Identity, trust and value. How an unbalanced investment in trust can be a detriment to you.

We can see in our research that most businesses are investing heavily in data and analytics to better understand their customers. This is great. The objective is to increase new customers and improve acquisition and onboarding rates. But, the same level of investment isn’t being put into data and analytics to fight fraud, or identify people. The result could therefore mean that businesses get more customers, but ‘bad’ customers. Fraudulent customers which will inevitably impact the returns expected.

Now, we hear a lot of talk about trust. This is a good conversation to be having as trust, as we move forwards, will be essential in not only capturing customers – but retaining and growing customer relationships too. Much of what we hear is about how trust is gained and created. Then, how this is managed on an ongoing basis.

Our global fraud research shows us that eight in ten consumers believe that a business’s top priority is protecting them. However, seven out of ten businesses cite the growing threat of fraud as a huge concern.

When we conducted some consumer research (which can be seen in more detail in our White Paper: Data attitudes in a digital world), we could see quite clearly that much of society don’t trust businesses and in fact have a huge fear over the privacy and security of their data. More specifically over how it is being used. This specific distrust seen in the data doesn’t mean society doesn’t believe businesses are trying, but circumstances (possibly the widely publicised data breaches and daily spam calls and emails), mean that as it stands today, businesses aren’t trusted. We therefore see a disconnect. But what we also see is how society is willing to trust, they are perhaps just overwhelmed by the consequence of fraud overall which doesn’t make them feel entirely safe – ever. I know I am certainly one of those.

A decade ago, I wouldn’t have considered the threat was less, I would have believed I was largely safe – my money and my data were secure. But today we live in a fast-paced digital world where things are moving so quickly it can almost appear we are losing control.  Thirty years ago, a bank manager would say you create trust by getting to know a customer. By socialising with them, by integrating into their lives and recognising them whenever they step in to the branch. Very Mary Poppins. In the digital world, that doesn’t work so well as those personal interactions are few and far between. Or are they?

The huge surge in new technologies in the last decade has meant that data and digital footprints – the information and data generated through our online actions – are seen, recorded and analysed, not only by service providers but often by their partners as well – which is where we start to see a data supply chain occur.

Data is everywhere. And each interaction and transaction should be personal and dealt with in the same way that we would have 30 years ago. With trust and integrity – and tailored to the individual.

We need to consider the greater emphasis of compliance and risk that comes with this virtual transaction, but we need to make every effort to know our customers to protect them, and better serve them too.

There is a real opportunity to build greater transparency and trust with customers by using their data in a clear and coherent way, underpinned by an obvious and well-communicated benefit to the individual – and this is something that many of the emerging, and longstanding regulations, have advocated for some time too.

Know Your Customer requirements are one of the forms of regulation that, in its purest, mandates the need to know who you are dealing with at every point in time. At Experian, we believe that if you know who your customer is – the threat of fraud is reduced consequently too. But not eliminated. Fraudsters wholly steal genuine identities, and also use genuine individuals – “mules” - to do their work for them. You must look for Fraud as well as verify ID.

In the now digital era, having digital, modern tools is essential. The cyberthreat is stemmed from online use. Most online use (75% of it), is done via a smart device such as a smartphone or a tablet. Bringing in tools that can monitor for device based risk is a simple answer. Identity verification is moving away from paper and we see the future centred around digital identities. Now, tools such as document scanning that leans on smartphone technology, can be integrated, soon, identity could be managed by a single trusted provider – such as Experian.

Machine Learning is another example. While perceived by many as a ‘robot’ if you think about the basics of this assumption, it is correct. But, robots aren’t new. They have been supporting manufacturing and various trades for decades. They make the parts, they manage the scale and the process – and are monitored by someone. This is the same as Machine Learning in many scenarios – but the robot is much smaller, it isn’t making spaceships, but it is using advanced analytics to reduce the threat of fraud that no one person would ever be able to do to this depth of accuracy or scale.

Whatever tool you employ, you need to ensure you can add, subtract, flex and scale it’s capabilities. This approach, this agile framework, will perhaps not help you stop all fraud but certainly better prevent and detect it.

