Proactive Measures Against Bank Fraud

Given the increasing prevalence of bank fraud, it is crucial for financial institutions to take proactive steps in combating this issue. Research indicates that when banks actively identify and address fraudulent transactions, customer loyalty can be maintained and even enhanced, especially among those directly affected by fraud.

Customers are significantly more likely to close their accounts if a bank cannot provide information on the perpetrator of a fraudulent transaction. According to a study from the University of Notre Dame, victims abandoned their banks at a rate 40% higher than customers who had never been defrauded.

However, when banks successfully identify and attribute fraud to specific criminals, customer attrition drops dramatically—62% fewer fraud victims leave compared to those with no history of fraud. Vamsi Kanuri, the study’s author, explained to Notre Dame News that “intuitively, we might expect that any instance of fraud would harm the relationship between a customer and their bank, even if the case was resolved; yet in cases of correct attribution, not only do customers stay but they also display higher levels of loyalty than those untouched by fraud.”

Long-Term Relationships

Banks must demonstrate a strong commitment to fighting on behalf of their customers.

“It is not about the fraud itself, but rather how a victim’s financial institution responds and advocates for them that truly matters,” said Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research. “Banks can build loyalty by showing they care about their customers’ well-being.”

This commitment to customer welfare fosters long-term relationships. Banks that successfully catch fraudsters earn a reputation for competence and reliability, while those who fail to stop criminals immediately may be viewed as unreliable. Although negative perceptions can sometimes fade over time, customers with shorter relationships or fewer touchpoints are more likely to leave if a criminal goes undetected. Long-standing or frequent-interaction customers tend to be more forgiving.

Worth the Effort

According to Javelin, fraud victims who have bad experiences with identity fraud might still opt to close their accounts and move on.

“This highlights how interconnected our financial and non-financial accounts are in today’s digital age,” said Sando. “The inconvenience of opening a new bank account and reconnecting various products and services outweighs the loyalty for some customers who experienced a bad fraud incident.”