A preemptive and UX-friendly approach to credit funnel optimization

It’s one thing to Know Your Customer; it’s another to Know Your Con-Artist. KYC checks, ostensibly, prevent banks from doing business with bad actors, but doing so requires neutralizing fraudsters at the point of entry, before they’re able to apply for a loan.

In other words: early bird gets the fraudster.

A preemptive strategy is the only realistic way to effectively prevent credit application fraud—when a fraudster submits personally identifiable information (PII) to apply for credit (credit card, loan, etc.). This approach saves banks from running costly, unnecessary credit checks on fraudsters, and ensures genuine customers are identified up front and not wrongfully declined. It also curbs the risk of fraudsters slipping through the credit application process scot-free. In a 2018 study, one major North American bank issued 1,400 credit cards per month to fraudsters—a loss of ~$500,000 per month.

But is spotting fraud pre-credit application, before the verification stage, even feasible?

A never-ending money hole

Before we discuss the practicality of shutting down fraudsters pre-credit application, let’s look at the two glaring downsides of not adopting this approach. Problem number one: credit application fraud can be a significant money pit (and time suck) for banks.

Factoring in the cost of running a credit application through third party sources—namely, multiple credit bureaus—can cost between $3-5 per application. The fraudster may then be asked to verify their document, a fabricated driver’s license matching their details, which costs the bank another $3-4 per applicant. Manual review alone can cost another $50-75. And, since synthetic identity fraud is now the largest form of identity fraud in the country, there’s a good chance banks could be chasing a made-up, nonexistent entity.

Synthetic identity fraudsters, whose fake identities are stitched together using bits and pieces from real identities, exploit the very processes that banks and fraud solutions rely on. For example, most banks look for static PII data such as a social security number or date of birth when analyzing credit applications, which is easily obtainable from the dark web. Additionally, synthetic fraudsters will often apply for credit with two lenders to compensate for the identity’s lack of credit history. Ironically, the first lender’s rejection of credit will usually initiate a credit file that enables the second credit application to go through. Low credit limits? Synthetics can work around that, too. A few small transactions here and there, paid off at the end of the month, and they can steadily increase their spending limit until it’s worthwhile to cash out.

A churn for the worst

Not detecting fraud until after the credit application process lets more fraudsters in. It also keeps more good users out.

For instance, geography is a common false positive trigger if a user has recently moved. After this user fills in their basic info, including their address, and creates an account, you can almost guarantee a red flag from the credit bureau. The new address doesn’t match what’s on file. Next step? Document verification. And if users are still around at that point, banks should count their lucky stars.

Legitimate users with thin files are the most likely to get declined. “Thin file” refers to applicants whose credit history is so sparse that standard fraud prevention tools lack the data to calculate risk. A thin file applicant might be a student applying for their first credit card. Other examples include immigrants without credit history in the US; consumers who haven’t used credit in a long time; and people who predominantly use cash over credit.

According to an Experian report, about 62 million Americans have a thin file.

Unlike synthetic fraudsters, who are cunning enough to establish a semblance of credit history by applying to multiple lenders, genuine identities with thin files are often automatically declined. Many of these rejected users will apply to another bank, resulting in churn and lost revenue. Even worse, a substantial amount of unfair declines could harm a bank’s reputation over the long term.

It starts at the top

We’ve established that preventing credit application fraud and false positive declines isn’t tenable unless banks act before applicants apply for credit. But rearranging the UX and security for the credit application process isn’t entirely an in-house operation. It requires assistance from a powerful and highly intelligent first line of defense, with a data stack that rivals the FAANG gang.

Deduce’s real-time identity network fits the description: 660 million US privacy-compliant identity profiles and 1.5 billion daily user events across 150,000+ websites and apps. With this magnitude of data powering their credit app fraud prevention efforts, banks can identify fraudsters and legitimate users pre-credit application, effectively bridging security and UX.

Deduce’s approach to preventing credit application fraud

As illustrated in the graphic above, if the Deduce Identity Network deems the user a fraudster, they’re sent to a landing page devoid of a loan or credit application option; if the user is legit, they’re presented with a list of loan or credit options that fit their needs. This is credit funnel optimization done right.

