By Jack Vonder Heide
The impact that fraud and identity theft have had on customers is more profound than originally believed and has caught many bank executives by surprise. Banks need to ramp up customer education offerings to address concerns, provide accurate information and reduce defections to non-bank competitors.
In a survey released in July 2007 by the Opinion Research Corp., customers were asked to identify their No. 1 concern. The results were as follows:
Fraud or identity theft: 54 percent
Over-the-limit bank charges: 12 percent
Unhelpful service centers: 10 percent
Unhelpful or rude tellers: 9 percent
Bureaucracy: 8 percent
Expensive ATM charges: 6 percent
Customers are subjected to a steady flow of information on financial fraud and identity theft. Newspapers, magazines, television, radio and the Internet provide headlines that are augmented by the personal experiences of relatives, neighbors and coworkers.
This abundance of information has resulted in a growing fear that demand deposits and investments are more vulnerable than they were a few years ago. Unexpected letters from banks notifying customers that their cards are being reissued increase stress levels, and cause fear, uncertainty and doubt.
Because of this anxiety and lack of reliable information, customers are hesitant to fully embrace Internet banking, online bill payment and other, newer offerings.
Non-bank competitors and several banks are creating a marketing advantage by hosting customer education seminars that provide clear and accurate information about fraud and identity theft.
In 2006, U.S. Trust invited clients and prospects to special receptions in the North Carolina cities of Raleigh, Charlotte and Greensboro. A 50-minute presentation provided an overview of key issues and attendees were given a handout with tips for reducing the chances of becoming a victim. Feedback was excellent, and local television and print outlets provided favorable coverage.
Several community banks around the country have hosted similar events in 2007 and their executives have been shocked by the high level of interest. When Iowa State Bank & Trust planned multiple seminars for a single day in June, they anticipated a total of about 200 attendees. Between 500 and 600 showed up.
A number of new fraud and identity theft schemes have appeared on the landscape recently. Every bank should take the time to learn about them and develop strategies to protect customers and preserve shareholder value.
Some examples include:
Caller-ID Modification: A bank customer is at home. The phone rings and the Caller-ID shows the name and phone number of a bank. The customer answers the call and the fraudster claims to be a bank employee. The fraudster goes on to say there is a problem with the customer’s account and they need to verify some information. The customer is duped into giving up Social Security number, date of birth, mother’s maiden name, etc.
Customer Satisfaction Survey: A customer receives an e-mail, allegedly from the bank. The e-mail contains a link to a survey. The customer is asked to rate his/her satisfaction with the bank in a variety of categories. The customer is offered $20 for their time and is asked to provide account number, Social Security number, date of birth and PIN so the money can be deposited in their account.
Remote Access Trojan: A customer receives an e-mail, allegedly from the bank. The e-mail contains an attachment. The e-mail states that the bank has received correspondence from a government agency (i.e. FBI, IRS, Secret Service, etc.) regarding the customer’s account and the correspondence is attached for the customer’s review. When the customer opens the attachment, malicious software is installed that monitors the customer’s keystrokes and records passwords, credit card numbers, etc.
Unsecured Wireless Internet Connection: A customer has wireless Internet access at home, but neglected to install encryption software. Fraudsters sit in a vehicle across from customer’s home, pick up the wireless signal and capture information about Internet banking activity and online purchases.
Philanthropic Grant: A customer receives a letter stating they have been awarded a $4,500 grant for outstanding service to the community. A bogus check is enclosed. The customer is advised to deposit the check in his/her account and wire a 20 percent fee to the “broker” who nominated them for the grant. Customer deposits check and wires money. Check is returned.
Urgent Document Request: A fraudster calls a bank and impersonates a customer. The fraudster states that he/she needs copies of documents (i.e. statements, mortgage docs, etc.) right away and that someone (attorney, CPA, etc.) will pick them up at the bank in an hour. Fraudster then gets customer’s signature from a county recorder’s free Internet document image database and copies signature onto a bogus authorization letter that is faxed to the bank. A bank employee compares the signature on the fax to the signature in the bank records. The signatures match and the documents are released.
These are but a few of the latest schemes and troubling new ones are on the horizon for 2008.
Banks that offer education seminars to help avoid these and other snares are responding to their customers’ No. 1 concern. Customers will appreciate this valuable service and the bank will reap appropriate rewards.
Jack Vonder Heide is a leading authority on the risks associated with emerging technologies. He is a frequent speaker at banking conventions and conferences, community bank customer seminars, bank executive retreats and other events. He can be reached at (630) 789-8222 or firstname.lastname@example.org.