How Credit Unions Can Mitigate Risk and Drive Growth

Consumer preference for online transactions continues to shape how credit unions adapt and serve their members. People appreciate a seamless digital experience when opening new accounts that is simple and secure. Yet, 51% of consumers have considered abandoning a new account opening because of a negative experience, according to a recent Experian report.

At the same time, over half of consumers said they feel like they are more of a target for online fraud, listing identity theft (64%), stolen credit card information (61%) and online privacy (60%) as their biggest concerns. Consumers aren’t the only ones feeling the increase in fraudulent activity, with over half of businesses reporting a high level of concern about fraud risk.

As credit unions focus attention on member retention and growth strategies for the future, it’s important that they have the right data and fraud prevention technology in place to reduce friction while also providing a trusted and secure online experience.

Focus on a Frictionless Member Experience

When members engage with credit unions online, they want to be recognized while still being protected from fraud. When it comes to online identification, 71% of consumers say it’s important for businesses to be able to accurately identify them online, according to the report. However, this cannot be done at the expense of a frictionless member experience. In fact, 37% of consumers said a bad experience will cause them to take their business elsewhere.

Nearly 70% of businesses reported that fraud losses have increased in recent years, stressing the importance of incorporating an innovative and multilayered fraud solution that protects consumers, while preventing fraud and providing a frictionless experience. Consumers are making their expectations very clear, with more than 85% of people saying that they expect businesses to respond to their identity and fraud concerns.

To provide the most seamless, personalized and secure experience, credit unions need to focus on investing in identity and fraud solutions that can minimize abandonment rates while simultaneously detecting and preventing fraudulent activity.

Address Fraud Risk with Data, Technology and Advanced Analytics

As credit unions look to incorporate more innovative solutions in an ever-evolving fraud landscape, there are several steps they can take to be prepared now and in the future, including:

Adopting a multilayered fraud approach: When it comes to fraud prevention, there is no one-size-fits-all solution. That’s why a multilayered fraud approach that harnesses the power of data and advanced analytics is essential. By incorporating data and advanced analytics, credit unions can identify different types of fraud, such as synthetic identity fraud or first party fraud, within their portfolio and apply the appropriate treatment for each one.

Leveraging innovative technology to stay a step ahead: As fraud becomes more advanced, so do fraud prevention tools. Innovative technology can help credit unions be more efficient and effective while managing resource constraints. Technology like machine learning can help by identifying both known and unknown fraud trends and threats, and flagging them in real time. Additionally, as generative AI increases the speed and complexity of AI-enabled fraud attacks, it’ll also be important for credit unions to use multilayered fraud prevention and identity protection solutions to “fight AI with AI” to safeguard members.

Leaning into member preferences: Credit unions should continue to lean into newer, more secure authentication methods such as behavioral and physical biometrics. For example, 85% of consumers reported physical biometrics as the most trusted and secure authentication method they have encountered but only 32% of businesses say that they’ll be investing in physical biometrics solutions to detect and protect against fraud. By using these more sophisticated verification methods, credit unions can build further trust with their members.

Focusing on member education: Credit unions are often regarded as a trusted source, which uniquely positions them to reach members with the education needed to help keep them safe from existing and emerging fraud schemes. Credit unions should consider investing in educational materials for their members around financial health and fraud prevention in order to not only inform members of ongoing risks but also help build trust and further the member’s relationship with them.

Consumer reliance and preference for digital transactions will only continue to increase. With that in mind, credit unions need to prioritize a personalized and secure member experience to maintain trust and meet individual expectations. Leveraging a multilayered fraud solution while investing in new and innovative technologies allows credit unions to combat growing fraud risks, retain members and remain competitive in 2024.

Kathleen Peters is Chief Innovation Officer for Experian’s Decision Analytics business in North America.