This episode was recorded at the Money 20/20 event in 2019. On this episode, PaymentsJournal’s editor-in-chief, Ryan McEndarfer, sat down with Molly Hetz, Product Marketing Manager at iovation.
PaymentsJournal:
Molly, thank you so much for joining me on today’s episode. So, iovation recently released a 2019 Financial Services Fraud and Consumer Trust Report. Would you mind giving our audience an overview of the findings from that report?
Molly Hetz:
Yeah, thanks so much for having me on the show with you today, Ryan. For the 2019 Financial Services Fraud and Consumer Trust Report, we really wanted to focus on looking at our data and seeing what kind of trends we’ve seen with financial institutions over the past year. We also wanted to speak with direct consumers by conducting an actual survey with them. What we really found was that fraudsters are targeting financial institutions. We’ve seen mobile go up by 50% of the time, meaning that they’re targeting mobile devices 50% of the time. We’ve seen mobile fraud really increase over this past year. We saw it go up significantly. In the report, the analysis that we did was over tens of billions of global online financial services transactions. And like I mentioned before, we went ahead and surveyed 1,604 consumers across the UK and the US. It was a really conclusive study that ranged across two different and really interesting markets when you think about financial services.
PaymentsJournal:
Certainly very interesting. Now, you pointed out there that fraudsters are going or attacking more mobile. I think you pointed out that 50% of the time it’s there, and I think that that’s very interesting. I would have to then make the assumption that consumers are using mobile more now because that’s where fraudsters are going, because usually the two are related on that. From the report, are you seeing that consumers are using mobile devices more in financial services?
Hetz:
Most definitely. 61% of traffic is actually coming from mobile, which is an increase from 2014, when it was just 28%. So we’ve seen an increase from 28% in 2014 to 61% so far in 2019. That’s a huge increase. This is mobile device usage, but when we look to mobile app usage during that same period of time, we see that it grew at twice the rate of mobile web usage. That not only shows you that consumers are using mobile apps, but also that financial institutions need to continue building out mobile apps. We saw that the mobile app usage went from 15% in 2014 to 39% in 2019, which is a huge increase in in a very short period of time when you think about it.
PaymentsJournal:
Yeah, I think that’s very interesting and that all makes sense, right? I think in particular, Google for web developers has really been beating the drum of your sites and landing pages really need to be mobile first. That’s the way that they are going to be starting to look at a lot of websites. From just a Webmaster Tools perspective, they’re particularly calling out in terms of mobile speed, mobile page load on that. They actually have an individual crawler that’s built to look at just mobile pages on sites or mobile sites themselves. Everything is falling together in terms of everybody seeming to be pushing in this mobile direction here. One other thing to note that I think is very interesting is that we recently released new data from our CMSS, so Mercator Advisor Group’s CMSS primary data, taking a look at mobile payments overall. One of the surprise things that came out of that was actually the increase in mobile payments themselves. I know for a couple of years, particularly in the US, a lot of people were saying mobile payment adoption isn’t happening as quickly as the industry may like, but we are starting to finally see that upward swing, particularly this year from the primary data. Now, if we could shift gears back here to fraudsters here, from your point of view, why are fraudsters using mobile devices more?
Hetz:
So, Fraudsters are following the trends of consumers. They’re looking at what consumers are doing and attempting to emulate it. They want to hide behind the behavior of good consumers and good transactions. What we’ve really seen over the past two years, so since 2017, we’ve seen the percentage of suspected fraudulent transactions, which means any transaction that has been either been flagged for review or denied in the iovation product system within our fraud force product, has increased by 138%. That is huge growth, and that far outpaced the growth overall in mobile transactions, which only grew in that same time by 30%. What we can deduct from this is that fraudsters are trying to catch up with consumers. They’ve been trending towards mobile and now fraudsters are going ahead and attempting to be able to hide behind good customer behavior and to emulate that so that they can commit fraud on mobile platforms.
PaymentsJournal:
Yeah, that’s an extremely interesting statistic there in terms of a 138% increase. The visual that I always seem to get with this, when we’re talking about security and fraudsters, you always think about the cat and mouse here and the last leg of this here is kind of the consumer being the cheese. You’ve got the mice chasing the cheese and the cats chasing the mice in this situation. Now, as we stick along with that, obviously financial institutions’ core values resides around trust and security. A lot of people throw that out, but I’d really like to get some data behind it. I believe that the report you just issued shed some light in terms of how actual consumers feel. From the report, how do trust and security influence which financial institutions consumers actually use?
