Fraud is continuing to surface in many ways, especially nowadays since so much activity is happening online because of the coronavirus pandemic.
Chris Ryan, senior fraud solutions business consultant at Experian, described the most noteworthy incident he’s seen during the past few weeks during this special episode of the podcast. It involved email and what seemed like kind gestures to maintain a company’s workforce morale.
To hear the whole story, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
ESI ThoughtLab looked to put some tangible figures on what investing in cybersecurity can do, especially during the coronavirus pandemic.
The firm recently released a comprehensive study that reveals increased investment in cybersecurity can generate a significant return on investment of 179% and provide greater protection as companies cope with the fallout from COVID-19.
ESI ThoughtLab explained that it benchmarked the cybersecurity investments, practices, and performance metrics of 1,009 firms across 13 industries and 19 countries to identify the most effective approaches for mitigating cybersecurity risks and losses. This ground-breaking research was conducted in conjunction with an advisory group of cybersecurity, cyber insurance, and technology specialists, including Arceo.ai, Check Point Software, Cowbell Cyber, Edelman, Fiserv, KnowBe4, Optiv and Verizon Business.
The analysis found that last year firms surveyed spent $9.6 million on average on cybersecurity — $515 per employee — and 97% of those expect to increase their spending by an average of 14% this year (pre-COVID-19 estimates).
Companies are investing in three areas: people, process, and technology. While the average ROI is 179%, it ranges from 271% for investments in people, 156% for process and 129% for technology.
According to the research, on average, investments in people result in a 46% decline in the probability of a breach versus 30% for process and 37% for technology.
“These cybersecurity investments can generate enormous ROI for companies, particularly for those in earlier stages of cybersecurity maturity,” said Lou Celi, chief executive officer of ESI ThoughtLab and the program director of the research.
“The reliance on digital technology during the pandemic, together with the rise of remote working, shopping, and healthcare, have served as a stress test for corporate cybersecurity systems,” Celi continued in a news release
“Our (chief information security officer) interviews have revealed that companies with advanced protection, detection and response frameworks, backed up by strong cybersecurity hygiene and governance, have fared well during the crisis,” Celi went on to say.
Companies still need to do more to combat rising threats
According to the surveyed companies, one in three attack attempts over the last year resulted in a successful breach.
While most cybersecurity breaches are minor, affecting only a small number of people or machines, ESI ThoughtLab discovered the average price tag per breach is around $330,000.
However, for firms that are in the top 10% in terms of breach costs, the average cost per breach is over $1.8 million.
Adding to the complexity, ESI ThoughtLab indicated that companies may be underestimating their exposure to a potential breach and overestimating the protection offered by their cybersecurity systems. While the average company assigns a 45% probability to a moderate or material breach, the research shows that the probability is much higher, ranging from 62% to 86%.
The research also showed that companies need to go well beyond compliance with cybersecurity frameworks, such as NIST or ISO, to be effective in reducing risks.
For example, only 64 of 151 companies (42%) classified as leaders in NIST compliance are advanced in cybersecurity effectiveness, according to the study’s rankings. Rather than applying the NIST framework as a box-ticking exercise, the most cyber-secure companies adapt this framework to their business goals, strategies, and individual risk profiles.
Cybersecurity leaders also combine analysis from advanced quantitative tools and input from internal business partners and third-party experts to make the best decisions, according to ESI ThoughtLab.
Even before COVID-19 hit, ESI ThoughtLab mentioned companies reported the largest losses from malware (66% of survey respondents), phishing (60%) and password reuse (49%), with cybercriminals cited as the biggest threat actors.
As business goes digital over the next two years, the research determined executives also expect an increase in attacks through artificial intelligence (38%), denial of service (34%), and web applications (29%).
With geopolitical and social unrest growing, and greater economic volatility ahead, ESI ThoughtLab pointed out CISOs in the financial, energy, automotive, retail and telecom sectors are bracing for a jump in cyber terrorism and activism, along with greater risks from nation-states.
The most successful approaches of companies advanced in cybersecurity
The study identified the practices of cybersecurity leaders that are most effective in mitigating cybersecurity risks and losses. Leaders commonly do six things that keep them well prepared for today’s high-risk environment:
1. Invest more in cybersecurity. Leaders spend about 25% more than others on cybersecurity per employee, increase those investments each year more than the average, and invest more than others in recruiting specialists, working with external consultants, and training, such as end-user security awareness training with simulated phishing.
2. Make cybersecurity hygiene a top priority. Leaders have the lowest percentage of “critical” unpatched or “high” vulnerabilities based on CVSS scores (18% for leaders vs. 28% for others). They also do more frequent backup restoration drills (5.6 times a year versus 4.3 for non-leaders), IT infrastructure scans (4.9 versus 3.4), and phishing tests (5.1 versus 4.4).
