When hackers steal 41 million credit and debit card numbers, or a hacker steals one PIN, the result can seriously wound customer trust. But for banks that are prepared and proactive, a breach can actually build trust and loyalty, according to a study released last week by the Deloitte Center for Banking Solutions. Half of those surveyed had experienced credit, debt, or store-valued card fraud; half had not.
 
“While 17 percent of fraud victims said their trust in their issuer has decreased, fully 40 percent said the experience had increased their level of trust,” the survey found. Fraud incidents led 29 percent of victims to reduce or cancel their business with their issuer.

A fraud event “ripples to products not directly affected,” says Brian Shniderman, a director at Deloitte Consulting and the lead writer of the report. About half of the study participants had checking accounts and 41 percent of them had savings accounts at the issuing institution. “Banks use cards as a tool for building core deposits,” Shniderman notes. “They can’t afford to lose that business.”

The ability of banks to regain that business varies widely, depending in part on the technology a customer uses and in part on issuer performance. “Customers with auto-draft are less likely to return,” explains Shniderman. “Once they go through all that effort, through that pain threshold, they won’t go back.” Banks can turn to pricing and fees to buy back some customers, “but no one needs that expense.”

Good fraud management planning is the key to building trust and mitigating the impact of a fraud event, the study shows. Leading elements of successful response include “accuracy and fairness, not losing money, and stopping transactions quickly.” As simple as it sounds, there was a wide disparity between the most trusted institution, which earned a 93 percent confidence rating and an 85 percent competence score; and the least trusted issuer, with grades of 63 percent and 55 percent, respectively.

Effectiveness does not correlate to size, the study’s results indicate. “It’s the execution itself that makes the difference,” Shniderman observes. Banks must “give customers tools so they are involved in resolution, not just waiting. They need to make the outcome less cumbersome and painful. Customers have such a low level of expectations that when they are pleased, there’s a tremendous ‘wow’ factor.”

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