2 minutes on why compliance IS a good thing for your business

Some see compliance as a barrier. And this perceived ‘challenge’ of compliance – the need to treat customers fairly and always help, respect and protect their interests – can mean some are held back by the fear of getting it wrong. How do we overcome that?

In fraud specifically, our research shows how some businesses are softening fraud controls to prevent friction occurring in the customer experience. We can see how only a third are ready and prepared for the General Data Protection Regulation (GDPR), that transitions Europe (with the UK adopting the Privacy Bill), into a new modern data protection regulation. We can also see that of the top three reasons as to why businesses are investing in analytics is to fulfil regulatory needs – auditing and enhancing controls and checks necessary to be compliant.

Regulations, in our view, are a force for good. And if you look at a few of the most topical at present you can see that:

1. The GDPR is purely outlining a process for data management that for a long time many have strived towards achieving anyway. Better transparency, data connectivity, better outcomes from data and better customer engagement
2. Open Banking opens transactional data that was until recently only limited to the holding bank. This rich information can now mean decisions are made to a much higher standard and with a much better degree of visibility around what a customer can afford – and what products best suit them. Again, something many have strived to achieve for years through technology developments.
3. PSD2 introduces a clearly defined regulated approach to tackling fraud for online payments. This will make e-commerce more secure and robust. It will also drive payments providers to introduce new ways to securely authorise payments and data release. We expect to see a biometrics arms race over the next few years because of this.
4. Anti-Money Laundering regulation outlines clear steps businesses need to take to ensure that they really know who they are doing business with, they have a real clear understanding of what risks they are taking on board. Again, something many strive toward daily to reduce unnecessary risks. Here again, the bottom line is the same common objective – know who you are dealing with each time.

Regulations, good businesses practices and personalisation can all help build trust. And trust is probably the one thing that is going to make or break loyalty, brand and growth moving forwards. So how do we move to a place where businesses are trusted?

To build trust, more secure data exchange needed. I believe it starts with identity. As we get the ability to verify people using different sources of data – using their phone, using more broad data sources – we move to a more modern process. We are no less vulnerable – but we’re agile, responsive and proactive – we’re therefore more secure.

There are, of course, complexities that sit behind digital identities. The average person on the street doesn’t wouldn’t be expected to understand  it. There is a lot of education to be don’t around helping customers understand the impact of giving their information to a third-party provider. But for Millennials, this won’t be new. It will be the norm. Most Millennials don’t hold a paper account, and therefore are fully embroiled in the digital economy. With this group, they are predominantly so tech savvy that if you asked them for paper they may need more educating on how to get it, than if you were to ask for a digital ID.

The way I see the landscape evolving is that in time you’ll have a Digital Identity from a chosen provider and you will be able to use that identity in different places depending on the certification it has. The identity will be transferable, digital and personal. It will be trusted and it will be fit for purpose.

As we move forward there is no need to suffer losses due to unbalanced objectives. Everything needs to converge and connect – it needs to be created under an entire infrastructure that isn’t siloed but centrally architected. We need to move to a place where systems will no longer topple like a game of jenga they are built upon, but they are multi-layered and agile. APIs offer a much faster way of ‘plugging’ in data and integrating tools – quickly.  

To gain trust and maintain it we need to ensure we reconsider everything. We need to ensure we put the customer, and their expectations on your business – and the market – at the core. We don’t need to respond and solve problems, we need to find them and then solve them. We need to be one step ahead and we need the ability to be in that position. How we get there will be interesting – but it is exciting. Every sector has a huge potential and 2018 is the start of a more integrated and value led proposition for all.

Regulation is purely a foundation that can be built from to achieve trust and excellence. While it may be a perceived barrier (we can see from our Global Fraud Research how most businesses intend on investing in analytics purely for compliance, rather than growth), if you look at the framework and overlay it to your business strategy – it can provide a pretty good skeleton for you.

The proliferation of new technologies has meant that our data footprints are seen, recorded and analysed, not only by our service providers but often by their partners as well. The quality, management and understanding of that data is crucial for both businesses and society.