Hetz:
A lot. What we found was that consumers have a high level of awareness of fraud techniques, they’re going mobile, they feel a lot more comfortable using online tools for their banking and financial service needs. So they’re there, they are online and they are mobile, but their preference for security protection methods is heavily weighted by the trust and security that they feel from the financial institution. We found that three out of four consumers say that security and privacy are the primary factors in deciding what institution they choose to bank with. Two out of three, so that’s 64%, said they would actually switch financial services companies for one that had more advanced security protocols in place. Two out of five consumers that we interviewed have already closed an account with an online company due to fraud and security concerns.
What’s particularly interesting about the two out of five, the 39%, statistic of actually closing an account already in the past year, is that we all can think about how much work it takes for us to close a financial services account. Especially retail banking – think about how many Bill Pay transactions you have coming out of that account. Think of all the places that you have that card number already saved for auto debits. It’s a laborious thing, and very few of us want to spend our off hours in our banking account, trying to switch over to a new account. So, it’s pretty significant that if consumers don’t feel like they’re being protected, and they don’t feel like the financial institution is really looking out for their security and is letting them know that they’ll be taken care of from a security perspective, then they’re going to leave. The fact that two out of five have already done that really shows us that within the industry, we need to be a lot more aware of what we can do to not only visibly show that we’re securing consumers accounts, such as push notifications when they transact or the ability to do card or block functionality within the app itself, but we also want to make sure that we are protecting them and that they’re not experiencing lots of fraud on their account.
PaymentsJournal:
I think that those are extremely important points there. I’ll share kind of a personal story that I’ve had in regards to banking and security. So a bank that I was with quite some time ago, when I was applying for my mortgage, I unfortunately had a fraudulent issue that was attached to my debit card. I randomly received a call from an organization that I didn’t even realize my financial institution was partnering with to monitor that fraud. I was caught off guard of “okay, you’re telling me there’s fraud; I don’t know who you are, you’re claiming that you’re from here.” I had no idea what was going on with it. This was all happening when I was applying for a mortgage, so there’s added stress on top of that. At the end of the day, I just said “enough is enough” and decided to change financial institutions. Even at that point, it makes you sit there and kind of wonder how much of an issue needs to happen for consumers to actually change because the process of moving from one financial institution to another is not easy. I’ve always kind of wondered why it is such a difficult process. Shouldn’t it be easy for me to just say, “You know what, I’m going to quickly and easily pack up all my stuff and I’m going over to this particular financial institution?” Or perhaps that should be a service that’s offered by the financial institution of them contacting your bank on your behalf and doing all the switching to another bank. So it’s completely painless, because as you pointed out not a lot of consumers really want to spend their off hours managing and reconfiguring, switching over to banks. And I’m curious: do you have any historical data when it comes to the percentage of consumers that are closing their accounts or switching to find financial institutions due to security concerns they may have?
Hetz:
Outside of the city, I don’t really have any kind of historical data, but it depends on what demographic you’re looking at. I know from previous work that I’ve done, in terms of direct to consumer quantitative studies, but also quality, that we see that older consumers are less likely to leave their financial institution. Once again, this isn’t from this specific data, just what I’ve seen from previous research I’ve done elsewhere. And younger consumers the 18 to 34 year olds, are more likely to be apt to change because they don’t have as much stickiness with the financial institution. Think about what you just said about your mortgage. In the 18 to 34 year olds, we only have a percentage who have a mortgage, so their ability to leave a financial institution like Wells Fargo is a little bit easier because their life with Wells Fargo isn’t as robust as someone in their late 50s or mid 50s who has been with institution for years and has a mortgage, maybe investment accounts, and that kind of stuff. So, I can answer it a little bit more anecdotally than your specific question, but I definitely think it’s something that is age dependent. That’s why it was really interesting when we looked at our research and that people between the ages of 18 to people in their 70s were saying that two out of five of them had already closed an account due to those concerns.
PaymentsJournal:
I think it’s extremely important to point out the age demographics there and the tolerance in terms of security concerns and saying enough is enough and actually closing the account down. Before we before we close out things here, Molly, I’d really love for you to tell our audience a little bit more about iovation.
Hetz:
Yeah! So, iovation is a TransUnion company that was founded in 2004. Our main focus is helping businesses fight online fraud and making it easier for good customers to transact online by leveraging intelligence about device behavior, using device based authentication, and multi factor authentication. We’ve been part of the TransUnion family since July 2018, when we were acquired by TransUnion. Our customers and intelligence allow us to protect about 11 billion transactions and stop around 200 million fraudulent transactions in a year. Now, with our acquisition by TransUnion, we’re able to really focus on the digital and the personal identity solutions to really help mitigate fraud on a global scale.
PaymentsJournal:
Excellent. Well thank you, Molly, for taking the time to speak to me about iovation and financial services and security and I hope to have you back on the podcast soon.
Hetz:
I’d love that. Thanks so much.
PaymentsJournal:
Thank you.