked at
our research and that people between the ages of 18 to people in their 70s were
saying that two out of five of them had already closed an account due to those
concerns.

PaymentsJournal:

I think it’s extremely important to point out the age
demographics there and the tolerance in terms of security concerns and saying
enough is enough and actually closing the account down. Before we before we
close out things here, Molly, I’d really love for you to tell our audience a
little bit more about iovation.

Hetz:

Yeah! So, iovation is a TransUnion company that was founded
in 2004. Our main focus is helping businesses fight online fraud and making it
easier for good customers to transact online by leveraging intelligence about
device behavior, using device based authentication, and multi factor
authentication. We’ve been part of the TransUnion family since July 2018, when
we were acquired by TransUnion. Our customers and intelligence allow us to
protect about 11 billion transactions and stop around 200 million fraudulent
transactions in a year. Now, with our acquisition by TransUnion, we’re able to
really focus on the digital and the personal identity solutions to really help
mitigate fraud on a global scale.

PaymentsJournal:

Excellent. Well thank you, Molly, for taking the time to
speak to me about iovation and financial services and security and I hope to
have you back on the podcast soon.

Hetz:

I’d love that. Thanks so much.

PaymentsJournal:

Thank you.

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Unpacking the 2019 Financial Services Fraud and Consumer Trust Report: A Conversation with iovation

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For the 2019 Financial Services Fraud and Consumer Trust Report, we really wanted to focus on looking at our data and seeing what kind of trends we’ve seen with financial institutions over the past year. We also wanted to speak with direct consumers by conducting an actual survey with them.

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PaymentsJournal

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PaymentsJournal

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