It’s no wonder that some leading financial institutions, such as SoFi, have adopted this preemptive, highly optimized approach to their credit application journeys. Aside from thwarting fraudsters and false positives, and improving conversion rates, checking for fraud upfront assists marketing efforts. If a new user is determined to be genuine but rejected because of their credit score, the initial collection of their contact info allows banks to keep in touch. That way, users aren’t lost in the sauce and can reapply in the future once their credit score reaches the required threshold.

SoFi’s signup page

There’s no better way to shut down credit app fraudsters who’ve grown accustomed to banks’ antifraud processes. Preventing false positives and salvaging quality customers is vital in its own right, and may prove even more so in the grand scheme of things. By placing Deduce at the forefront of your credit app fraud strategy, the marriage of security and UX is indeed possible, and bottom lines will be all the better for it.

Ready to shut the door on credit application fraud? Contact us today and get up and running in a few hours.

The five fundamental steps to measuring UX more effectively

In part one of this two-part series, we discussed the importance of creating company-wide OKRs (Objectives and Key Results) to align your organization and teams to a set of prioritized objectives and measurable key results to improve your products, services and customer experiences. Once organizational objectives are created and communicated, each team will work together to define a set of accountable OKRs that supports the broader company goals. Tailoring OKRs for teams and individuals provides opportunities to focus on outcomes that are clear, transparent and measurable, creating alignment across regions, time zones and organizational departments.

In part two of this blog series, we will discuss how to measure what matters with new customers, subscribers and users. We’ll also outline the five fundamental steps to creating a measurement framework, along with additional tools and resources to collaborate more effectively and align to your company goals. Using these steps as a starting point to create your own framework will help your teams become more customer-focused.

Step One: Create a Team OKR that maps to your company OKRs and scales easily

The purpose of an OKR is to create an Objective (O) that is simple, clear and specific to enable teams to develop a series of Key Results (KRs). Because CX can positively or negatively impact several touch points across the organization, it is important to ensure that your objective resonates with your stakeholders, and is measurable. For example, take this company-wide objective from Part One: “Achieve Greater Scale by Increasing New Subscription Accounts.” It is easy to see how this objective can easily scale across product, user experience, engineering, security, brand marketing, sales and customer support centers.

A team Objective (O) that maps to the broader company goal would be, “Improve the Customer Experience to Increase Growth.” Key results could then include some of the following:

  • Increase new account creation by >40%
  • Increase return user transactions by >50%
  • Reduce false positive MFAs for return users by >20%
  • Reduce password reset requests by >50%
  • Reduce cart abandonment rates caused by authentication by >30%

Pro Tip: Implementing shared OKRs across an organization allows each team to identify where they can improve the customer experience to increase growth, loyalty and satisfaction.

Step Two: Align a cross-functional team of stakeholders that are customer-focused

It’s important to establish a cross-functional team of stakeholders who are invested in this collaborative exercise to identify as many touch points and CX friction points as possible. Once you have identified your stakeholder team, you can begin discussing how to improve the journeys by reducing unnecessary friction for the first-time and returning users caused by identity and security steps.

Pro Tip: Look at the different dimensions of the customer journey including onboarding, return users, product experiences, marketing and support centers to better understand your customers.

Step Three: Create effective CX Journeys to better understand your customers

The third step is to create a set of Core CX journeys that define customer pain points to better understand first-time and return customer needs. User and Customer Experience Journeys help to shape and clarify where your immediate efforts should focus and prioritize areas that benefit from an improved experience that creates business value and maps to the OKRs. There are a lot of online resources to help create your core journeys, and a great place to start is with the Nielsen Norman Group where there are different articles, templates and videos to help guide you through the process.

Pro Tip: It is important to ensure that your teams work together to identify opportunities that will benefit the customer, and even validate hypotheses using qualitative and quantitative methods.

Step Four: Establish scorecards that identify gaps and friction points

After defining your top customer journeys, teams should work together to identify gaps and where improvements can be made. Throughout this process, it’s important to begin developing scorecards for first-time (new) and return customers by assigning values to each action identified. A great example of this is to identify each step, field or scenario that challenges your customers whether that is their first visit or their 50th visit.

