1. Fraud and the Consumer: Does trust matter? Kieran Hines, Datamonitor1

2. Introduction After the 2010 Fraud Conference we decided to look more
closely at fraud in our global consumer survey
This gives us a very consumer-centric view on fraud,
particularly on how well banks meet expectations
As a result, we have a lot of data to talk through this
afternoon 

3. Agenda What is the consumer view of UK fraud?
How does this affect banks and issuers?

4. Key messages
Reducing fraud will require targeted messaging at high risk groups
Avoiding a negative behaviour change is worth anti-fraud investment
Dealing with the aftermath of fraud well is almost as important as prevention

5. What is the UK fraud story?

6. 19.2% 12.8% 6.4% Experienced fraud since 2009 Were compromised once
Were a victim two or more times
Over 65s more likely to be a victim (24%)

7. Which types of fraud occur most frequently?
Mobile banking
8.0%
compromise
Identity theft
9.1%
Online or phone banking
10.8%
compromise
Tricked into giving details
11.4%
to a fraudster
Compromise at ATM
13.5%
Compromise in a shop or
17.0%
restaurant
Of the total, what is the proportion of fraud by type?
Pie or horizontal bar charts showing the %. Add the actual fraud data?
Online payment fraud
30.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Proportion of the number of incidences of fraud (%)

8. The age breakdown of fraud paints a reasonably unsurprising picture
-15%
-10%
-5% 0% 5%
10%
15%
20%
25%
30%
18-24
25-34
35-44
45-54
55-64
65+
Proportion of all fraud (%)
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Share of fraud relative to the total population

9. What types of fraud are younger consumers most susceptible to?
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Relative incidence of fraud (%)
25-34
18-24
More likely
Less likely
Mobile banking
Tricked into giving details
to a fraudster
Online or phone banking
Compromise at ATM
Compromise in a shop or
restaurant
Identity theft
Online payment fraud

10. In the case of online payment fraud, familiarity is the key to fraud prevention
45%
18-24
25-34
35-44
45-54
55-64
65+
40%
35%
Share of total online payment fraud since 2009 (%)
30%
25%
20%
15%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
Share of the total number of online payments in 2011 (%)

11. More mature consumers are also high risk in some situations
65+ Compromise in a shop
or restaurant
35-44, Online payment
fraud
65+ Compromise at ATM
45-54, Online payment
fraud
55-64, Compromise in a
shop or restaurant
65+ Online payment fraud
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Incidence of fraud relative to the market average (%)

12. How concerned are consumers about being a fraud victim?
19.6%
21.1%
18.3%
22.5%
22.2%
Proportion of consumers 'Very concerned' about fraud (%)
18-24
25-34
35-44
45-54
55-64
65+

13. However there are some big differences in the level of concern about fraud by type
30.0%
Online payment fraud
25.0%
Mobile banking
compromise
20.0%
Proportion of consumers who are 'Very Concerned'
about fraud (%)
Tricked into giving details
15.0%
to a fraudster
Online/phone banking
compromise
10.0%
Identity theft
Compromise in a
Compromise at ATM
shop/restaurant
Fear of fraud relative to incidence – highlight mobile banking compromise
5.0%
0.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Reported incidence of fraud since 2009 (% of respondents)

14. Relative likelihood of fraud (%)
A major issue is that some high-risk groups are not overly concerned about the dangers
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-3.0%
-2.0%
-1.0%
1.0%
3.0%
5.0%
Concern about being a victim of fraud, relative to the total market (%)
Relative likelihood of fraud (%)
55-64, Compromise in a shop
or restaurant
65+ Compromise at ATM
65+ Compromise in a shop
or restaurant
25-34, Identity theft
18-24, Mobile banking
compromise
45-54, Compromise
in a shop
or restaurant
18-24, Online or phone
banking compromise

15. This sense of some consumers not being careful enough is certainly well-founded
-3.0%
-2.0%
-1.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Proportion of consumers, increased fraud risk (%)
0.0%
Keep a
18-24
25-34
35-44
45-54
55-64
65+
Increased
record of
fraud risk
PIN

16. Indeed, certain attitudes correlate with higher levels of fraud
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
There is more I could do to
protect myself against fraud
If I am a victim of fraud I will get
my money back from the bank
I am more careful now than I
was a year ago
Proportion of consumers who "Strongly agree" with each
statement (%)

17. How well do banks and issuers serve customers who report fraud?
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
How well treated
when reporting
during investigation
Speed and ease
of sorting things out
Satisfaction with how the post-fraud process
was managed (%)
Focus on one or two outliers?

18. However, the experience is not uniform across all age groups
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
How well treated when
reporting the case
How well treated during
investigation
Speed and ease of sorting
things out
Consumers who are 'very happy' relative to the average (%)
65+
55-64
25-34
18-24

19. What are the costs of fraud?

20. Fraud has both direct and indirect costs
There are several direct costs of fraud
Detection/prevention
Losses
£233m in H1 2009
£170m in H1 2011
The indirect costs can be more significant

21. Fear prevents consumers from doing the ‘right’ things
Frictions in moving customers to lower-cost servicing
Online banking
Lost revenue opportunities
Online commerce
Contactless cards

22. There is also a post-fraud behaviour change
25% keep the card/account open and are more careful
11% do not change their behaviour
13% keep the card/account but use it less
13% become dormant accounts
27% close the affected account
10% don’t revisit the location of the compromise

23. This impact is more pronounced in some kinds of fraud than others
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Online payment fraud
Compromise in a
shop/restaurant
Online/phone banking
compromise
Mobile banking
Difference between the average reaction to all types of fraud
and the selected types shown (%)
“Good” reactions
“Bad” reactions

24. What role does trust play in this?
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Consumers who agree that banks are doing enough to protect them
, and the relative difference(%)
All consumers
18-24
25-34
35-44
45-54
55-64
65+

25. In some cases trust can lead to recklessness
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
All consumers
18-24
25-34
35-44
45-54
55-64
65+
Consumers who agree that they will be refunded
any fraud losses (%)

26. Indeed, a high level of trust can work against a bank if a customer is compromised
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Good
Bad
Retail
Reaction to online payment fraud by consumers
who have a high level of trust (%)
Banks are doing enough to protect against fraud
If I am a victim I will get my money back

27. Consumers who are convinced they will be refunded respond well though
Banks are doing enough to protect against fraud
If I am a victim I will get my money back
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Kept the card/account but am more careful
I do the same as before
Kept the card/account but use it less
Kept the card/account but do not use now
Closed the card/account
Do not go back to where the compromise happened
Do not use any products of this type now
Reaction to online payment fraud by consumers
who have a high level of trust (%)

28. Effective case handling has the biggest impact on the behaviour change
Good
Bad
Retail change
0.0%
Speed and ease of sorting it out
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Who were happy with their post-fraud experience (%)
Reaction to online payment fraud by consumers
Happy with the experience when reporting

29. A smooth process means consumers are more likely to remain customers
Happy with how it was reported
Speed and ease of sorting it out
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Kept the card/account but am more careful
I do the same as before
Kept the card/account but use it less
Kept the card/account but do not use now
Closed the card/account
Do not go back to where the compromise happened
Do not use any products of this type now
Who were happy with their post-fraud experience (%)
Reaction to online payment fraud by consumers

30. So is trust irrelevant?

31. Key messages
Reducing fraud will require targeted messaging at high risk groups
Avoiding a negative behaviour change is worth anti-fraud investment
Dealing with the aftermath of fraud well is almost as important as prevention

32. Any questions? Kieran Hines Practice Leader, Global Financial Servicese: t: