There are two numbers that every credit union and member should know:
Those numbers correspond to the cost of fraud every year. It costs consumers $4b in consumer identity protection products (such as LifeLock). It costs institutions $40b to cover the cost of that fraud—and that doesn’t include additional heavy spending for cybersecurity.
These numbers are big, and they show just why digital ID and digital ID protection are necessary in 2020 and beyond.
Member Confidence and Experience
Money isn’t the only driving factor in this discussion (nor should it be). Improving the member experience, providing utility, and granting agency and peace of mind are critical… especially in an age when more and more people are adopting digital banking—and demanding a more frictionless experience.
Requiring branch visits to open accounts is losing you members. Offering subpar digital banking frustrates your members. Increasing member risk of fraud is eroding their confidence.
So, the question is, if you can reduce the risk of fraud at your credit union, are you thinking about your member’s financial health or your own?
And if you can reduce the risk of fraud, should you?
Improving Digital ID Security
There are a few ways of reducing fraud at your credit union. And increased cybersecurity doesn’t count, because fraud comes from all over the place—online retailers, other financial institutions, credit reporting agencies, e.g.
The first way to reduce fraud is to join a growing ecosystem of ultra-secure digital ID. If members have a nearly-unhackable digital ID that they own (meaning it’s not controlled by an institution), they can provide credentials that hackers couldn’t. And if that digital ID gained acceptance at other institutions and retailers, it would go a long way toward preventing fraud.
A global consortium including IBM, the Linux Foundation, MasterCard, and CULedger are working to solve this exact problem. Not only does this approach drastically reduce individual fraud—it also means that institutions and retailers would retain less PII, making them less of a target for fraudsters.
(If you haven’t read that blog above, it’s worth your time!)
Preventing Fraud After a Breach
The unfortunate reality is that data breaches continue to occur, even though activity has calmed somewhat in mid 2020. Even with secure digital ID, there’s no way to eliminate fraud risk when so many institutions and retailers are still vulnerable to breaches.
Personal (and financial) information will still be compromised.
And if $4b is spent annually on products like LifeLock, you know there’s a demand for post-breach fraud protection. But most traditional tools don’t actually prevent fraud—they just help people recover from it. For example, free credit reports help people see when bad activity is happening on their accounts. But credit reporting doesn’t stop that activity. Consumers must work with their financial institutions to resolve the issue.
But imagine if they were alerted whenever they were affected by a data breach—and then given clear, step-by-step instructions about how to prevent anyone from using that information. That would save consumers countless headaches…
And it would save financial institutions up to $40b annually.
Breach Clarity has developed a system to handle this task. Right on their front page, they feature a free, limited version of their full service:
It’s like a search bar for data breaches. Type in the name of an institution, see their breach history, and receive consumer-specific recommendations for how to protect yourself if you’ve been affected.
With the rapid transition toward digital banking in 2020, we’ve had our eye on the issue of digital ID for a while. The above are two ways that credit unions can get involved in digital ID and ID protection ASAP.
You can join CULedger’s MemberPass™ Digital Trust Network to get the ball rolling on secure digital ID.
Or you can give members an alert when their information is compromised—and a detailed plan to protect themselves thereafter.
Or of course, you could do both…