3. Keep management teams focused and aligned. Cybersecurity heads typically report into the CEO, COO, or the board in leader companies. CISOs at these firms focus more on security than IT (75% of leaders) and play a bigger role in managing data privacy (54%), digital transformation (57%) and operational resiliency (49%). Leaders are also more likely to make cybersecurity a shared responsibility of two executives, such as the CIO and CISO, or the CISO and CSO.
4. Rely heavily on advanced analytics and specialized teams. More than eight out of 10 leaders conduct cyber-risk scenario analysis, assess the financial impact of risk events, and measure the effects of mechanisms to mitigate cyber risks. Leaders also outsource incident response, red team, risk management, and security ops more often than others.
5. Extract greater value from cybersecurity tools. Leaders invest more heavily in — and achieve greater effectiveness from — key cybersecurity technologies, including cloud workload security, endpoint detection, mobile device management, deception technology, email filtering, multi-factor authentication, and firewalls and web filtering.
6. Make more use of cybersecurity insurance. Since it is impossible to mitigate all risk, leaders rely more on insurance to transfer it: 57% of leaders have cyber insurance coverage over $10 million, compared with 30% of non-leaders. Overall, six out of 10 firms plan to spend more on cybersecurity insurance over the next two years.
“Companies across the board are improving their cybersecurity practices and reducing their losses thanks to smart investments in people, process, and technology,” Celi said. “While these steps have helped contain cyberattacks during the pandemic, today’s turbulent environment has underscored the value of business continuity and resilience, as well as using advanced analytics to assess cyber risks in an interconnected world.”
The full findings of the study can be found at https://econsultsolutions.com/esi-thoughtlab/driving-cybersecurity-performance/.
The Conference Board — a member-driven think tank founded in 1916 — acknowledged that rapid changes in customers’ attitudes and expectations are challenging marketers like never before because of the coronavirus pandemic.
At the same time, it also presents major opportunities, according to new research from The Conference Board, which found that one of the key parts of innovation during these times will be involving customers.
The Conference Board also recognized that finding the right balance between the efficiency of technology and personal connection through human interaction has become even more challenging for marketers. Its new report, “Customers Are Changing, and So Should Marketing,” is based on a survey of senior marketing and communications executives at 84 leading firms across North America, Europe and Asia. It highlights their views on how a variety of customer preferences and behaviors as well as marketing may evolve.
While half of respondents expect customers to use more voice communications to interact with companies, report orchestrators found more than a third expect customers’ cravings for human interaction to increase.
Specialist skills — including data analytics, artificial intelligence and digital media — are the most sought-after skills in future marketing hires. However, “left brain/right brain” thinking and creative skills, which marketers prioritize least, shouldn’t be underestimated, according to the report. Such skills will be important in designing competitive strategies and customer-friendly processes and interfaces. They complement marketing teams’ digital expertise and are certainly crucial for managing the COVID-19 crisis and recovery.
“The pandemic has inspired much more digital interaction with companies at all stages of the customer journey. While people may appreciate technology even more now, human touch points are still essential. They complement tech efficiency and convenience and help maximize the customer experience,” said Denise Dahlhoff, senior researcher at The Conference Board.
The report indicated nearly 40% of marketing executives expect brand loyalty to drop. While 60% of marketing leaders expect increased customer attention to companies’ values, about half see rising cynicism about brand promises.
Staying true to brand values has never been more critical, according to Dahlhoff.
“The importance of authenticity has grown even more during the pandemic,” Dahlhoff said. “In a crisis like this, people expect companies more than ever to do the right thing. But words and actions have to fit a brand’s DNA and they need to be meaningful.” Being authentic helps to foster customer loyalty by building trust.
“In addition, unique offerings, innovation, and close customer relationships can support loyalty objectives,” she went on to say.
Furthermore, the report revealed customers’ expectation for frequent new or enhanced products/services will grow, according to more than three-quarters of marketing executives.
Almost two-thirds think customers’ openness to experimental approaches to new products and processes, and their interest in providing input for new products, will increase.
“Involving customers in product development processes that are typically behind the scenes isn’t only valuable to better meet customer needs but also creates unique customer experiences. This type of customer engagement, along with an experimental innovation culture, can enhance a brand’s perceived authenticity and appeal,” Dahlhoff said.
To make customers’ involvement most engaging, the report suggested companies should keep customers updated on how their input is being used. There is also potential for companies to leverage digital capabilities more in the innovation process, including mobile ethnography, AR/VR, and social media, to inspire ideas for innovation and gauge their potential success.
In addition to other insights, the research found that two-thirds of marketers expect customers to want more control of their data. Authors noted 40% expect customers’ willingness to trade personalization for privacy will increase. Companies should be transparent about their data practices and offer data-based benefits that customers value.
Moreover, The Confernece Board found that for almost three-quarters of senior marketers, a variety of channel options (omni-channel, self-service) is a way to serve customers in the future. Convenient channels will only increase in importance for customers, more so after the COVID-19 crisis.
“Offering a choice of communications and distribution channels can address this need,” experts said.
The Conference Board report can be found on this website.
