While the media has focused its attention on the seemingly never-ending data breaches that occurred over the past year, another type of fraud is on the rise again, threatening customer loyalty and wallet share of financial institutions and businesses in similar high-risk industries.
According to an infographic by NICE Systems, 90 percent of fraud cases involve at least one interaction in the customer contact center. In addition, after becoming a victim to fraud, 40 percent of customers close their accounts with their financial institution, and an additional 40 percent reduce their wallet share.
“Organizations that have a data breach are getting a lot of bad publicity, and their customer loyalty is at risk,” said Matthew Storm, Director of Innovation and Solutions at NICE Systems. “However, on the back end of data breaches it’s the financial institution that becomes at risk. People are reselling information on the black market so fraudsters can use it for bank wires and identify theft.”
And the enabler of this fraud scenario, he added, is the contact center.
1. Customer Service Reps Are Easy Targets
According to a white paper (registration required) by Aite and NICE Systems, as financial institutions have beefed up their efforts to mitigate online fraud, fraudsters are increasingly targeting the contact center and customer service representatives who focus on delivering a positive customer experience.
“The contact center, with its customer service representatives (CSRs) who are trained and measured on their ability to provide high-quality, friendly customer service, represents easy pickings for the determined fraudster,” states the white paper. “Sometimes the fraud is solely perpetrated via the contact center, but more often it is just one target in a more complex cross-channel fraud scheme.”
So, how do fraudsters take advantage of customer service representatives who are more focused on customer service than on fraud detection?
Social engineering of phone reps: According to CSOonline.com, social engineering is “the art of gaining access to buildings, systems or data by exploiting human psychology, rather than by breaking in or using technical hacking techniques.”
So, basically, fraudsters are tricking customer service representatives into helping them break through authentication protocols, and according to the infographic, succeed in doing so in 1 out of every 5 attempts.
Email and online chat: Fraudsters are increasingly using email or chat credentials from data that had previously been compromised to request transactions.
Persistence: Fraudsters repeatedly call the same financial institution to get bits of information until they have enough to move past authentication protocols. Some may even target customer representatives they know are particularly vulnerable.
Taking Advantage of Change: When banks go through system conversions due to acquisitions and mergers, customer service representatives are often confused. Fraudsters understand this and use it to their advantage.
Once fraudsters have the information they need, they go on to request:
- balance checks and increases
- travel alerts in order to create counterfeit cards and transact in areas outside of the normal cardholder’s transaction geography
- PIN/Password resets
- contact information changes
- new checks or new debit/credit cards
- wire transfers
Fraudsters will also engage in other activities, such as committing Bill Pay fraud.
2. It Can Happen to Your Business
Although high-risk targets, financial institutions are not the only ones that need to protect themselves and their customers from call center fraud, said Storm. He cites insurance, telecommunications and retail – particularly retailers that sell and quickly dispatch electronics and other expensive items – as other high-risk industries.
Because products like iPhones and other electronics are usually shipped out quickly, he continued, there typically isn’t time to catch the fraudster before the product has already been delivered.
3. You Can Reduce Contact Center Fraud
One of the most effective ways to prevent fraud in the contact center is to use real time tools to detect fraudsters, stated Storm, as he discussed the capabilities of NICE Systems’ recently released Real Time Fraud Prevention solution.
The solution allows contact centers to detect and prevent fraud in real time using voice biometrics, as well as both speech and desktop analytics. In addition, the solution identifies 90 percent of fraudulent callers within a few seconds, enabling organizations to quickly investigate unauthorized transactions before they are completed.
“Until now, there was still a window of time (from 24 hours up to several days) that fraudsters might succeed in carrying out a malicious transaction, as risk case management was done offline after the call had ended,” he clarified in an e-mail to CMSWire.
“Adding the element of real-time is a game-changer for organizations. It means that fraudsters are identified on the spot and malicious activity is thwarted while the call is taking place. This closes any window of opportunity that a fraudster may otherwise have."