While many bankers and technology professionals profess a belief that individuals can't be motivated to protect themselves, new Javelin research shows that more than eight in 10 online bankers view security as a shared responsibility. Nearly four in 10 consumers turn off paper statements out of concern that someone will steal their personal information, indicating that customer-empowerment strategies go hand-in-hand with the sense of shared-responsibility necessary to fight crimes that harm both consumers and companies. This, and myriad other data, disproves the theory that consumers need to feel the pain of financial loss in order to monitor their accounts against fraud and shows that consumers are willing to mitigate against fraud.

More evidence: Even when presented with zero-liability protection, consumers continued to express interest in partnering with financial institutions on additional security methods. When surveyed, consumers that most strongly preferred zero-liability protection had an even higher interest in additional authentication security capabilities, many of which would reduce consumer convenience. By analyzing rigorous data comparing latest behaviors and preferences toward banking security and technologies with nationwide trends on actual fraud patterns, we are able to identify steps bankers can take to not only cut losses but strengthen profitable customer relationships.

Specific methods for creating the shared account security responsibility preferred by consumers include better authentication, alerts, user-defined limits and prohibitions (UDLAPs), extended validation SSL, and discounted third party services such as PC protection software, credit monitoring and fraud prevention services.

Partnering with consumers on security decreases the length of time fraud can take place and therefore lowers the mean dollar value of the fraud losses for consumer and the total expenses for all parties involved. A study partially sponsored by Intersections, Inc. and Wells Fargo Bank found that banks and merchants absorb the great majority of financial losses in the average $4,840 case of identity fraud, yet consumers are now spending 30 hours resolving such crimes with nearly $500 in out-of-pocket expense. Friendly frauds are even worse, requiring 50 hours for resolution compared with the average of 30 hours, and double the average consumer costs. Given this, and with half of fraudulent activity first detected by consumers, consumers' willingness to get involved is in both parties' bottom-line interest.

Safety not only prevents fraud losses, it also creates more profitable relationships. When consumers are either selecting a new credit card company or one of the several existing payment cards for their next transaction, current Javelin research shows they rank security against identity fraud as their paramount concern, overtaking interest rates, rewards, customer service, and other costly offerings. Increased security and privacy protection also make a consumer spend more online; and credit cards that are perceived as more secure will generate more transaction income for the issuer as well.

Finally, banks' bottomline interest in security partnership may also be enhanced with revenue opportunities. Consumers are already participating in identity theft programs outside financial institutions. Over half of consumers use anti-virus protection, eliminating or at least cutting down on malware infections; and one in four subscribes to services that offer credit monitoring, fraud alerts, and transaction alerts. Consumers that shop online go to great lengths to feel safe while doing so. More than eight in ten consumers use firewalls, update their antivirus software regularly, and monitor their bank accounts more often, even though these activities require additional efforts. Since consumers are often paying for protection services elsewhere, why shouldn't banks sell bank-branded versions of white-label products?

Identity crimes uniquely target both identity-holding consumers and the companies that serve them, and therefore all parties will be most effective when working together for the prevention, detection, and resolution of a crime that totaled some $48 billion in 2008 in the United States alone. While the financial industry has excelled in behind-the-scenes fraud mitigation solutions and after-the-fact customer fraud resolution capabilities, Javelin sees an opportunity for banks and card issuers to build on the important zero liability guarantees from the card industry while providing additional security options to safeguard consumer accounts against emerging threats. Even the largest U.S. credit card issuers have many opportunities to strengthen customer-partnered prevention and detection capabilities.

With consumers seeking greater participation in their security, banks, issuers, merchants, and vendors can take advantage of the tremendous growth opportunities in the financial security sector. Security professionals can improve their ability to fund strategic investments in customer-partnered security methods, using factual research data to bolster business cases with benefits such as increased customer acquisition, cross-selling, loyalty, and increased preference at point-of purchase.


James Van Dyke is founder and principal of Javelin Strategy & Research.

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