On Tuesday, Digital Matrix Systems (DMS) enhanced its suite of solutions to assist finance companies to navigate through new mandates federal officials have put in place in response to COVID-19.
The company announced the availability of a new subset of its DMS Summary Attributes that have been tailored to help finance companies and other lenders respond effectively to consumer protections afforded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
DMS explained this set of tri-bureau attributes is available to leverage on both archived and production data.
The company recapped that the 2020 CARES Act provides consumers with loan modification options that lenders must address today and for the foreseeable future. DMS cautioned that a “one size fits all” approach offered by many scores or simply ignoring these modifications will not serve lenders or their customers well.
To help clients detect and monitor loan modifications effectively, DMS has identified six specific scenarios that are addressed by these new attributes and can provide professional services to help clients with the required analysis. They include:
• Deferred: Temporary delay to the start of payments, typically for new loans
• Forbearance: Temporary suspension of payments, with payments moved to the end of the loan
• Natural disaster: Consumer ability to pay impacted by a natural or declared disaster
• Loan modification: Change to existing loan terms such as length of time for repayment or loan type
• Payment plan: Agreed upon plan to pay outstanding debts within defined terms
• Inferred modification: Tradeline has a balance but no stated monthly payment amount
To help identify impacted loans and lines of credit, DMS went on to mention this specialized set of tri-bureau attributes addresses the number of tradelines with a modification applied, the sum of the balances of those tradelines and the corresponding monthly payments and the percentage of a consumer’s tradelines with modifications.
“As these adjustments are made to provide consumer relief, we caution lenders not to allow either their portfolio or their customers to fall victim to underestimated monthly debt,” DMS executive vice president David Graves said in a news release.
“Our team is eager to help companies support their customers with empathy during this challenging time, while still effectively mitigating risk so they remain profitable,” Graves went on to say.
On Monday, CDK Global announced the launch of Sign Anywhere, its new remote electronic signing solution.
And Volkswagen is among the first to offer Sign Anywhere at VW dealerships through its captive — VW Credit.
Through the innovative remote signing capabilities of Sign Anywhere, CDK Global highlighted that dealers can offer customers a secure, quick, and convenient way to electronically sign the majority of F&I forms needed to purchase a vehicle without having to be present at the dealership.
With Sign Anywhere, dealers also can receive funding in hours following a vehicle purchase.
The tool is a free addition to customers who have CDK eSign, according to a news release.
“CDK continues to invest in products that will help our customers accelerate their digital transformation as we prepare for a new automotive retail landscape,” CDK Global executive vice president and chief product and technology officer Mahesh Shah said.
“Dealers can count on Sign Anywhere to enhance customer experience and expand their digital capabilities beyond the showroom floor without sacrificing time or security,” Shah continued.
CDK Global explained Sign Anywhere houses a portfolio of F&I forms in one secure digital location for dealerships and customers. As part of the solution, dealers can load forms into a digital deal jacket (DDJ). Customers access the forms via multi-factor authentication and can electronically sign those documents at their convenience.
Once customers sign, the company said the dealership can securely proceed with the completion of the sale.
In addition to offering more convenience to customers, CDK Global asserted that Sign Anywhere also can shorten the time it takes compatible finance comapnies to fund completed vehicle purchases for dealers. What typically could take four to six days for lenders, now can be processed in 24 hours or less.
“At CDK, the success of our customers is what drives us, and we feel it is our responsibility to provide tools that will sustain their continued growth today and in the future,” CDK Global vice president of customer success Michael Seeman said.
“With Sign Anywhere, dealerships stand out from the competition with a new omnichannel approach that gives customers convenient options to experience the car-buying process as they choose,” Seeman went on to say.
And one of the earlier adopters of this tool is Volkswagen Group of America and its captive.
According to that same news release, VCI recapped that it immediately recognized Sign Anywhere as a “differentiator” and called on CDK to provide its dealers with the solution.
“VCI and VW not only want to provide world-class vehicles but also world-class car-buying experiences that match the evolving expectations of our customers,” VW Credit president and chief executive officer Anthony Bandmann said.
“Through a collaborative approach that focused first and foremost on the consumer, VCI and CDK worked together on equipping VW with a game-changing solution that is speeding up transactions for customers and providing a new avenue of cash flow for dealerships,” Bandmann added.
To date, CDK Global indicated Sign Anywhere is active in more than 400 VW dealerships and more than 3,600 dealerships across multiple OEMs. Sign Anywhere has also helped complete more than 8,000 vehicle purchases.
In the next six to 12 months, CDK said it intends to add additional captive and national financial institutions to the list of Sign Anywhere compatible finance companies.
Dealers can learn more about the remote signing capabilities of Sign Anywhere, the full eSign solution and the CDK Digital Contracting product portfolio by visiting cdkglobal.com.
Back in March when the coronavirus pandemic was beginning to intensify, Ally Financial rolled out a relief package for its consumer contract holders that included the option of deferring payments for as long as 120 days.
