The Power of Customer Education for Fraud Prevention

As long as there have been financial institutions, there have been frauds and scams designed to separate them from the money they steward. The tactics have changed over time, but the results are the same – the bank is left holding the bag when fraud occurs, and for a small- to medium-sized community bank, the effect on profitability can be very serious.  

Leonardo DiCaprio portrayed 1960s con man Frank Abagnale Jr. in the 2002 film Catch Me if You Can. Abagnale’s fraud involved complicated schemes including the forgeries of an airline’s payroll checks, where he was posing as a pilot. In today’s world, fraud can look like a recent set of viral TikTok videos that had people across the country saying that they could get “free” cash from Chase Bank ATMs. According to the bank, a simple glitch in the system meant that customers thinking they were getting “free” money were actually committing a form of check fraud, a criminal offense. 

As fraud tactics advance, one of the best tools an institution has in its arsenal to fight them is customer education, and it should begin on Day One with the opening of customer accounts. Getting the message out to your customers about red flags to look for can be far more effective than other more expensive, time-consuming solutions because it cuts the fraud off at its source – and institutions of any size can do it and do it well. There’s a saying that when the bathtub is overflowing, it’s better to turn off the faucet than to get more towels! 

Jen Megee, PRI Director of Performance Enhancement, says there are five fraud tactics that PRI clients commonly experience, and she gives tips for how to best counter them to save the financial institution time and money in the blog Fraud Trends: 5 Common Tactics and How to Counter Them. 

Community banks have several avenues to regularly educate their customers about fraud tactics to watch for. Fraud education doesn’t have to be boring, and the payoffs are invaluable. 

Educational messaging utilizes many channels. 

Consistent repetition of information across many channels – and in the way customers want to receive it – is proven to be the best method to penetrate the awareness of the people you want to reach. Successful financial institutions have employed various ways to educate their customers (and their frontline employees!) about the latest trends in fraud tactics that they are seeing. FIs are hosting fraud awareness workshops and webinars, using real-time text and email alerts, offering personalized advice, and partnering with local groups that are also interested in preventing fraud. They are utilizing all their communication channels, including website banners and social media announcements to create learning opportunities for their customers. For example, Alabama’s Troy Bank & Trust posts #FraudFridays on social media where they create a short piece of content teaching their customers how to avoid a trending scam, such as phishing. New account owners should be educated about common fraud tactics as part of the onboarding process. 

It doesn’t have to be boring. 

Campaigns that are creative and attention-grabbing will drive more engagement and reduce the number of customers that fall prey to fraud, saving them and the bank precious time and money. For example, the American Bankers Association created an industry-wide campaign called #BanksNeverAskThat to educate consumers about the persistent threat of phishing scams. They offer the content to member banks and asked them to share funny videos, GIFs and tip graphics as well as a #BanksNeverAskThat quiz. 

The Kansas Bankers Association launched a statewide Code Word campaign to combat fraudulent phone activity and broadcasted information on it on every radio and TV station in the state for two months, in both English and Spanish. They also created ads and postcards with QR codes to get the word out. Community institutions can create similar content to help educate their audience about fraud. 

The payoffs: Stronger relationships and improved profitability. 

Besides saving your institution time and money, which improves your bottom line, educating your customers about fraud strengthens customer relationships, which is paramount in the community bank space. It showcases the institution’s expertise and fosters trust and loyalty in its customers. Not only are you demonstrating your institution’s expertise by offering fraud education, but you’re also strengthening your commitment to protect your customers. 

Resources 

Fraud Trends: 5 Common Tactics and How to Counter Them – PRI 

Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to strategic planning to propel growth and improve profitability.