Why ‘helpful friction’ is crucial in the battle against scammers

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NAB Group Executive Personal Banking Rachel Slade spoke about scams, friction and customer service to the Trans-Tasman Business Circle on 30 November 2023 in Melbourne:

 

Introduction

I acknowledge we’re meeting on the traditional lands of the Wurundjeri people of the Kulin nation and pay my respects to Elders past, present and emerging.

Thank you to the Trans-Tasman Business Circle for organising this event and to our hosts King & Wood Mallesons. Good morning and thank you for joining today.

 

The scale of the problem

Imagine losing a month’s wage, or worse, your entire life savings. Or how would it make you feel losing a full year’s worth of business profits?

Believe it or not, this is what is happening far too often.

$3 billion – that’s what Australians have collectively reported they lost to scams last year.

Reported.  But who knows how high the real figure is?

A few more numbers for you:

  • NAB Economics found individual scam victims lose around $570 but often it’s much more.
  • Average business losses are nearly $20,000.
  • Data from the Australian Competition and Consumer Commission reveals losses are up 80 per cent from 2021 to 2022.
  • And at NAB we receive around 80,000 calls reporting scams or fraud each month.

I’ve listened to many of these calls.

The emotional toll on these customers, the angst you can hear in their voices when they come to grips with what’s been lost, is heart-breaking.

The issue of scams and fraud isn’t just getting worse; it’s spiralling across the globe at a horrific rate.

And the criminals behind this aren’t kids on their laptops. They are organised, global crime gangs stealing Australians’ money. And they’re using it to fund things like human trafficking, drugs and serious crime.

Scammers prey on all sorts of personality traits and psychologically manipulate their victims. They don’t care who you are. The outdated view that only older people or those with less digital nous are falling victim to scams is just wrong. They target young and old, tech savvy as well as those less digitally-literate.

Earlier this year, AFL star Jacob Weitering bravely revealed he’d lost a significant amount of money through a sophisticated impersonation scam.

The scammer convinced Jacob he was from NAB’s fraud team and his accounts had been hacked. Fearing he’d lose everything he’d worked hard to save and panicked by the sense of urgency from the scammer, he sent money from his NAB accounts – where it was safe – to the scammer, where it was cleaned out. In his words, “it can happen to anyone. I honestly didn’t think it was going to happen to me, and it did”.

More recently, a 65-year-old retired Pastor, Victor, walked into our Hurstville branch in Sydney where he tried to transfer more than $1 million to his fiancé. He had never met her.

When our team stepped in and asked him a series of questions about the transfer, we put a stop to the scam and the penny dropped.

He had nearly lost his money to an insidious romance scam – almost conned into sending money to the love of his life – who didn’t exist.

Scammers are always on. They work in bulk. Firing off high frequency calls or mass text messages until someone lets their guard down.

So, we need to be always-on to prevent that happening.

In the last year, we’ve added more than 70 dedicated colleagues to our team of 470 specialist fraud and investigation experts – they’re on the frontline of this fight, supporting our customers.

We have a dedicated security ‘Fusion Centre’ which brings together all our security capabilities in one place to help the fight against organised criminals and cyber-crime. It’s a 24/7 operation.

Banks have introduced measures to protect customers from scammers but more needs to be done. This may mean slowing down in a world where everything is speeding up.

 

Scammers taking advantage of simplicity

For the past two decades, banks like ours have been doing everything we can to make your payments faster and easier. Gone are the days of waiting overnight or even longer to transfer money. It happens in seconds. It’s a swipe of a phone or watch and you’ve transferred your friend money for dinner or paid an invoice. This is what customers want and expect.

But scammers love this new ‘instant’ world. They see any number of ways to take advantage of our preference for speed and simplicity.

The issue of scams exploded several years ago and COVID poured jet fuel on it. Digital uptake leapt forward a decade in a matter of months as we worked from home and shopped online in lockdowns.

Cafes swapped cash for digital payments. Businesses which had only a limited online presence before the pandemic went digital to stay in business.