On Wednesday, Ally Financial unveiled a package of seven initiatives intended to help dealerships in their efforts to return to business safely as they sort through the impacts of COVID-19.
Ally’s suite of new offerings includes:
• A set of free, customizable templates for Facebook and Instagram posts, including artwork. The posts may evolve based on changing COVID-19 needs. Some topics for the posts include new-car buying, maintaining a clean dealership, caring for employees, thanking first responders and frontline workers. Additionally, Ally can review a dealer’s social media presence and make suggestions on how to better connect with customers through social properties.
• A turnkey email campaign template that dealers can use to reconnect with customers. Key messages could include dealership incentives, profiles of local volunteers and philanthropic efforts by the dealership, and sanitation protocols taken to keep customers safe.
• Using Ally social channels to highlight charitable dealership work to help drive customer engagement and raise awareness for local organizations.
• F&I product descriptions, videos and digital brochures to help dealers educate consumers during the online buying experience.
• A grand re-opening kit that includes a variety of items that help dealers let customers know the dealership is safely open for business. The kit would include items such as decals that help remind customers to stay six feet apart, signs about hand washing, sanitizing wipes for cars and desks, and individually wrapped pens for customers.
• Donations on behalf of dealerships to support local community food resources. The donation can be done in a lump sum to the charity, a virtual test drive format or tied to a food drive at the dealership.
• Free virtual classes for dealership employees focused on topics dealers are working through as they get back to work. About 400 people participated in recent, virtual expense management classes. Several auto and F&I sales and management classes are available.
“The pandemic has created significant complications for dealerships that the industry has never experienced before. Ally’s goal is to help dealerships drive customer engagement and increase traffic to their websites while also helping dealerships stay safe as they get back to work,” Ally chief marketing and public relations officer Andrea Brimmer said in a news release.
Ally indicated the social media programs and virtual classes are currently available to dealers. The other activities will be available in the coming weeks.
All dealers who work with Ally are eligible to participate in the activities. The company said dealers should contact their local account executive with questions.
“This packet of services provides grass-roots solutions that help dealers kickstart their businesses,” Brimmer said. “It’s part of our commitment to doing right by our dealer customers and remaining focused on helping them find ways to rise from the hardships facing the entire industry.”
Experian is ramping up its efforts to curtail synthetic identity fraud as well as other threats, with one solution designed for the company to have “skin in the game.”
To combat a growing threat that’s expected to drive $48 billion in annual online payment fraud losses by 2023 according to Juniper Research, Experian recently announced the launch of Sure Profile. Experian claims to be the first company with an offering to combat synthetic identity fraud that is integrated into the credit profile with “market-leading” assurance.
With Sure Profile, Experian said it is putting “skin in the game” by sharing fraud losses with the lender or finance company if the losses occur on assured profiles.
Sure Profile can validate consumer identities, detects profiles that have an increased risk for synthetic identity fraud and helps cover losses resulting from synthetic identity fraud for assured profiles.
Leveraging the capabilities of the Experian Ascend Identity Platform, Sure Profile utilizes Experian’s data assets and data quality to drive advanced analytics that set a higher level of protection for lenders and finance companies. Powered by newly developed machine learning and artificial intelligence models, Experian indicated Sure Profile can offer lenders and finance companies a streamlined approach to define and detect synthetic identities early in the originations process.
Experian’s Sure Profile can differentiate between real people and potentially risky applicants, so lenders and finance companies can confidently increase application approvals with less risk.
“Experian can confidently define and help detect synthetic fraud. That’s why we can help stop it,” said Craig Boundy, chief executive officer of Experian North America. “Experian stands behind our data with assurance given to our clients. It’s better for lenders and it’s better for consumers.”
Experian expects to authenticate most credit applications through Sure Profile. In the cases where the identity can’t be assured, the company will deliver additional fraud risk indicators, so that lenders can take the right next steps to verify the potential borrower’s identity and prevent fraud.
To date, Experian acknowledged that detecting synthetic identities has been a significant challenge for lenders and finance companies because there’s not an industry standard or a single definition that can be used to establish the legitimacy of an identity.
In addition, Experian pointed out that understanding the financial impact of synthetics has been difficult for lenders and finance companies as losses tied to synthetic identity fraud are typically categorized as defaults or “bad debt.”
Synthetic identity fraud is the fastest growing type of financial crime in the United States, accounting for 10%-15% of lender and finance company losses each year, according to McKinsey & Co.
Experian said its data also shows that 9% to 15% of credit card losses are due to synthetic fraud.
To create synthetic identities, Experian explained fraudsters use a combination of real and fake information, such as names and Social Security numbers, to create “Frankenstein IDs,” which are used to obtain credit. Synthetic identity fraudsters may also add the identities they create to an existing credit account as an authorized user. In either case, the identity is reported by the financial institution to credit reporting agencies, creating a new record associated with the fraudulent information.
Once established, Experian said the synthetic identity can be used to set up additional fraudulent accounts such as financing for vehicles.
