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Can Smaller Banks Have it All?

Can Smaller Banks Have it All?

Credit unions, smaller banks and community financial institutions feel the pressure to stay competitive with the big banks. 

This includes achieving similar results in the area of fraud prevention. They want to rival the basis point losses and low false positive rates experienced by large financial institutions. 

The challenge comes in achieving those results with fewer resources and smaller budgets while also not compromising the personal service customers expect from these smaller institutions.

When it comes to fraud prevention, can smaller banks have it all?

The answer is yes.

By consistently making smart decisions, effectively engaging customers, and putting the right partnerships in place, smaller financial institutions can compete with larger banks on fraud prevention.

Making Smart Decisions

Competitive fraud management strategies start with smart decisions about how to best involve customers in the overall fraud strategy. When financial institutions put themselves into their customers’ shoes, they can develop empathy that leads to wise decision making about how to best communicate with customers. 

For example, many customers are afraid to click on an email from a bank or are wary of divulging personal information over the phone to anyone claiming to represent their bank.

Smart banks think of communication avenues that customers will recognize as safe. In-app communications, messages displayed within the secure portion of the online banking environment and printed messages included with new card activation mail and account statements are all trustworthy channels that smart banks can leverage when talking with customers about fraud.

Effectively Engaging Customers

Customers often choose to engage with smaller or regional financial institutions because they want a more intimate experience. They want to know the people who are helping them safeguard and manage their finances. 

In terms of fraud prevention, this intimate experience means low on-hold wait times and phones staffed by knowledgeable employees familiar with where customers live.

It also means rolling out fraud strategies in ways that align with customers’ communication preferences. Financial Institutions should solicit customers’ preferences and tailor message delivery by device, time of day and even take into account generational differences. 

By anticipating customers’ communication preferences and responding when they indicate how they like to receive important messages, smaller banks can deliver a satisfying level of service to their customers. 

For example, it could be assumed that older customers would prefer phone calls over text messages; responsive banks could default to that form of communication until a customer communicates otherwise. 

Another area where smaller financial institutions can compete well is in leveraging local branches to deliver fraud prevention advice and answers. 

Local advertising campaigns could be run that inform the community of this distinction, touting the smaller financial institution’s commitment to fraud prevention in a personal way. Employees in various operational areas can be trained and given contextualized talking points to use with customers.

In these ways, smaller financial institutions can execute fraud mitigation strategies with a human touch, maintaining a point of differentiation in the marketplace.

Putting the Right Partnerships in Place

Small banks and credit unions don’t have the resources of large financial institutions, but with the right partnerships they can leverage robust fraud prevention and security software solutions with capabilities like tokenization, mobile messaging, device authentication, behavioral analytics and more, to drive competitive results. 

Smaller financial institutions often turn to home-grown solutions to save money on fraud prevention tools. Such a strategy can result in longer time to market, strain on staff resources and a product with outdated functionality at the time of implementation.   

Cloud-based solutions have come a long way in offering large and small financial institutions an economical way to take advantage of best-in-class fraud prevention solutions.  These cloud-based offerings eliminate the resource constraints of long projects and in-house investments in technology infrastructure.

Instead of trying to reconfigure a less expensive solution or build something in-house with limited resources, smaller financial institutions should focus on investing in an outsourced product from a reliable vendor that does what they need it to do out of the box, including maintenance and update support and remaining relevant for years down the road. 

The sooner smaller financial institutions can put an effective fraud prevention solution in place, the faster they can reduce fraud losses and attrition rates.

An ongoing effort to invest in the right technology, effectively engage customers and deliver personal service can give small banks the edge they seek in an increasingly crowded financial marketplace.