Banks that Identify Fraudsters Increase Customer Loyalty
University of Notre Dame | Financial institutions fight a constant battle to catch the criminals who use fraud to steal money from customer accounts. Every year, they spend millions to identify who is committing the fraud and to prevent customers from leaving. In most cases, it’s almost impossible to figure out who committed the fraud.
So, is it worthwhile to spend all that money attempting to figure out who is making fraudulent transactions? Yes, according to research from the University of Notre Dame by Vamsi Kanuri, Associate Professor of Marketing.
The study found that customers lose trust and are more likely to leave the bank when it cannot identify who made the fraudulent transactions. “A lack of clear answers” resulted in a 40% higher rate in customer departures compared to those who weren’t defrauded.
But when the bank could provide information about who was responsible for the fraud, customers were more likely to stay. In fact, 62% fewer leave compared with customers who hadn’t experienced fraud.
“Fraud is a serious violation of trust, and you would think it would automatically push customers closer to the exit,” Kanuri said. “Not only do customers stay, but they also display higher levels of loyalty than those untouched by fraud.”
Banks that effectively detect fraud and protect their customers benefit from the effort.
Identifying the culprits restores customer confidence, encourages loyalty, and can even improve the customer-bank relationship.
The inability to identify the fraudsters tends to undermine trust, which leads customers to move their money and close accounts.
Reforms proposed by the U.S. Treasury Department could make it easier for banks to trace fraud by increasing transparency in ACH transactions and reporting of money-transfer apps.
Full article: Banks that identify fraudsters increase loyalty, retain more defrauded customers than others who never were compromised