Sure Profile complements Experian’s set of identity protection and fraud management capabilities that address fraud and identity challenges, including account openings, account takeovers, e-commerce fraud and more.
In 2018, Experian launched its free Child ID Scan service and designated Sept. 1 as Child Identity Theft Awareness Day.
In 2019, Experian pointed out it was also the only credit bureau named as one of the 10 participants in the initial rollout of the Social Security Administration’s new electronic Consent Based Social Security Number Verification (eCBSV) service.
For more information on Experian’s Sure Profile, visit https://www.experian.com/business-services/sure-credit-profile.
Experian releases new version of CrossCore
In other company news, Experian also conceded that the ability to recognize consumers confidently and safeguard their digital transactions is becoming increasingly challenging for businesses.
In addition, Experian noted fraud threats continue to rise across the globe as fraudsters take advantage of the COVID-19 global health crisis and rapidly shifting economic conditions.
To help with the ongoing situation, the company highlighted that Experian’s CrossCore combines risk-based authentication, identity proofing and fraud detection into a single cloud platform, which means businesses can more quickly respond to an ever-changing environment. And with flexible decisioning orchestration and advanced analytics, Experian said businesses can make real-time risk decisions throughout the customer lifecycle.
The newly released version of CrossCore can allow businesses to limit fraud losses and reduce unnecessary customer friction which can impact the bottom line.
“Now more than ever, businesses need to lean on capabilities and technology that will allow them to rapidly respond in these challenging times, increase identity confidence in every transaction, and provide a safe and convenient experience for customers,” said E.K. Koh, Experian’s senior vice president of global identity and fraud solutions. “This new CrossCore release enables businesses to easily leverage best-in-class, pre-integrated identity and fraud services through simple self-service.”
The company explained CrossCore combines advanced analytics with Experian’s rich data assets with identity insights and capabilities from its curated partner ecosystem. Businesses can connect any new or existing tools and systems in one place, whether it be Experian’s, their partners’ or their own.
With its built-in strategy design and enhanced workflow, fraud and compliance teams have more control to quickly adjust strategies based on evolving threats and business needs, which helps to improve efficiency and reduce operational costs.
Updates to the new version include the ability for clients to submit dynamic API request payloads, apply progressive risk assessments, apply parallel logic, enable self-service workflow configurations and provide an online business intelligence (BI) module to view transactional volume reports.
Experian thinks these updates will give CrossCore users a simpler way to manage complex orchestration; faster, more scalable performance nd key performance indicators in near real time, all while enabling a personalized and seamless experience for their true customers.
“Recent Aite Group research shows that many banks have seen digital channel usage increase 250% in the wake of the pandemic, so ensuring a seamless and safe customer experience is more important than ever,” said Julie Conroy, research director at Aite Group.
“Platforms such as CrossCore that can enable businesses to nimbly respond to changing patterns of customer behavior as well as rapidly evolving attack tactics are more important than ever, as financial services firms work to balance fraud mitigation with the customer experience,” Conroy continued.
To date, Experian said CrossCore is being used by more than 250 clients worldwide and offers technology and capabilities from multiple leading third-party partners. Experian offers identity verification capabilities specifically designed to deliver comprehensive online fraud management that can be deployed quickly so companies can identify fraudsters better and stop fraud attacks before they happen.
All fraud and identity services are available through the Experian CrossCore platform.
RouteOne recognizes fewer deliveries are happening at dealerships, while paper is being used in less quantities, too.
To enhance the eContracting process for dealers, finance sources and their customers, RouteOne on Tuesday announced the launch of eSign Anything.
RouteOne’s eSign Anything can allow dealers to electronically send all eSignable deal documents through RouteOne’s secure signing portal to a customer and capture signatures in one signing ceremony; either remotely or in-store.
RouteOne explained that eSign Anything is possible with its latest enhancement to the eContracting workflow, which can allow dealers to upload additional deal documents and easily apply signature fields to those documents. These documents are then integrated with RouteOne generated eDocs, including the retail installment contract or lease agreement, in one eSigning process for a complete eContracting package and a better, more secure, and fully compliant customer experience.
The company reiterated that more dealers and consumers are seeking a flexible, paperless contracting process to enable low-contact sales processes with consumers. RouteOne’s eSign Anything is a secure signing method, which is designed to meet the compliance and security requirements for participating finance sources. The tool also can allow consumers to eSign all deal documents, including:
— RouteOne-generated credit applications
— RouteOne-generated e-contracts
— RouteOne and MaximTrak-generated aftermarket product forms
— Dealer-uploaded documents (originated outside of the RouteOne platform)
RouteOne’s newest feature — the ability to eSign dealer-uploaded documents — is available immediately to all RouteOne eContracting dealers. Dealers can include these documents in a single, remote eSigning session.
RouteOne has waived fees until Sept. 1 for remote eSigning.
“Creating a streamlined customer experience, that accommodates dealer choice of processes, and meets finance sources compliance requirements, has always been the RouteOne vision,” RouteOne senior vice president of product solutions and marketing Amanda George said in a news release.
