bond between bank and customer can be irreparably damaged when
fraud occurs. A new study from Deloitte reveals just how much
damage can be done when a customer is the victim of fraud, and what
banks can do to minimise the risk. Charles Davis
The most recent news on the card fraud front in the United States –
breathless live coverage of the Department of Justice charging a
dozen people with stealing more than 40 million credit and debit
card numbers from US retailers – does precious little to restore
faith in the security of the payments system.
A report by global consultancy Deloitte underscores just how
devastating an event like this can be, and how it affects the
relationship between the card issuer and customer.
The new report, Building Consumer Trust in Retail Payments: Laying
a Solid Foundation, describes such episodes as “a moment of truth”
– and explores the ways in which a negative experience in a
trust-damaging event like fraud can lead customers to switch
providers. By the same token, the survey finds that a fraud event,
when handled correctly, can result in a bank or issuer winning a
customer for life.
Despite this potential competitive advantage, many institutions are
lagging behind their competitors and have significant work to do to
establish effective practices in managing the impact of fraud
Key drivers of trust
Deloitte conducted a survey of consumers, half who had experienced
an unauthorised use of a credit, debit, or stored value card and
half who had not. The survey found that eight service attributes,
including overall reputation, competence, the ability to quickly
fix problems, and accuracy were key drivers of overall trust. These
eight attributes explained as much as 66 percent of the trust level
“Trust in the banking system is very tenuous today, unlike any time
since the Depression,” said Brian Shniderman, a director with
Deloitte Consulting. “Banks and card companies have more to lose
than just the interchange, but the entire relationship, including
net interest income and fee income.”
The survey found that institutions run significant risks when they
fail to effectively manage the impact of trust-damaging events like
fraud on their customers. For example, almost 20 percent of the
fraud victims surveyed said their level of trust in their issuer
had decreased as a result of the incident, and almost one-third
reported reducing their business or terminating their relationship
Fraud was seen to be a growing problem by 79 percent of the survey
respondents who had not experienced it and by 88 percent of fraud
victims. Roughly 90 percent of both groups felt that an incident of
fraud could have a major negative impact on people’s lives.
Deloitte found a major opportunity for those institutions that work
to rectify fraud events co-operatively with consumers. For example,
roughly 40 percent of fraud victims had been pleasantly surprised
by the service and assistance they received, saying that their
level of trust with the financial institution involved had actually
increased as a result of the fraud incident.
There was a significant gap between highest-rated institutions and
the lowest-rated institutions on these key attributes. For example,
85 percent of fraud victims said they were very satisfied with the
performance of the highest-rated issuer in alerting them to
potential fraud, compared with just 57 percent for the lowest-rated
To Deloitte, trust is an important asset to financial institutions
and the firm recommends that an explicit focus be placed on
establishing and maintaining consumer trust at the overall
enterprise level since it likely spans multiple lines of business
and is impacted by almost all functions.
First, the study recommends establishing consumer trust governance
and performance metrics. Governance might take the shape of a
consumer trust council, chaired by the accountable executive and
comprised of representatives from different business units and
functional areas across the organisation.
The council’s responsibilities might include setting consistent
bank-wide policies that impact consumer trust on topics such as
information usage, privacy, data security, the handling of identity
theft, when to side with which party in disputes, investments in
customer-facing tools and channel infrastructure. Second, the study
recommends that issuers examine their infrastructure to determine
how it can positively or negatively impact consumer trust.
Selective infrastructure should be made to enhance the customer
experience and promote consumer trust.
Finally, once consumer trust governance and measurement is in place
and infrastructure has been designed to maintain and enhance
consumer trust, the challenge becomes one of execution.
Unfortunately, consumer trust can be considered a basic requirement
for a financial institution, so customers rarely notice good
execution until something goes wrong.
The ‘wow’ factor
There is a significant performance gap between the highest- and
lowest-rated issuers for the factors that drive trust. Across the
eight attributes, the highest-rated issuer was rated an average of
22 percent higher than the lowest-rated issuer.
For example, while 93 percent of fraud victims were very confident
in the overall reputation and ability to quickly fix problems of
the highest-rated issuer for this attribute, only about 65 percent
had this level of confidence for the lowest-rated issuer.
Similarly, only 55 percent of consumers were very confident in the
lowest-rated issuer, far behind the 85 percent rating received by
the highest-rated issuer for this attribute. Clearly, some issuers
need significant improvement in their performance on these key
“Those that do well with customer service and fraud/dispute
resolution will be rewarded in the end with a customer for life.
They need to counter the churn every way they can,” said
“One thing that continually surprises me is that bank customers
have such a low level of expectations that when they are pleased,
there’s a tremendous ‘wow’ factor. There lies another opportunity
for such financial institutions to take advantage of the newly
created goodwill and extend the relationship by quickly identifying
the right new product to offer to the impacted customer who is now
more likely to accept it.
“But we suspect most financial institutions are not prepared to
make use of the situation.”