Three essential steps for fintech trust and safety
CX Best PracticesFintech & Financial Services
Three is a powerful number. Stalemates are broken with rock, paper, scissors. An understanding of the alphabet starts with ABC. Merely hearing "on the count of three" is likely to get your adrenaline pumping.
As it turns out, three is also a powerful number in the defense against financial crime. For fintechs to counter the rise in this unwanted activity, there is a trio of essential steps to establish an effective trust and safety operation.
The case for these steps cannot be overstated. In their Global Economic Crime and Fraud Survey 2022, PwC shared that nearly half (46%) of organizations reported experiencing some form of fraud or financial crime in the last two years. In the financial services and fintech industries, respondents said the dominating forms of fraud were customer fraud, cybercrime and know your customer (KYC) failure.
And the expense is adding up. Fraud carries a high cost, resulting in reputational damage and heavy fines. A report by tax, advisory and risk firm Crowe UK, indicates the global financial cost of fraud is roughly $5.38 trillion. Financial crime, as a growing and global threat, creates an urgency for businesses to set up effective trust and safety operations.
It's even more critical when you look specifically at the fintech industry, where sensitive data and KYC information are exchanged almost exclusively in the digital realm, says Yao Yao, senior product marketing manager at TELUS International. It's a challenge that is compounded by the increasingly borderless nature of digital transactions and ever-evolving regulations that surround fintech anti-money laundering (AML) and KYC.
Currently, there is a lack of global consistency in KYC requirements and processes. "Regulation and compliance can be very complicated in any one country," says Yao. "Matters only get more complex when you widen the scope and account for different regions."
Fintech fraud detection and prevention, data privacy and user safety are only going to become more important from here on out, Yao adds. "It's really a fintech's responsibility to ensure online safety and protect their customer's virtual assets."
Let's take a look at what makes a successful trust and safety operation, and the three steps that you can follow to put one into practice.
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Putting the trust in "trust and safety"
While fintechs may have inherent digital agility and aptitude, consumers remain more trusting of traditional financial services companies. According to Mastercard's recent The rise of open banking in North America report, more than half of those surveyed said they strongly trust traditional banks with their data. Less than a third (32%) said the same about fintechs.
These trust gaps need to be bridged, and there is great incentive for fintechs to do just that. When customers trust a fintech, they are more likely to be comfortable trying out their products and services and sharing their own personal information. But know this: Trust is earned, not given. Fintechs need to leverage innovative technology and decisive strategies that protect client data and foster confidence.
Characteristics of a successful trust and safety operation
Effective trust and safety operations bring together the best combination of people, processes and technology to eliminate downtime and keep pace with fraudsters. In particular, your operation should be:
- Adaptive: Fintech KYC efforts should be not only relentless, but also continuously evolving. Organizations must regularly verify customer identities in order to meet AML compliance obligations, and stay on top of the ways financial criminals try to slip past protocols. This highlights the importance of ongoing education and training for your team members.
- Intelligent: Faced with extraordinary amounts of data, deploy intelligent technology and processes that simplify the tasks at hand for your team members. Advanced KYC and identity verification features like two-factor identification, alongside various forms of automation, can detect anomalies and defend against identity theft.
- Comprehensive: End-to-end encryption and blockchain technologies can add layers of security that give your customers peace of mind and protect you from organizational threats.
- Scalable: Make sure your trust and safety operations grow with your brand — in numbers, and across geographies. An outsourcing partner with expertise in the fintech industry can help you to do this quickly and effectively.
How to set up a trust and safety operation
Brands don't always know where to start when they set out to establish a robust trust and safety operation. A capable partner who has been there before can help you to avoid learning lessons the hard way. In TELUS International's work with dynamic brands across the financial services and fintech ecosystem, the following three steps have become clear.
1. Agreement and planning
There's no way around it: First you must understand your unique needs as a fintech, says Yao: "You need to be very clear about your business objectives and how they intersect with, or rather depend upon, trust and safety."
Understanding your objectives will help you identify the right key performance indicators (KPIs) to track in order to measure your success. For fintech trust and safety, this should include fraud detection accuracy and process handling time, among others.
An outsourcing partner can not only help you to map your KPIs to your overall business objectives, they'll also be able to help you plan what you need to get results. For one financial services brand, TELUS International introduced automation to offer decision-making guidance on refunds, identifying high-risk claims and more. The solution resulted in an improvement in customer satisfaction by 40% and a decrease in average handle time by 9%.
During the agreement and planning phase, it is also important to determine the AML, KYC and other regulations that your company must follow.
2. Hiring and training considerations
Once you've understood your organization's needs, goals and KPIs, the next step is to establish or scale your team.
In all facets of trust and safety, background checks are a must, as are hiring processes that examine how candidates manage stress. At the same time, the borderless nature of many fintech firms means your team should be as diverse as the customers you serve.
Once team members are hired, industry-specific training curricula can strengthen their understanding of trends and the tactics they're defending against, as well as their ability to communicate with customers in a way that feels natural, empathetic and informed.
Given the complexity that is commonplace in the fintech industry, a searchable and accessible internal knowledge base can be invaluable. By storing information about your technology, brand, the industry, regulations and processes, your team members will be better equipped to solve any issues brought to them by your customers.
3. Production and control
At this stage in the development of your trust and safety framework, your security team will model different scenarios surrounding data breaches and other scams to systematically test your security.
A security audit will help you identify potential breach points, flaws in your processes and regulatory compliance track record. "At the production and control stage, it's all about how you can be proactive," says Yao.
"Root cause analysis is a really important concept," she continues, referring to a process that allows a business to get to the origins of an issue and rebuild by developing new processes or bringing in new tools — like adding biometric verification to increase security.
Yao points out that a partner can support fintechs' trust and security efforts by offering a "macro view" of both the industry and what comparable industries are doing. In this regard, a partner with cross-vertical experience can suggest potentially unexpected ways to improve efficiency or innovative technology to help overcome trust and safety issues.
As the fintech industry continues to evolve, so too will the threats that companies face. While you can't predict the future, when it comes to trust and safety, a proactive approach is key. Don't just hope that the threat goes away; establish a trust and safety operation that mitigates risk and earns your customers' confidence.