“For some time, RouteOne has built a foundation and executed on delivering tools to enable our any time, any place, any device methodology for dealers. Now through those long-standing, trusted, and secure processes dealers can deliver anything to customers for eSigning,” George continued.
Dealers or finance sources interested in eContracting can contact RouteOne at 866.768.8301 or www.routeone.com.
The COVID-19 pandemic and government measures to slow its spread are altering the way Americans bank, pay and shop on an unprecedented scale and with rapid speed, according to a survey recently released by financial services technology provider FIS.
J.D. Power pointed out that banks have been confronting a difficult paradox for the last several years. According to the J.D. Power 2020 U.S. Retail Banking Satisfaction Study, the most satisfied retail banking customers use both branch and digital services to conduct their personal banking, while the least satisfied are those who have a digital-only relationship with their bank and do not use branches.
But like so many businesses, the pandemic is forcing significant changes.
FIS surveyed more than 1,000 American consumers about the ways they are paying and banking amid social distancing and stay-at-home actions taken across the U.S. since the COVID-19 outbreak. The findings indicated that the pandemic has accelerated the digital transformation of banking and commerce, and that these adjustments likely will not be temporary but rather mark a new normal in consumer behavior in a post COVID-19 marketplace.
More than 45% of banked respondents stated they have changed how they interact with their bank since the outbreak of the pandemic. FIS explained these findings were true across all generations surveyed, with 46% of Baby Boomers, 39% of Gen Xers and 35% of millennials saying they are using new channels such as online and mobile to do their banking.
The FIS survey also found that consumers are flocking to mobile wallets and contactless payment methods to avoid the exchange of paper money or checks during the current pandemic. FIS mentioned 45% of survey respondents said they are using a mobile wallet of some type and 16% indicated they are now using paper-based currency less than before the pandemic.
Additionally, the survey showed 31% of respondents said they would use contactless or mobile wallet payments instead of cash and checks in the aftermath of COVID-19.
Other notable survey findings that FIS shared:
— Forty percent of survey respondents said they will shop online more in the future than in store
— Thirty-eight percent said they will rely on food delivery services and take-out more often than they did before the pandemic
— Sixty-five percent of respondents cannot meet financial obligations for longer than six months, notably 74% of millennials and 76% of Gen Xers say they do not have enough savings to last longer than six months
“The impact of COVID-19 has rapidly accelerated trends that we have been seeing for years in terms of banking and digital payments,” said Mladen Vladic, general manager of loyalty at FIS. “Once consumers begin using convenient new digital services, few tend to go back to their old habits, so we expect this to be the new normal going forward.
“We are now further along on our path towards becoming a cashless society in the U.S., and perhaps looking at the end of the paper check altogether,” Vladic continued in a news release. “These findings should be a wake-up call for organizations about the importance of taking a digital-first approach. Now is the time for banks and merchants to be reassessing customer experiences.”
FIS will be hosting a webinar to share further insights on the survey findings on June 24. Registration for the webinar can be completed on this website.
More details of J.D. Power banking survey
Officials released the J.D. Power 2020 U.S. Retail Banking Satisfaction Study before FIS’ survey results.
As the COVID-19 pandemic places constraints on in-person retail banking and forces customers to increase reliance on digital service channels, J.D. Power stressed that banks are facing an important test.
According to J.D. Power’s annual survey, 52% of retail bank customers classified as branch dependent before the COVID-19 pandemic. J.D. Power stressed that successfully transitioning these individuals to digital — without compromising customer experience — will be critical in the weeks and months ahead.
“With fewer customers visiting branches, it will be important for retail banks to replace the in-person service they would have provided with personalized services delivered instead through digital channels,” J.D. Power senior director of banking intelligence Paul McAdam said in a news release. “Given the technology available to banks, customer pain points with digital should be easy to address.
“Let’s keep in mind that digital retail banking was introduced 25 years ago,” McAdam continued. “Executing basic user-friendly functionality, providing a full range of services and offering easy ways to pay and move money are areas where banks could improve their digital offerings.”
McAdam went on to mention four other findings of the 2020 study, including:
— Pre-pandemic, branches still played major role: Prior to the COVID-19 pandemic, 52% of retail bank customers were classified as branch dependent, meaning they either used the branch exclusively (10% of customers) or used a combination of branch visits, online and mobile banking service (42% of customers) during the past three months. Branch-dependent customers visit a branch an average of 1.5 times per month. Following 25 years of bank investment in providing and upgrading digital offerings and customers’ increased adoption of them, 30% of bank customers now do their banking in a digital-only manner and do not use branches.
— Digital-only customers have lowest levels of satisfaction: Overall customer satisfaction with retail banks tends to decline as customers transition away from the branch and to digital-only banking relationships. The overall satisfaction score among branch-dependent bank customers is 824 (on a 1,000-point scale), which is 23 points higher than the score among digital-only customers. That satisfaction gap is widest (31 points) among members of Generation Y.
