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How to Lose $14.9 Billion

Posted on 5.02.2016

What is the financial impact of consumer friction and fraud attrition?

To measure the long-term economic impact of adding unnecessary fraud controls to the consumer digital experience, ThreatMetrix recently conducted a sponsored research study (“The Path to Digital Transformation: Controlling Friction While Tackling Cybercrime in Financial Services,”) in conjunction with consulting and M&A advisory firm First Annapolis.

This Q1 2016 multi-market study explored consumer perceptions of online and mobile banking and payments security by analyzing responses from 3,090 consumers across the U.S., U.K. and Australia. Among the many takeaways from the study was this staggering insight: one year’s worth of friction and fraud is estimated to cost U.S. banks $14.9 billion in lost relationship value. Consistent levels of friction and fraud over a five-year period would translate into a cumulative $74.3 billion – which does not include the lifetime value of their account, future cross-sell potential and referrals.


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Well-intended step-up authentication challenges create friction and dilute consumer relationships. Of the respondents who said performing additional steps had a negative effect on their perception of their bank and that it affected their behavior, 30 percent changed banks, 26 percent called customer service to complain and 26 percent used online/mobile banking less often.

“This report quantifies what we have intuitively known: banks are missing the opportunity to increase customer lifetime value and improve satisfaction because they are under-investing in fraud and authentication solutions that know their customers, as opposed to tools merely trained to recognize threats,” said Armen Najarian, chief marketing officer for ThreatMetrix. “The nearly $15 billion in annual loss is staggering and should serve as a wakeup call for the industry to deploy a more balanced approach that reduces friction while combating fraud with more consumer-friendly, secure methods.”

 

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