DDA and the risk of fraud in the retail bank, Part 1 – How is your fraud prevention affecting your operations?

December 30, 2009 by Guest Contributor

By: Heather Grover

In past client and industry talks, I’ve discussed the increasing importance of retail branches to the growth strategy of the bank. Branches are the most utilized channel of the bank and they tend to be the primary tool for relationship expansion. Given the face-to-face nature, the branch historically has been viewed to be a relatively low-risk channel needing little (if any) identity verification – there are less uses of robust risk-based authentication or out of wallet questions.

However, a now well-established fraud best practice is the process of doing proper identity verification and fraud prevention at the point of DDA account opening. In the current environment of declining credit application volumes and approval across the enterprise, there is an increased focus on organic growth through deposits.  Doing proper vetting during DDA account openings helps bring your retail process closer in line with the rest of your organization’s identity theft prevention program. It also provides assurance and confidence that the customer can now be cross-sold and up-sold to other products.

A key industry challenge is that many of the current tools used in DDA are less mature than in other areas of the organization. We see few clients in retail that are using advanced fraud analytics or fraud models to minimize fraud – and even fewer clients are using them to automate manual processes – even though more than 90 percent of DDA accounts are opened manually.

A relatively simple way to improve your branch operations is to streamline your existing ID verification and fraud prevention tool set:

1. Are you using separate tools to verify identity and minimize fraud?

Many providers offer solutions that can do both, which can help minimize the number of steps required to process a new account;

2. Is the solution realtime?

To the extent that you can provide your new account holders with an immediate and final decision, the less time and effort you’ll spend after they leave the branch finalizing the decision;

3. Does the solution provide detail data for manual review?

This can help save valuable analyst time and provider costs by limiting the need to do additional searches.

In my next post, we’ll discuss how fraud prevention in DDA impacts the customer experience.