As bank fraud continues to grow, it’s more important than ever for financial institutions to be proactive in fighting it. Research shows that when banks make a clear effort to identify and catch the criminal, customer loyalty improves—even among those who were directly affected by fraud.
When a bank can’t tell a victim who was behind a fraudulent transaction, that customer is far more likely to close their account and leave. A study from the University of Notre Dame found that fraud victims abandoned their banks at a rate 40% higher than customers who had never been defrauded.
But the story changes dramatically when the bank identifies the criminal. Not only do customers feel safer, but attrition drops sharply—62% fewer victims leave compared to customers who never experienced fraud at all.
“Intuitively, we might expect that any instance of fraud would harm the relationship between a customer and their bank, even if the case was resolved,” Vamsi Kanuri, author of the study, told Notre Dame News. “Yet in cases of correct attribution, not only do customers stay, but they also display higher levels of loyalty than those untouched by fraud.”
Long-Term Relationships
Banks need to show a strong willingness to fight on behalf of their customers.
“It’s not necessarily about the fraud itself that’s driving customers away; it’s more about how a victim’s financial institution is showing up for them and being an advocate,” said Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research. “Banks can grow loyalty and trust in demonstrating that they care about what happens to their customers.”
That loyalty persists over the long haul. In fact, a bank that successfully catches perpetrators of fraud earns a lasting reputation for competence. On the other hand, a bank that fails to stop criminals immediately risks being seen as unreliable.
While that negative impression may fade over time, customers with shorter relationships or fewer touchpoints are more likely to leave if a criminal goes undetected. By contrast, long-standing customers or those who interact frequently with the bank are generally more forgiving.
Worth the Hassle
According to Javelin, victims who have a bad experience with identity fraud are similarly willing to close their accounts and move on.
“This says a lot given how interconnected our financial and non-financial accounts tend to be, with growing digital footprints,” said Sando. “The work involved in opening a new bank account and reconnecting various products and accounts is a better option than sticking with the financial institution where they suffered a bad fraud experience.”