And as we get even more digital in our financial life, scammers are there to take advantage.

NAB is now processing more than one billion online payments annually. And 99.99 per cent of these are legitimate transactions. Last bank year, of those, we saw around 1,500 scam events each month.

What we’re grappling with is this: How do we balance the needs and demands of customers who want to transact quickly and simply with the growing plague of scams?

How do we stop criminals from stealing money without grinding those billion payments to a halt?

How do we find a handful of needles in a paddock of haystacks?

The answer is a balance between speedy service and security speed bumps. It is the service-friction paradigm. We call it safety and security by design and it involves re-introducing some helpful friction back into the payments system.

 

Helpful friction

But how do we do that without upsetting our customers?

We need to make sure it’s not friction for friction’s sake that does nothing but annoy customers. A one size fits all, blanket approach, that’s baked into any payment process risks being glossed over.

Alerts and triggers have to be founded on a risk assessment of each individual payment that gets a customer to think really carefully before they click.

Helpful friction needs to be targeted and appropriate, it needs to protect customers while allowing them to transact how they want, and it needs to identify the right transactions that need extra scrutiny – giving customers a prompt to pause.

For banks, this friction might be triggered by a customer sending money to a high-fraud-risk crypto exchange, a transfer to a suspected investment scam, or tell-tale signs about a transaction or interaction that might indicate a customer is being scammed.

But the challenge is shifting the perspective on what ‘good’ customer service looks like – from speed to security by design.

We need customers to come with us on the journey and understand ‘how and why’ we’re striking the balance between friction and speed. We can’t risk the relationships we’ve worked so hard to build and undo years of work with blunt instruments.

A good example of friction that’s now acceptable is the one-time PIN code customers are sent – and have to enter – before they transfer money.

Tellers in branches have been criticised for asking customers why they’re withdrawing large amounts of cash. I can assure you bankers aren’t being nosey. They’re trained to ask questions. And it works.

In Victor’s case in Sydney was caught by a banker who asked the right questions. In fact, the NAB banker who stopped this scam – Rosa – was the subject of a TikTok influencer’s video when he made light of banks for asking these exact questions just weeks earlier.

Our research shows four in 10 Australians are ‘extremely willing’ for payments to be slower if they were better protected from scammers. This is incredibly encouraging.

We need to be wary of the hurdles we place on customers to transact with the instancy we’ve all become used to.

Speed is wonderful until you make the wrong decision. You often don’t see the need or value for payment friction until it is too late.

 

What is NAB doing?

I want to share some things we’re doing at NAB.

We’ve invested more than $260 million directly to help tackle scams and fraud over the last 3 years and we’ve already completed 33 bank-wide initiatives this year to help address the global scam epidemic.

Many of these have involved bringing some friction back into the process in a helpful way using NAB’s sophisticated fraud prevention technologies.

We’ve introduced real time payment alerts on payments that raise scam concerns.

These tailored prompts are triggered by unusual and uncharacteristic activity and designed to get the customer to pause and review a suspicious transfer before they hit send.

While many customers end up completing their transaction, $220,000 of payments each day and $50 million in total have been abandoned since we launched the feature in March. This tells us customers are taking the time to stop and think before they make a payment after this alert.

You might ask why we can’t put triggers like this on every transfer? We’ve made sure this friction is targeted. Too many pop ups risks ‘banner blindness’ and customers flicking and clicking.

We’ve designed these payment alerts to be flexible. We can scale them up or apply them to different scams that might arrive on our shores.

We’ve also blocked some payments made to high-fraud-risk crypto exchanges. One of the fastest growing security threats, Australians lost more than $200 million to crypto scams last year. This friction is designed to stop criminals sending stolen funds quickly and – often – overseas.

And we’ve removed links from text messages we send from NAB. Scammers were cloning numbers to infiltrate legitimate text message threads – just as they do for delivery companies, toll operators and more – with dodgy links to fake websites.

Now if a customer receives a message saying it’s from NAB with a link in it, they’ll know it’s fake. It adds friction into the customer experience but removes another way scammers can con customers.