— Big banks lead midsize and regional banks on digital engagement: What J.D. Power calls the Big 62 banks currently have a jump on regional and midsize banks to build digital engagement. Prior to the pandemic, 49% of big bank customers had high levels of digital engagement, compared with 41% of regional bank customers and 36% of midsize bank customers.
— Person-to-person payment integration emerges as wild card for bank customer satisfaction: Satisfaction is significantly higher among customers who have linked their bank accounts to digital payment services (such as Zelle, Apple Pay, PayPal, Venmo) than among those who have not. Among person-to-person payment providers, direct integration with Zelle generates the highest boost in bank customer satisfaction.
The J.D. Power study measures customer satisfaction with banks in 11 geographic regions. Highest-ranking banks and scores, by region, are as follows:
California Region: Chase (825)
Florida Region: Chase (851)
Mid-Atlantic Region: S&T Bank (871)
Midwest Region: First National Bank of Omaha (847)
New England Region: Bangor Savings Bank (863)
North Central Region: City National Bank (WV) (857)
Northwest Region: Columbia Bank (837)
South Central Region: Arvest Bank (863)
Southeast Region: United Community Bank (862)
Southwest Region: Arvest Bank (851)
Texas Region: Frost Bank (863)
The U.S. Retail Banking Satisfaction Study, now in its 15th year, measures satisfaction in six factors (listed in alphabetical order): account opening; communication and advice; channel activities; convenience; problem resolution; and products and fees. Channel activities include seven subfactors (listed in alphabetical order): ATM; assisted online; branch; call center; IVR; mobile; and website.
The study is based on responses from 91,950 retail banking customers of 182 of the largest banks in the United States regarding their experiences with their retail bank. It was fielded from April of last year through February.
J.D. Power explained big banks are defined as banks with more than $250 billion in domestic deposits. Regional banks are institutions with $55 billion-$250 billion in domestic deposits, and midsize banks are organizations with less than $55 billion in domestic deposits.
Even before COVID-19, auto-finance companies were on the on-ramp to change. An increased focus on the customer, new modes of engagement and preparation for a slowdown were driving digital transformation in their operations and offerings. COVID-19 will not throw this transition into reverse, but instead accelerate it.
Now, auto-finance companies must harness the digital and analytical capabilities they were already developing and put them to work in two new ways. First, to address the current crisis. And second, as part of a longer-term customer- and asset-focused strategy reset.
To achieve this, auto financiers will need to take five concrete steps, including:
1. Develop digital-first debt management capabilities
Auto collections volumes are on the rise. As customer income continues to fall, auto financiers will face an even higher volume of complex collections. And, due to social distancing measures and health issues, fewer collections agents will be available to manage the influx. The solution? Augmenting the human-driven approach to collections with automated and omni-channel customer engagement strategies.
Fortunately, the “stay at home” strategy for dealing with coronavirus has forced digital to become the standard and primary means of communication. Financiers should use this digital goodwill to improve their collections efforts. To manage increased workload from customer calls and delinquencies, which may be delayed due to payment deferrals and loan extensions, auto financiers will need to consider solutions like interactive voice messaging, backed by conversational artificial intelligence (AI) with integrated speech analytics.
What’s more, financiers that develop a quick, accurate, and sensitive digital collections experience will promote more collaborative interactions, increase their chances of being at the top of customers’ wallets, and prevent customers from taking their business to savvier providers.
For example, instead of all delinquent customers receiving a barrage of automated payment reminders, they should receive more pointed, personalized messaging and personally relevant restructuring plans. This type of intelligent targeting is enabled by a deeper understanding of both the organization’s changed debt servicing capacity and the customer’s preference of interactive channel.
A digital-first collections strategy has three further benefits for auto finance companies. First, by enabling them to engage customers early and empathetically, it will help them stay on the right side of consumer-protection bodies looking to ensure that consumers are treated fairly. Second, it will free up agents from more mundane calling activities so they can take on more targeted and nuanced customer interactions. And third, it will deliver huge cost savings to lenders and improve their ability to handle fluctuations in collections volumes, both now and in the future.
2. Enhance risk-based segmentation with data analytics
To emerge from this crisis with reputation and finances intact, auto lenders need to understand two things better: their customer and the macroeconomic conditions. Data — both internal and external — becomes very important in this respect. The world is upside-down: traditional internal data that helped indicate when to collect, how, and from whom, may still be useful — but financiers need to capture and act upon it with more immediacy. Similarly, external data assumes a more significant role in helping to identify new sources of risk. As a result, financiers must now use advanced data analytics to:
• Capture new data: In light of the crisis, new external data sources (such as customer zip codes, geo-economic data, and event-based triggers from credit risk bureaus) have suddenly become more important than traditional, internal, historical payment-cycle data. Finding innovative ways to capture this data will enable auto financiers to conduct what-if scenario modelling as the situation evolves.
