Mobile Growth In Financial Services and Lending


Walking the line of Customer Experience and Fraud

Image 1 – Mobile Phone 1

LexisNexis® 2019 True Cost of FraudTM Study examines how firms are faring.

There’s no doubt that 2019 has been the year of mobile for financial services and lending firms. A sizeable majority now offer this channel, and with good reason: People, on average, spend 226 minutes a day on their phones1 —and the smartphone is the consumer’s device of choice for banking, according to a Deloitte study.2

We recently completed our tenth year of our True Cost of Fraud Study for Financial Services and Lending, and it’s no surprise that the mobile channel figures prominently into the discussion. In fact, 73% of the financial services firms and 71% of the lenders participating in our study now offer services through this convenient, customer friendly channel.

Multiple uses of mobile

M-commerce means many things. Some firms make services available on a mobile browser; others implement third-party apps or build their own. Transaction types may include more advanced features such as contactless payments.

Our study revealed a big year-over-year jump in the development of branded mobile apps: 69% of participating financial services firms that offer m-commerce are now using their own branded mobile app. On the lending side, 76% have gone that route. Customers appear to be loving it: transaction volume here jumped by double-digit percentages among mid/large financial services firms. It skyrocketed for the small banks and small digital financial services firms that made the investment. It’s worth noting that despite the rising commitment to apps across the industry, mobile browsers still account for a much larger percentage of lending transaction volume overall.

Customer experience is a key driver

As you might expect, the majority of respondents named “customer convenience” as a primary driver of mobile. That said, it’s interesting to note that this year we see more respondents adopting mobile to “reduce friction of in-person/location waiting.” For example, where only 10% of mid/large financial services firms cited reduced friction as a goal in 2018, 54% do in 2019.

Digital financial services firms in particular have come to place more emphasis on mobile as a means of remaining competitive; this suggests that firms that do not reduce customer friction will be at a competitive disadvantage.

Fraudsters try to ruin it for everyone

Despite its benefits, we can’t deny that mobile adds significant fraud risk for many reasons:

  • It’s anonymous and remote.
  • The rise of synthetic identities and mobile botnet attacks make identify verification more difficult.
  • It’s a struggle to implement fraud prevention without compromising the fast, easy, convenient interactions consumers demand.
  • Consumer behaviors also add risk by using open Wi-Fi networks, staying logged in and perpetuating other bad habits.
Image 2 – Mobile Phone 2

Clearly, fraudsters are using all this to their advantage. Fraud volume is up. Mid/large financial services firms and banks recorded more than double the number of total fraud attempts (prevented and successful) since 2018. For banks, that number nearly tripled. Even more alarming, nearly all financial services segments—small firms, mid/large firms and banks—experienced double the number of successful fraud attempts year-over-year.

Most digital lending segments, while not hit as hard as some of the digital financial services firms and banks, have also seen sharp rises in prevented and successful fraud attempts.

You might wonder why fraud continues to rise. The truth is that fraudsters have become quite skilled at implementing automated bots designed to specifically attack mobile. Meanwhile, firms need to be where their customers are and today, that means being accessible on mobile channels. It’s a perfect storm—and as our study reveals, financial services firms are finding it difficult to manage bots and customer friction. When asked to rank challenges on a 5-point scale, the number of respondents that agreed with the statement “combatting botnet activity is overwhelming and difficult” rose year-over-year by double-digit percentages in almost every financial services segment. Credit and digital lending firms seem a little more positive about their handle on botnets, but mortgage lenders reported a 20% growth in bot activity.

What’s the answer?

A multilayered solution that addresses both identity and transaction-related fraud detection is foundational to a well-rounded mobile strategy:

  • Identity verification and authentication enable you to “let your customers in” with the least friction, while transaction verification is important for keeping fraudsters out.
  • Relying on physical identity attributes alone is not effective in the mobile environment.
  • Financial services firms and lenders need to explore more digital identity and behavior data and analysis.

Remember this: The mobile channel is not simply another flavor of “online.” Web and mobile differ in terms of challenges and fraud costs. More broadly, organizations should take a customized approach to every channel to address the right risks, reduce false positives and optimize the customer experience.

Mobile Growth

2019 True Cost of Fraud Study: Financial Services and Lending


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