Banking ML scandals lose customers

The latest research from global analytics software provider FICO (www.fico.com) suggests that UK banks could face a potentially catastrophic customer defection event in the wake of a money laundering scandal.

FICO’s Digital Consumer Banking and Fraud Survey – Global Results (www.fico.com/en/latest-thinking/white-paper/fico-consumer-fraud-survey-2021) research reveals 56% of UK respondents said they would switch banks if theirs was reported to be involved in such a scandal.  The younger age groups would be most eager to swap their financial service provider in the aftermath of a money laundering scandal: 64% of 18 to 24 year-olds would switch, as would 68% of 25 to 34 year-olds.  

The report also found that 20% of 25 to 34 year-olds say they do not believe banks are fair when customers have been tricked by fraudsters, and 15% of UK consumers do not believe banks are fair when dealing with customers who have been victims of account take-over.

“There have been several high-profile money laundering scandals in the last few years, and consumers have clearly had enough,” says Matt Cox, vice president and general manager, EMEA, FICO.  “This raises the stakes for banks and means that powerful controls are more crucial than ever.”

FICO’s survey also showed that some work may need to be done by banks to improve how consumers perceive the support offered in fraud cases.  While over half of survey respondents think it’s fair how banks deal with customers who have been victims of fraud on their credit or debit cards, this still leaves 16 million cardholders who don’t know whether current measures are fair or believe they are unfair.  This suggests there could actually be a strong marketing opportunity for those institutions that want to highlight how well they look after fraud victims.

“The rise of scams during the pandemic has been truly frightening.  This is creating a challenge for banks, which need to walk the line between stopping scams and enabling a smooth customer experience during financial transactions,” adds Cox.

“Whilst a relatively low number of customers in our survey said they thought banks’ management of fraud cases was unfair, a much higher proportion did not know if banks were fair.  This may signal an opportunity for some positive marketing by those institutions that are already investing in the latest analytics to detect scams.”