• Regularly revise data sources: Data sources must be routinely updated. For example, credit scores captured at the time of auto-loan origination could be a couple of years old and may no longer be a true indicator of a customer’s current credit worthiness. Likewise, data that is useful now may not be in a few months’ time.
• Use synthetic data and theoretical models: Because this is a completely new scenario, auto financiers will have to feed and train models with synthetic or proxy data, or build new theoretical models to help them understand, explain, and predict credit risk and devise appropriate customer segmentation and treatment strategies.
3. Improve customer retention
If auto financiers do not make changes to their offerings and operations, they will not only see a rapid increase in delinquencies, but also a loss of customers.
To improve customer retention, they will need to reshape a range of finance options. For example, some financiers are giving new borrowers the option to defer their first payment by 90 days or existing customers the ability to defer payment for up to 120 days without any late fee.
But it doesn’t end there. Auto financiers need to use predictive analytics to proactively identify and support customers with latent risk of delinquency. This means targeting ‘at risk’ customers early and often with personalized, flexible offers, such as restructured loans, trade-ins, and extended terms. For example, Hyundai and Genesis are offering up to six months of payment relief for owners who lose their jobs.
Financiers will also need to use deep data analytics and build and use digital channels to present these new finance options to customers– for example, a self-service portal that allows customers to rework their terms based on their financial situations and choose their own path to resolution.
4. Roll out new repossession and return strategies
No matter what auto financiers do, many customers will still not be in the position to meet their auto-loan repayments. And in some cases, the relief available will not be enough for them to hold onto their vehicles. Auto financiers will need to brace themselves for much higher rates of repossession and return. But this does not have to be painful.
Auto financiers can implement strategies that will help to reduce repossession in the first place. For example, in addition to developing agile resolution strategies, they can also digitally enable downgrades.
In the past, car-swaps were generally associated with customers looking to upgrade vehicles. Now, due to the financial hardships auto customers are facing, they will also be looking to swap their cars and downgrade in order to reduce their monthly payments. Auto lenders need to provide options to customers to swap vehicles based on their affordability. For example, financiers can roll out and promote affordability calculators to help customers downgrade to a less expensive car to reduce the need for repossession. While this may increase inventory of more expensive vehicles in the short- to mid-term, it will also drive customer retention and help maintain cash flow.
Even with these strategies, a high number of cars may still come back to the market quickly – whether through repossession or return – which will increase pressure on lease residual values, widening the gap between the realizable value of the car and the loan value. Therefore, lenders will need to build intelligent models, feed them with data (such as contact history and external payment history), and use deep data analytics to obtain insights on the asset value and the right time to repossess cars.
5. Remarket more efficiently
As more customers will be returning their cars, and financiers will be repossessing still more vehicles, inventories of used cars are likely to explode. To maximize profitability, these cars cannot sit in the parking lot indefinitely.
To reduce the time from return or repossession to resale, auto financiers can take four steps:
• Use touchless, self-serve inspection solutions: As social distancing remains in effect, customers will be reluctant to bring their vehicles into the dealer for end-of-lease inspections. And there may not be enough staff to perform this service in any case. Remote inspection capabilities will be crucial during, and directly after, the pandemic. And, in the long term, these capabilities will drive cost efficacy for the auto financier.
• Better predict residual values: Using predictive analytics, auto financiers can better predict residual values based on current market conditions.
• Restructure used-car loans: With a rise in hardships, demand for used cars will increase. Financiers need to shift their focus from term-wise management of loans to innovative ways of structuring loans so that customers can buy these used cars in the first place.
• Improve marketing platforms for second-hand vehicles: Existing marketing platforms for used vehicles can be time-consuming to use and opaque in their pricing, and they are not well-trusted by consumers.
By focusing on the whole remarketing journey and using digital and analytical technologies to make it seamless from end-to-end, auto companies can keep inventories of used cars moving, which will help maintain healthy portfolios despite low sales and high returns.
It’s time to hit the gas
People will always need mobility solutions, but the auto-finance industry won’t go back to where it was before. COVID-19 has radically changed its short-term outlook. And rapid action is required to control the immediate risks and ensure long-term success.
The digital and analytical solutions auto finance companies put in place today will serve them well during the pandemic by easing financial pressure on customers and reducing repossessed inventory. They will also enhance loyalty and maximize customer lifetime value, helping to usher in a new era of better customer and asset-focused finance.
The sector was already moving in this direction, but now it’s time to hit the gas.
Rohan de Souza is the global auto finance leader for Genpact. In his role he is responsible for the growth strategy across auto finance clients which encompasses developing disruptive transformation solutions spanning digital, data science and engineering, intelligent operations and the execution of these solutions to deliver business outcomes for the portfolio. Rohan brings extensive financial services expertise having spent over 20 years in the industry. He has deep domain experience across leasing & lending having held leadership positions in operations, business transformation / Lean Six Sigma, human resources and client management in his 19-year career with Genpact. Based in London since 2009 when he relocated from the U.S., he has experience delivering transformation for clients across Europe, North America, Australia & Asia.