These measures – and more – have helped us stop our customers from losing more than $200 million to scammers.

 

Considerations

When we consider helpful friction we also need to make sure it’s accessible. We can’t risk further excluding those who might be at risk of vulnerability.

Consumer groups I’ve met with on this issue – some of whom are here today – agree we need to consider the impact additional friction might have on those who already face hurdles to financial inclusion.

Even the simple things – like a one-time pin delivered to a mobile – can be a barrier for someone who doesn’t have a phone, is at risk of homelessness, or who has changed phone numbers to escape family or domestic violence. These considerations are all top of mind.

We’ve also had to rethink the way we identify and support customers who’ve been scammed. Our Customer Advocate and fraud teams have worked together on training for our colleagues who are speaking to scam victims so we can sensitively refer them to the right place at NAB for specialist support.

 

Working together with others

We know more needs to be done and there’s still a wealth of work to do to combat this plague.

Scammers use multiple channels to reach and con their victims. Phone calls, links, emails, texts, social media ads – any digital channel.

That’s why greater coordination is key to stopping scammers from shifting from one platform, one scam, one closed loophole to the next.

There’s a role for government, banks, businesses, telcos and social media giants to play here.

Businesses have recognised the challenge and broadly stepped up to secure their own channels and platforms, especially after high-profile cyber breaches. But too often we still hear about attacks that cripple companies.

Working with telcos, we’ve made it harder for scammers to clone bank phone numbers or infiltrate text message threads over their networks but bad actors are still slipping through.

And Australians continue to be caught out by scams advertised through social media with slick investment marketing promising returns too good to be true or an online marketplace scam that catches you out when you’re trying to sell an old couch, bike or laptop.

Banks are stepping up too. The Scams-Safe Accord announced just last week will help the banking industry better protect Australians and small businesses from this global crime wave.

On top of important frameworks and policies, there’ll be investment to tackle business email compromise scams. Soon, when you transfer money to a business, you’ll be able to confirm where it’s going – so scammers won’t be able to hijack email invoices.

And wider membership of the Australian Financial Crime Exchange means we can quickly share crucial information, tackle emerging threats together and all banks – big and small – can ‘level up’ to protect more customers.

Collaboration between banks helped us pick up the trail of Victor from Sydney – and piece together that he was a mule in a much more complex scam. He was about to unwittingly transfer funds from a victim at another bank to criminals trying to evade detection.

What’s clear is that greater coordination across the ecosystem can help us prevent a ‘whack a mole’ effect, where scammers pop up on the next vulnerable channel.

 

Education

I’ve spent a lot of time talking about the role of banks in fighting scams.

We’ve added more friction, we’re winding back some of the gains we’ve made in speed and simplicity over the past two decades to better protect customers.

This friction – the hurdles that slow down or stop customers from inadvertently sending money to scammers – is an important part of the solution but it is only one part.

I’ll end on the need for greater education and awareness – so Australians can spot the red flags and identify a scam. This will strengthen our collective effort and stop scammers in their tracks.

Hang up. Delete the message. Think before you click or transfer.

We’re also investing to help customers spot the red flags of scammers with education and awareness campaigns.

These are designed to encourage Australians to stop and think about whether the demand and urgency to part with their hard-earned money is legitimate – and it’s usually not.

While education is key, cut through is also critical.

Lots of organisations are working to educate Australians with different campaigns, but perhaps it’s time to unite behind a central campaign.

We know there is no silver bullet that will stop scammers and we know we’re in for a long fight.

Meanwhile, Victor from Sydney is counting himself lucky. The right questions and the right amount of friction – even in branch – helped us stop these scammers in their tracks.

But we know there’ll be more Victors.

Australians need to be scam aware and comfortable with a level of friction they might not be used to as banks and businesses balance protection and speed.

This, combined with a coordinated approach and greater education will help us change the dynamic.

Together, we can all work to make Australia a hostile place where scammers won’t strike a criminal pay day.

Thank you.

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