How Do We Balance Security and Customer Experience in Financial Services?

There’s a constant tug-of-war between customer experience and security in financial services. Advances in network analytics, segmentation, machine learning, and generative artificial intelligence (AI) have led to huge steps in the algorithmic identification of money laundering and terrorist financing and made identity verification increasingly sophisticated. But for financial institutions (FIs), enhanced security tools can come at the expense of one very important thing — keeping customers happy. A customer may be surprised with sudden account restrictions or closures. And they may have no obvious recourse.

There are reasons for an FI to place restrictions on or close a customer’s account: bounced checks, too many overdrafts, large transfers to unfamiliar recipients, or a zero balance. But a reason isn’t required. Bank of America’s deposit agreement booklet, for example, includes items like, “You or we may close your checking or savings account at any time without advance notice” and “At any time we believe that your account may be subject to irregular, unauthorized, fraudulent, or illegal activity, we may, in our discretion, freeze some or all of the funds in the account and in other accounts you maintain with us.”

Some problems are that algorithms that decide if an account should be closed, by nature, don’t have common sense; security policies aren’t perfect; and human analysts have limited capacity. As a result, things that are of little ultimate risk to the bank, like a new checking account opened by a law-abiding, solvent consumer, can be restricted with huge consequences. It also makes some account closures, cited by a recent column in the New York Times, seem inane. It should be no surprise that consumers are upset if something innocuous about them or their account prevents them from accessing their money.

Even fintechs, generally known for their superb customer centricity, aren’t immune to offending their customers with closed or restricted accounts. A sublime front end and sophisticated self-service can’t guarantee that consumers are insulated. Chime, for example, made headlines due to social media chatter and a trail of claims filed with the Consumer Financial Protection Bureau (CFPB) that alleged sudden account closures or lack of access to funds with lengthy response times. Like with the example from Bank of America, Chime’s partner bank has disclosures that reserve its right to restrict or close accounts. And only the customers who know the fine print can fathom what might happen.

At the end of the day, customers don’t know what they don’t know about fraud or breaches. That means it is up to providers to figure out how to keep security ironclad without being so zealous that their customers are hit with false positives. With further advances in AI and better training data, it’s possible, particularly for FIs that have the technology budget. But in the interim, communication is key. FIs need to be able to respond quickly and clearly and ensure recourse is available when a legitimate customer ends up at the mercy of stringent protocols.