Financial Institutions & Wealth Managers

A Simple Way Financial Institutions Can Protect Their Most Valuable and Vulnerable Customers from Fraud

Cameron Huddleston
Cameron Huddleston
January 29, 2024
A Simple Way Financial Institutions Can Protect Their Most Valuable and Vulnerable Customers from Fraud

Financial institutions’ most valuable customers are also their most vulnerable.

Americans age 60 and older hold the bulk of bank deposits in the U.S., according to the American Bankers Association. Yet, they and their hard-earned savings face an outsized threat. AARP estimates that this age group loses $28 billion annually to financial exploitation and fraud. 

It’s no secret that fighting fraud is a challenge for financial institutions, as bad actors have gotten increasingly sophisticated. This sophistication means that the organizations stopping fraud need to catch up. Simply confirming identity won’t do it in today’s world of fraud. “Fraudsters are manipulating and coercing customers into making payments to them, bypassing bank controls,” according to KPMG’s Global Banking Fraud Survey. To succeed in today’s world, fraud protections need to be just as focused on the behaviors and intent of their customers. 

That’s why the key to fraud prevention and detection requires a layered approach that begins with the customer. With the right financial safety platform, this is possible.

Why older adults are at a greater risk

A combination of factors puts older adults at greater risk of exploitation. Scammers target older adults, in particular, because they assume that older adults are flush with cash from a pension, retirement savings or other assets. Scammers also consider older adults easy prey because they think they are vulnerable, are trusting and won’t report that they are victims.

Not all older adults are such easy prey. However, many are because isolation, health issues or cognitive decline has, indeed, made them vulnerable. What puts them at even greater danger of exploitation is believing that they aren’t vulnerable. “If you think it won’t happen to you, you’re already at risk,” says Dr. Nathan Spreng, professor of neurology and neurosurgery at McGill University and expert on aging and exploitation.

Risk is compounded by a lack of oversight. A survey by Cornerstone Advisors found that 87% of seniors manually check their accounts for suspicious activity without additional oversight by adult children or other trusted individuals. “This confidence—or possibly overconfidence—is what fraudsters want to see,” according to Cornerstone Advisors’ Aging and Banking report. When an intended target thinks they have all their financial bases covered, a fraudster can capitalize on this confidence given there are no additional ‘eyes’ monitoring what is happening.”

A layered approach is needed to reduce risk

A one-size-fits-all approach to fraud prevention and detection isn’t effective when fraudsters can exploit the weakest link in the system—the customer. That’s why protecting the most vulnerable customers, who also happen to be the most valuable, requires a layered approach that is more than just focusing on identity.

Smart account activity alerts: Account alerts that customers can activate to receive notifications when there is activity on their accounts don’t go far enough to alert them to fraud. What’s needed is real-time monitoring combined with machine-learning behavioral analytics to evaluate patterns and detect changes in transactional behavior. This sort of smart money monitoring will catch and alert customers to a much broader range of unusual activity and signs of fraud.

A second set of eyes: Older customers, in particular, would benefit from enabling adult children or other trusted family members to receive account activity alerts or to even have view-only access to their accounts. This is especially valuable for seniors who don’t recognize the signs of fraud, authorize transfer of funds when being exploited by scammers or don’t know what steps to take if fraud is spotted in their accounts. Having that second set of eyes from an adult child who can quickly intervene when threats are identified can limit fraud.

Education: Activity alerts and a second set of eyes are key for fraud detection. However, more needs to be done to educate customers to prevent them from falling prey to fraud and scams. “Financial institutions should critically engage and educate account holders, who are often the best line of defense for their own money,” according to the BAI Banking Strategies Safeguarding Against Fraud 2024 report.

A simple solution

More than half of financial institutions surveyed by Alloy allocated funds in 2023 to external resources to combat fraud, up from 40% in 2023. That trend is likely to continue as financial institutions look for more agile solutions to fraud prevention and detection.

One such cost-efficient solution that provides the layered approach that financial institutions need to protect their most vulnerable customers is Carefull, which was built specifically to recognize senior-specific risks. Carefull uses advanced technology to monitor accounts to determine what is normal for account holders and detects changes in transactional behavior to alert them to unusual activity, signs of fraud, the latest scams and misuse of their personal information. 

For example, Carefull recently helped a customer at one of its bank partners—The Cooperative Bank (TCB) in Boston—identify fraudulent checks, including one written for $40,000. Then, a Carefull Care Agent walked the customer through steps to take to avoid future check fraud. The American Bankers Association Foundation recently named TCB a 2023 Community Commitment Award winner for protecting its older customers with Carefull.

Carefull’s comprehensive platform also includes a Trusted Contacts system that allows older adults to give trusted family members view-only access to accounts and alerts so that they can get involved, if necessary. It offers education through timely articles and Scam Alerts written by Carefull’s team of financial experts. This is all provided to users in their Carefull dashboard, weekly activity summary email, monthly newsletters and co-branded microsites built for FI partners. And it rolls in credit, identity and home title monitoring to provide comprehensive fraud prevention and detection—all backed by $1 million in identity theft insurance.

A win for customers and FIs

Taking a proactive approach to fraud prevention should be a priority, considering that financial crime and fraud are projected to cost banks and financial institutions around the world $40.6 billion by 2027, according to an ACI Worldwide report

More importantly, it’s what customers want. When asked in a survey by BAI for the top ways banks and credit unions can help them manage their money more effectively, consumers said better fraud and identity theft protection was their No. 1 priority.

By providing Carefull’s comprehensive financial safety platform, financial institutions can give vulnerable older customers the protection they need. That, in turn, will bolster customers’ trust and commitment and drive referrals. Plus, Carefull’s Trusted Contacts feature offers an unparalleled opportunity to connect with and win over the next generation. It’s a win for customers and financial institutions.

To learn more about how Carefull can help your financial institution protect older customers against fraud, get in touch with our team.

Cameron Huddleston

Cameron Huddleston

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