Here are examples of scorecards that illustrate some common friction points for new and returning users.

Pro Tip: Identify how many customers are on mobile versus desktop, and whether there are additional steps for individuals who engage across multiple devices, locations and geographies.

Step Five: Align on measurements and impact to deliver outcomes and opportunities

The final step is to align on measurements that deliver positive outcomes and create opportunities. Identifying baseline measurements while establishing scorecards drives transparency and cross-functional visibility within the UX and CX. Real-time product analytics are preferred, along with dynamic dashboards that visualize the data and can be easily shared across the company—from an IC to the C-Suite. As each team will have a different focus, it is important to review the scorecards and data daily to provide a more complete picture of customer experience.

Click here to use the calculator shown below and measure how UX friction is impacting your business.

Pro Tip: Prioritize for challenges and patterns in your CX data that impact multiple areas and/or provide opportunities for continuous improvements for users, the business and brand.

The most important step: Always focus on the customer

Every company and organization is different. It is important to work together to develop a series of OKRs, scorecards and measurements that focus on the customer and create value for the business through transparency, accountability, and shared goals.

For more information about measuring friction in your authentication process, please read our previous blog post here.

OKRs align teams that are critical to customer success

At a recent CXO conference, we had the opportunity to poll top marketing and user experience leaders with a series of questions about their biggest challenges with user friction and security. Our questions uncovered some interesting results and concluded that most organizations do not have effective OKRs (Objectives and Key Results) and measurement frameworks to identify, track and reduce friction caused by security for new customers in the areas of account creation and first-time purchases.

One of the most significant poll results found that 80% of leaders stated there was “little to no” interaction between their UX and security teams. Separately, 70% did not measure the business impact of user friction on the experience, and 65% only tracked users after they had logged in.

As an executive leader in the Design and Product development space, I can attest to the challenges that many organizations face, no matter their size. In today’s digital world, organizations are moving fast and focused heavily on actions to get their launch, iterate and evolve their products quickly. As a result, many do not take the time to establish a set of clear OKRs and scorecards to evaluate customer impact on their acquisition and business during launch and following their product release to market.

OKRs have become widely adopted by many of the largest companies in the world including Google, Netflix, IBM, Microsoft and Amazon, to achieve ambitious goals for the organization, teams and individuals. OKRs are effectively divided into two parts that align objectives with measurable outcomes.

  1. Objectives should define what you want to achieve. They should be clear and concrete, action-oriented and challenging to ensure that everyone is aligned.
  2. Key Results should express how the objectives will be achieved by the organization, team, or individual to create a measurable outcome that is time-bound and challenging.

Now you may be asking yourself, how are OKRs different from KPIs (Key Performance Indicators)? Simply put, OKRs help to establish and set measurable goals for performance and a defined set of actions that lead to outcomes that can scale more broadly and effectively across the entire organization. KPIs are generally a set of metrics used to assess the performance of ongoing activities, features and processes. When developing company-wide organizational OKRs it is important to remain inspirational at a high level in order to define key priorities for the organization. In doing so, it allows managers and team members to set their own OKRs that best align with the company’s objectives and creates both flexibility and autonomy through transparency and accountability. 

So, how can you create shared OKRs to measure the impact of security friction on your customers and business? It starts with the UX and Security teams working together with a cross-functional group of product, engineering, marketing and business leaders to identify areas within the journeys that can be improved or eliminated. Every company is different in how it will score and measure friction through qualitative and quantitative methods; however, what is most important is gaining alignment between teams that are critical to the customer experience through a set of shared OKRs.

Here are two examples that will help with context and guidance for you and your teams when creating corporate and cross-functional team alignment.

Example 1: A new fintech company that focuses on wellness apparel, equipment and content is launching a new product that includes retail and subscription services.

Objective (O): Launch a new minimum lovable product for web and mobile users.

  • KR1: Get 250,000 new account subscribers in the first year.
  • KR2: Get 25% of first time users to make a purchase within 7 days of account creation.
  • KR3: Maintain an App Store rating of > 4.5 stars.

