Mobile Capture In An Age Of Rising Fraud

Financial institutions can thrive only insofar as they can keep bringing in new business. The movement toward gathering new accounts is increasingly becoming a challenge for financial institutions (FIs), according to Mitek, an identity verification software vendor.

In a white paper titled “Mobile Capture and Identity Verification: More Acquisitions, More Securely,” the firm noted that an increasing number of consumers have been taking their financial activities online, and especially to the mobile arena. The key demographic making the switch has been the millennial demographic (typically defined as 18 to 34 year olds), which contains the most tech-savvy users.

Mitek also noted that the far-reaching legislative impact of both the Dodd-Frank Act and the creation of the Consumer Financial Protection Bureau have added levels of scrutiny to the risks that may be associated with new accounts against a backdrop where fraud is ever more prevalent. There’s also the sea change afoot as smaller FinTech firms “nip away at various banking services,” as Mitek termed it, “in an effort to displace the traditional banking relationship.”

Mobile thus becomes ever more important, according to Mitek, as it offers a steady and always available conduit for consumers and FIs to interact. But even as mobile banking grows in usage, it becomes ever more important to ensure security remains stringent. As a result, said Mitek in its research, mobile data capture and identification verification become top of mind for an optimal mobile banking experience.

Speaking broadly about the United States and its belated move to adopt EMV, Mitek posited that there are lessons that can be taken to heart from all of the other nations that have adopted the technology and liability standard. As has been widely noted, even as general card fraud has declined, card-not-present fraud and other avenues of fraud and attempted fraud have been on the rise.

Mitek’s research offered up Canada’s own experience as a prime example. Canada offers a learning experience in that application fraud losses were up 500 percent after the country’s EMV transition. The fraudsters moved toward buying stolen credit card and other identity-focused information, often on the black market, online.

In its own research, a majority of executives Mitek surveyed said that application fraud will almost certainly rise, as has been seen in other countries. And many larger FIs are already seeing the impact of growing and accelerating losses, key among them large FIs with more than $20 billion in assets on the balance sheet. Overall, application fraud has been on the rise across institutions of all sizes.

Of course, mobile is on an inexorable growth path, as more than 80 percent of consumers in the United States have cellphones in hand. ECommerce sales are also on the rise, with 30 percent of eCommerce sales coming through mobile vs. 25 percent a year ago during the all-important holiday shopping season.

And yet, according to Mitek, the use of mobile itself for applications has lagged. Mitek found that checking account applications tied to the mobile channel have been completed a relatively paltry 3 percent of the time, at least as of the first quarter of last year. Part of that anemic uptake is due to the physical limitations of a mobile device itself, in terms of keyboards and screens, which can, due to small size and displays, make applications unwieldy.

Key solutions, according to Mitek, include mobile data capture, where cameras are used to capture, and present, personal data such as a driver’s license. That capture and submission to the FI eliminates tedious manual data entry. There’s room for growth here, as only mid-teen percentages of FIs across all asset sizes have such solutions in place, said MItek – and both customer experience and operational experience are helping drive further inroads to these and other technologies.

In reference to advice offered to FIs adopting technology in the face of all but certain gains in application fraud, Mitek recommended in its white paper that finance professionals prepare for an increase in application fraud. Executives and IT professionals should build their fraud combat strategies with the mindset that data has already been compromised. And creating a streamlined and intuitive customer experience remains key, the firm added.

To download Mitek’s white paper, “Mobile Capture and Identity Verification: More Acquisitions, More Securely,” please fill out the form below.