WORDS ON WEALTH
Last week I wrote about disruption in the banking industry and how our “Big Four” traditional banks (Absa, FNB, Nedbank and Standard) have struggled to keep pace with the innovations introduced by the newer, digitally-driven banks, beginning with Capitec in the early-2000s.
Don’t get me wrong: technological progress and digitisation has transformed the entire banking industry over the last 30 or so years. For a large part of my life, I settled my monthly bills by writing out cheques and posting them to my creditors. The ritual involved having a steady supply of stamps and envelopes and expending copious amounts of saliva to append the stamps and seal the envelopes.
A downside of this new era of banking has been the depersonalisation of the customer. Because the bulk of one’s transactions can be done online or through an app, face-to-face contact with banking staff has declined dramatically, and branches have become more and more redundant. Justifiably, banks have been closing and downgrading their branches and, more frustratingly, decoupling customers from their branches through the use of centralised call centres.
Unfortunately, this depersonalisation has been accompanied by a massive upswing in banking fraud. Fraudsters have found ways to fool banks into processing a transaction supposedly done by you when it was, in fact, done by the fraudster impersonating you.
So how does the bank distinguish between a genuine customer and a fraudster?
Verifying your identity requires a fine balancing act: the bank needs to inconvenience you to some degree in order to establish that you are you. But the inconvenience should not be sufficient enough to seriously jeopardise the bank-customer relationship.
What terrifies banks more than you, their customer, losing money through fraud, is being found liable of having to compensate you for the fraud. I believe this has skewed the balancing act towards over-inconveniencing you, especially if the verification process goes wrong.
Last week, my experience with my bank caused me to seriously consider moving my current account (which I have held for about 32 years) to another bank. I was initially going to name and shame the institution, but I now realise my experience may have been similar at some of the other banks.
My requirement was a simple one: I had been existing for a while just using a debit card, and wanted to order a cheque card, which has the functionality of a credit card. The bank’s app and online banking site did not let me order the card electronically, so (in trepidation, for I knew what to expect) I phoned the bank’s call centre.
From what I can gather from my subsequent enquiries, and certainly from my own experience, is that the following method of establishing your identity is widely used by the banks. The call centre agent (who has no more interest in you than in a bar of soap) asks you a set of questions to which only you would know the answer. But these aren’t personal questions, such as asking your mother’s maiden name, colour of your eyes or place of birth; they are financially-related questions, such as whether you have a Foschini clothing account, a bond on a house, or own a property in Pofadder.
It appears that banks pay service providers connected with the credit industry millions of rands a year to generate lists of random questions with which call-centre agents interrogate bank customers.
Furthermore, some of the questions are “trick” questions that require a “no” answer, such as “Do you own a property in Pofadder?” (unless you really do own a property in Pofadder).
Well, I failed the test. Not once, but twice. The call-centre agent informed me that I had answered some questions wrongly and could not indicate how many or which questions they were. There was no option but to go to a branch.
This was infuriating, not only because I now had to queue for what could be hours at a physical bank ‒ with Covid restrictions the queues at my bank’s few surviving branches are horrendous ‒ but because I now knew that my bank had incorrect information on me. Unless I could somehow correct that misinformation, my days of phoning my bank (if a remote, “couldn’t-care-less” call centre could be defined as such) were over.
To cut a long story short, I eventually got my card. But I couldn’t help thinking that there must be an easier, more customer-friendly way of verifying identity.
When I made some enquiries, three of the five banks I contacted were very cagey or refused outright to give me any information. They seemed petrified that the fraudsters themselves would read this article and glean insights that would help them in their criminal activities.
The only bank that was forthcoming with a sensible reply was Nedbank. With potential fraudsters in mind, I will just say that Nedbank employs two relatively straightforward and painless means of identifying you, one of which involves biometrics. Only where these methods fail or are inappropriate does it resort to questions “derived from an authentication question matrix”.
It’s the little things that blow up into big things that cause people to vote with their feet. To me the solution is simple: if you prioritise getting to know your customer better through building a strong personal relationship with him or her, the fraud problem (and other risks) will go away.