Example 2: An online retail company wants to increase monthly subscriptions that convert into higher transactions and return-users as they shift primarily to online digital versus traditional.

Objective (O): Achieve greater scale by increasing new subscription accounts.

  • KR1: Gain >50,000 new subscribers per month.
  • KR2: Increase first time purchases by 20% per month.
  • KR3: Achieve a Net Promoter Score (NPS) of >65%

In order to be successful in this rapidly changing world where customers are at the heart and soul of your company’s success, it’s important to ensure alignment, consistency and transparency through cross-functional company collaboration and goals. When you’re ready to implement OKRs, these three keys will help create positive results for your customers and business.

  1. Encourage teams to work together to create a customer-centered approach.
  2. Define a set of company-wide OKRs, scorecards and measurements for success.
  3. Ensure collaboration, communication and transparency to prioritize customer needs.

Having the confidence and intelligence to better understand your first-time customers before they reach your site or application, and super-serve your returning customer needs, yields two significant outcomes. Not only does it build trust in your brand, but also creates a more meaningful user experience that lowers acquisition costs while increasing customer satisfaction (CSAT) and lifetime value (LTV).

Ready for some more UX nuggets? Check out Part Two of The UXtraordinary Experience: “Measure What Matters.”

New Gartner report rethinks the marketer’s to-do list

According to a recent Gartner report, CMOs have a new priority at the top of their to-do lists—and it isn’t to order more custom flash drives and beer koozies.

The State of Marketing Budget and Strategy 2022, Gartner’s annual survey of enterprise CMOs, indicates that marketing brass are shifting most of their attention to “Customer Acquisition, Retention and Engagement.” As users grow more impatient and wary of fraud, meeting all three of these needs requires an airtight, yet seamless approach to security. It also requires a combined effort from marketing and security teams.

Though still below pre-COVID-19 levels, marketing budgets are, on average, 9.5% higher than last year. Here is why spending on the right security solution is central to attracting, engaging, and keeping users around.

In the beginning…

All customer journeys start with identity, and optimizing the customer experience (CX) starts with account creation.

This means taking a good, hard look at outdated account signup measures such as email verification. At Deduce, we’ve talked to companies signing up millions of new users every month that have churned 10 percent of these accounts because of email verification issues. Further damage awaits downstream, negatively impacting lifetime customer value and brand reputation.

To neutralize fraud—including synthetic fraud—while maintaining an easy-breezy signup process, deploy an antifraud solution that provides real-time trust signals at the account creation stage. For regulated industries, these trust signals can also reduce the cost of customer onboarding.

A churning sensation

Remember those trust signals from two sentences ago? They not only fastrack signup, but alleviate another major customer pain point: false positives.

Once customers are acquired and have created their account, getting blindsided by a false positive upon logging in will often trigger a DEFCON-1 churn reaction. Security solutions bereft of real-time identity data that rely exclusively on behavioral biometrics and device fingerprinting will generate more false positives and smack users with a multi-factor authentication (MFA) alert.

Many users don’t think MFA is worth the increased security. They don’t have time for clicking CAPTCHA squares of traffic lights or authenticating via one-time passcode. And, thanks to SIM swapping, SMS codes aren’t 100-percent secure, let alone user-friendly, anyway.

A delicate balance

If CMOs wish to treat users to a Ritz-Carlton-esque app experience, they’ll need a security solution that’s rock-solid yet frictionless.

Fortunately, Deduce lies at the intersection of CX and security. With a real-time identity network comprising 500 million anonymized user profiles, 150,000+ websites and apps, and over 1.4 billion daily activities, Deduce uses real-time identity intelligence to ensure a user is legit during account creation and beyond, greatly decreasing the likelihood of a false positive MFA trigger. Spoof-proof trust signals—geolocation, new device, time of day, etc.—promise a smooth verification process throughout the customer journey.

The trusted user experience needn’t be a slog. Safe can also mean seamless, and vice versa.

Looking for a CX-traordinary security solution? Try Deduce for free today.