What’s your financial institution’s fraud prevention philosophy

Like any great debate, you’ll find advocates on both sides of the mobile banking fraud debate. Some believe smartphones and tablets, in combination with emerging authentication strategies, are the magic bullet to a meaningful decrease in fraud losses. Others will argue that for every step forward taken by the good guys, it’ll soon be two steps back the minute fraudsters get their crafty brains wrapped around the solution.

From my perspective – and that of my colleagues here at SHAZAM – the solutions lie less in the method of transaction and more in the financial institution’s (FI’s) detection and prevention strategies.

Community FIs’ fraud philosophies and goals are as wide-ranging as the size and location of today’s banks and credit unions. Whereas some want to find and stop as much fraud as possible, others accept some losses as a cost of doing business. Whereas some expect cardholders to “deal with” the pains that come from stopping fraud; others do not want their cardholders to experience any inconvenience at all.

If an FI has not nailed down its internal philosophy of fraud prevention, risk managers should push for these conversations to happen. What is the FI’s stance on balancing fraud prevention with a positive, reliable customer experience?

To have this conversation intelligently, however, FI leaders must first understand their current and potential interchange income, as well as their overall fraud losses (both in terms of actual dollars and in basis points).

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