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Credit Monitoring: Simple Advice for a Complex Problem

Data breaches happen, on average, about four times a day – and there is one thing that happens almost universally every time. The victims are advised to monitor their credit.

It seems credit monitoring has become a panacea for data breaches. It is almost “throw-away” advice recommended by breached organizations, pundits, and even financial services providers alike. Victims then sign up for credit monitoring services and feel a sense of security … which may later sadly prove to be false.

‘Monitoring’ Means Fraud Has Already Happened

Before I go on – let’s be clear. Credit monitoring is certainly a helpful tool. It alerts consumers to suspicious or fraudulent activity when it comes to the opening of new credit accounts. This puts them in a position to intervene and minimize the damage.

But, this makes credit monitoring a tool for detecting fraud, not preventing it. It doesn’t offer any protection for preventing new credit accounts from being opened in the first place. It also isn’t primarily intended to help with far more prevalent data breach threats; existing account fraud, which is also referred to as account takeover and payment card fraud.

Unfortunately, in my work as a damages expert in data breach court cases, I’ve seen account takeover live up to its ominous-sounding name. With access to enough compromised personally identifiable information and credentials, it is not as difficult as one may think for a criminal to gain access to financial accounts, especially in the absence of additional security measures like two-factor authentication. Account takeover and existing account payment card fraud represents about 65% of identity fraud losses and the results can be devastating for both the consumer and the FI that has to foot the losses repeatedly for numerous customers.

But, there’s good news in all of this. 1) Consumers are motivated to protect their financial health, and 2) Digital banking provides new opportunities to engage them in proactive, fraud-preventing actions for existing accounts

Signs Point to Consumer Appetite for Digital Banking Integrations

We know that consumers are motivated to protect their financial health because the annual spend on identity protection services is around $4 billion. (Many sometimes refer to ID protection simply as ‘credit monitoring’ because that particular feature of the overall service is often most predominantly touted.) When credit monitoring and free credit scores are offered by financial providers, consumers often embrace these opportunities to manage their creditworthiness. But as mentioned above, while useful, none of these services offers primary value in stopping fraud in the first place.  

The rise in popularity of free credit scores within digital banking is another strong indicator of consumer willingness to adopt more effective fraud prevention measures when they are integrated into their digital banking environment. Our primary research supports this as well, as indicated in our survey of 1,000 U.S. adults which found:

• Younger consumers (18-35) are as interested in using Breach Clarity (41%) as they are in free credit monitoring (41%)

• Consumers over 55 are 1.7 times more likely to want to use Breach Clarity (40%) than identity protection services (24%)

• Fraud victims were most likely to see value in Breach Clarity, with 44% reporting they would want to use the product, compared to 39% for free or discounted access to credit reports and scores.

There’s a real opportunity here for financial institutions to take the next step beyond credit monitoring and free credit scores. What this means is communicating with customers when they are the victims of a data breach about the specific risks they now face, and enabling preventative action within the digital banking platform, such as turning on enhanced, but targeted security controls with a click.

Just a few years ago, this customized approach would have been a daunting task for fraud and digital teams. Advances in technology make this sophisticated offering surprisingly easy to implement.

We long for simple advice in the face of complex problems. “Monitor your credit” has filled that role for years now, but it’s left far too many financially vulnerable. Breach Clarity was created to deliver a much more proactive and protective approach that still maintains a great customer experience. Credit monitoring has its place, but its time to recognize its limitations and move onto next-generation guidance.

Breach Clarity’s financial services product Breach Clarity Premium engages customers quickly following a data breach to reduce fraud losses and strengthen the relationship.

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