It’s obvious, isn’t it? Location data is useful. Major organisations have been using data on the location of prospective and existing customers for a while, to identify new markets, improve customer service or to provide insights into user identity and behaviour. Location data can be a powerful asset in financial services, enabling relevant content, customised service and – critically – providing a means to keep customers, citizens and organisations safe from the bad guys online.
Geolocation data is becoming a powerful weapon against fraud, helping protect against phishing attempts, account takeovers and other unauthorised activity, using real-time location verification to help organisations validate legitimate activity and comply with global and regional Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
In its article ‘Location Detection: Building The Bank Business Case For Better Geolocation Data’, pymnts.com show that the use of geolocation technology can drive down fraud rates, reducing from “about 3 percent of purchases to 0.2 percent” where enabled and concluding that, through use of geolocation data, the fraudsters were being scared off, shifting their operations to less well-protected areas.
The question of consent
In the bid to bring geolocation services to greater prominence in financial services there are myriad complexities to overcome: what data is most valuable, where is it, who owns it, how to expose it and how will it be used? But perhaps the most important is the question of consent: will customers accept the use of location data to enhance or protect?
The pymnts.com research found that 55 percent of millennials say they would switch to a financial institution that uses geodata to enhance the security of users’ accounts. That number is even higher, they say, “for those individuals who earn higher wages – and taken together, higher earners and younger demographics are the sweet spot of banks’ customer bases”.
This can explained in part, because younger users, “conditioned by Venmo, Revolut and any number of digital-first offerings” are more open to data sharing. Geolocation services power everything from food delivery to ride-hailing to finding the nearest coffee shop.
So what’s the problem?
The issue, they maintain, is that many of us, as consumers, assume that location-enabled capabilities are a part of the core digital banking experience, but that’s not always the case. Geolocation data is gathered from multiple sources – including mobile operator network data, GPS, WIFI and low-energy Bluetooth beacons – and applied using different rulesets by the applications and services that we use.
Financial institutions must be clear on the reasons for why user location data is being used. After all, “you’re not tracking for the sake of tracking your customers,” says Karen Boyer, VP of Financial Crimes and Fraud intelligence at People’s United Bank, “you’re using that data to figure out who’s the customer – and who’s pretending to be the customer.”
Communication and Trust
Even where the technology and the privacy framework are in place, the balancing act between experience, fraud protection and security must be top of mind for the banks. Customer outreach is a key enabler – if they can illustrate to customers how often fraudsters might have hypothetically tried to log into customer accounts, then acceptance might be easier.
Effective use of location data is and will continue to be at the core of many key digital journeys. The banks can engender trust in this use through clear application of privacy and consent guidelines and effective communication of the rationale for (and limitations of) its use – that location data is used to protect the consumer, and used for this purpose only.
“There are ways to make consumers comfortable,” Boyer concludes. “They obviously trust their banks with their money, and they expect them to keep their money safe. If a consumer can contribute and be part of that, why wouldn’t they – if presented with the right way to do so – want to participate?”
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