“Get big, fast.”

“Move fast and break things.” 

“Ask forgiveness, not permission.”

That’s what fast growth looks like to a lot of companies. As TechCrunch puts it: “[They] are moving at a break-neck speed… And if it grows at the speed of a top-tier rapid-growth company, well, you will have enough money and lawyers to figure it out later.” TC was referring to early-stage startups, but the same holds true for rapidly growing companies as well - if not more so.

Except, it’s not the same for financial companies, is it?

When I first joined PayPal, many of the product teams completely avoided speaking to the risk teams. Risk were considered the “Naysayers” who would kill your initiative if they could. What we were able to do over the following years was to engage and share with these teams how the risk team’s capabilities can actually allow them to build delightful user experiences that they wouldn’t even have dreamed possible. Fraud management at a high-growth company can be an enabler and not a detractor. I know it, because I’ve seen it first-hand. But not everyone believes it - and I understand the pressures that make them feel that way. 

For Consumer Financial Companies, Pressure Comes From All Around

Consumer financial companies face all the same pressures as other high growth companies. Growth is critical, competition is rife, and consumer expectations are sky high. Every department has to support the overall company goals and growth aspirations. Seamless, delightful experience is (almost) everything.

The “almost” is what sets consumer finance apart from other high growth companies. Because at the same time as all those consumer and rapid growth challenges, they also have to meet requirements  from regulators, privacy legislation and the complex framework of the financial ecosystem. 

Even more pressingly, consumer expectations push in both directions. While customers expect your service to be frictionless, they also expect you to protect them and their money. The burden of trust, which is borne by all online businesses, is exceptionally heavy for consumer financial businesses. If customers don’t trust you, they won’t want you anywhere near their money, bank accounts or credit. 

Consumer financial companies are often caught between the rock of fast, frictionless growth and the hard place of gaining consumer trust. These can seem impossible to reconcile - but in fact, with the right mindset, the dynamic tension between the two priorities can represent a great opportunity for both the company and its customers.  

Interestingly, adding friction at the right place and time may lead to greater consumer satisfaction, if they feel it was done to protect their interest. This is especially easy to see in the context of fraud fighting, which can be either a point of particular tension between growth and responsibility, or a vital part of company success and growth.

Fraud: The Ultimate Litmus Test

If the challenge consumer financial companies face is juggling the fact that consumers want both seamless online experience and a robust, secure financial service, then fraud prevention is the clear point of tension where all these pressures meet. 

Fraud prevention naturally forms part of the effort to ensure a secure financial ecosystem. The point is to prevent bad actors from carrying out theft, and to protect consumers’ financials and accounts from exploitation by these bad actors. 

At the same time, though, today’s fraud departments are judged just as much on how well they reduce friction for consumers, both in the sense of avoiding false declines, and in the sense of avoiding putting customers through hoops to prove who they are. The company’s fraud prevention efforts, more than any other, encapsulate the urgency of the problem. Get it right, and customers will love you for it. Get it wrong, and they’ll never come back. 

This isn’t just a problem for the fraud department; multiple stakeholders, from marketing to product, and payments to customer experience, all care. The way fraud prevention plays out in the organization impacts all of their metrics just as much. So how do you find the right balance between frictionless experience and powerful protection?

Consider Some Friction

Friction and protection seem to be diametrically opposed. That’s where the problem comes from. But are they? Not necessarily. Consumers expect fast, efficient service. They don’t want to fill in five CAPTCHAs on the same site. But not all verification steps are created equal. It’s all about context. 

According to a 2021 study, 71% of people now cite security as the most important factor when opening a new account. 64% of participants say that security is more important to them when opening accounts with new providers than it was in 2020. In addition, 49% of consumers report that transparency around the collection and use of their personal data is now more important.

Consumers don’t want unnecessary, extra friction cluttering up their paths. But tactful checks that they can see are to protect them, their data, and their accounts? That’s not friction, that’s a reassuring sign that your company has their best interests at heart. It’s trust-affirming action. 

Let’s Talk About Trust

The difference between friction and trust-affirming action is based in, well, trust. Friction breaks trust - it suggests to a customer that you don’t know them, are unable to tell whether they are trustworthy or not, and makes them suspicious of whether you’re able to deliver the kind of service they expect. Trust-affirming actions, on the other hand, leave the consumer feeling protected and secure. More likely to become a loyal customer.

So how do you make sure you’re avoiding friction, and only presenting the customer with trust-affirming actions to complete? There are two components. 

Only Validate Where You Must

Your customers need to feel that you’re only checking in when it’s justified. Verification when they know they’re logging in while travelling, from a country they’ve not visited before with that device, is the kind of step they’ll appreciate rather than resent. Similarly, customers using new devices will be comfortable verifying their new device when they use it for the first time. 

(Of course, if you’re part of an anonymous network of many companies, the customer only needs to verify their new device or IP a few times to have it accepted, known and trusted by the entire network, resulting in no further friction after that… But l won’t get distracted and talk about Identiq.)

Even better yet, being transparent about your decisions may help customers feel well protected. “We’ve noticed you are travelling, but were able to identify you are using a trusted device” is a simple message that could go a long way when it comes to building trust and wowing the customers with how well you know and protect them.

This kind of mentality also helps the teams who touch fraud prevention efforts, whether payments, fraud, risk or customer experience, to measure how necessary friction appears to be in any given situation. If the customer would have absolutely no idea what your problem is with it, do you really need friction at all? Or should you be looking for invisible ways to check identities instead? (No, I’m not going to talk about Identiq’s invisible identity validation here either. I promised not to get distracted.)

Go Company-Wide

In the same way that fraud prevention is a kind of litmus test for whether you’re getting the balance right between security and seamless experience in your company, when you are getting it right, it isn’t just about fraud. 

Being trust-focused is an entire company effort. It’s in the language your marketing team uses, the features your product team rolls out and the way your customer success team describes them when talking to customers. It’s in the messages your payments team consider at checkout. It’s everywhere. 

The teams who think about fraud - whether fraud departments themselves, or risk more broadly, or payments or even product and customer experience - have the opportunity to guide the company in this trust-focused, and trustworthy, direction. Done right, it can lead to the kind of consistent, seamless experience that leaves customers feeling special and appreciated by your business.

It’s not easy, and it requires deep levels of internal collaboration. But the results for the company and your customers makes it worthwhile. 

When working at PayPal I would frequently tell my team - “Anyone can move money from point A to point B. This is not the hard part. Our job is to inject Trust into the system of moving money so that users will be happy to do this with us.” 

I learned so much from my time at PayPal about the challenges of fighting fraud in a high growth consumer-facing financial company. I’d love to continue the discussion with you at our roundtable on Scaling Fraud Teams Fast. 

Want to join me there? Click here. 

Uri Arad, Identiq’s VP Product, has been fighting fraud and fraudsters for more than a decade and has seen the fraud and identity challenge from diverse perspectives: product, risk, and R&D. Before he co-founded Identiq to create the solution he’d been dreaming of for years, he was the Head of Analytics and Research at PayPal’s risk department. He has tremendous experience building cross-functional teams which use the latest technological developments to create innovative products that both reduce loss and improve customer experience. Uri's expertise extends both to analyzing and meeting business needs and to an in-depth understanding of the technology that makes improvement possible.