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7.son Eficaces Los Metodos Actuales Utilizados en Las Instituciones Pueden Ayudar A Los Incentivos
7.son Eficaces Los Metodos Actuales Utilizados en Las Instituciones Pueden Ayudar A Los Incentivos
7.son Eficaces Los Metodos Actuales Utilizados en Las Instituciones Pueden Ayudar A Los Incentivos
by
Utica College
December 2019
Master of Science in
Financial Crime and Compliance Managment
ProQuest Number: 27666612
In the unlikely event that the author did not send a complete manuscript
and there are missing pages, these will be noted. Also, if material had to be removed,
a note will indicate the deletion.
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Published by ProQuest LLC ( 2020 ). Copyright of the Dissertation is held by the Author.
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© Copyright 2019 by Taneeya Sharelle Bryant
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Abstract
Fraud is a prevalent issue that does not appear to be going away anytime soon. It does not
discriminate and affects millions. Anyone can become a victim of fraud. The losses and affects
are felt by individuals and businesses. One industry that is constantly impacted by fraudulent
activity is the financial industry. Retail and business clients of financial institutions are under
This paper will attempt to determine if the current methods used by financial institutions
to educate clients on fraud prevention are effective and if incentives can help. The way financial
institutions educate their clients is imperative in their fight against fraud. Clients have the
potential to aid financial institutions in their fraud prevention methods if they are being presented
the appropriate information in manner that is conducive to the various ways people learn and
retain knowledge.
Incentives are used in various industries to alter behavior and entice change. Financial
industries offer incentives but not in fraud prevention. This will be investigated as part of the
research for this paper. The use of incentives will be analyzed to learn about their uses,
advantages, and disadvantages to establish if they can be used by fraud departments at financial
institutions.
Client education is important if banks want to protect themselves and their client’s assets.
However, the challenge can be finding a method that works for different people. This paper will
review if the methods being used are effective and if more can be done to ger clients to protect
themselves and their information. Keywords: Financial Crime and Compliance Management, Dr.
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Acknowledgments
I would like to thank my husband Curtis Bryant Jr. and my daughter Corinne for their patience,
love, and understanding while I completed this program. My husband acted as a cheerleader and
fill in editor. I think he knows as much about fraud and financial crime as I do at this point. Next
I would like to express gratitude to Alexis Bell for being an amazing professor and mentor. Brad
Warren (former Fraud Manager at First Midwest Bank) and Joseph Broz (First Midwest Bank)
thank you guys for all of your help. Whenever I needed assistance with an assignment you were
willing to take time out of your work day to help and I truly appreciate you for it. Julinda Lewis
thank you for stepping in last minute to take on editing duty for me. And lastly, thank you to all
those who shared words of encouragement and support while I pursued my degree. It has been a
long journey but the end is near. I hope all those reading this paper find it interesting and
inciteful.
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Table of Contents
v
List of Illustrative Materials
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Introduction
The focus of this paper will be on the clients (consumers and businesses) of financial
institutions that fall victim to scams. The purpose of paying attention to these individual groups
is to determine if the methods used by banks to educate these clients are effective. Educating
and businesses can be a first line of defense in preventing fraud at financial institutions. They can
be an asset in terms of fraud prevention.The Federal Trade Commission (FTC) reported that
consumer fraud losses from the year 2018 were up thirty eight percent more than they were in
2017. The top three complaints received by the FTC were imposter scams, debt collection
complaints, and identity theft. Consumers suffered fraud losses of $1.4 billion in 2018 and much
of this loss can be attributed to the ingenious and persistent work of scammers. Scammers are
those individuals that commit fraudulent acts to swindle victims out of their money and personal
information. For instance, government imposter scams are when scammers call victims
pretending to be from a government agency, like the IRS or Social Security Administration.
Victims will be told that their social security numbers are inactive in an attempt to get them to
give their social security numbers or pay to have them reinstated (FTC, 2019). They will also
pretend call and tell victims tht they owe the IRS and will be arrested if they do not pay. And
while the scams being used are not all new, the methods are. Modern advances in technology
have created a new way for consumers to bank. These innovative ways of banking are also
With financial institutions offering their customers more convenient ways to bank, they
are also creating more ways for the customers to have access to their accounts without physically
entering the bank. Customers have twenty-four-hour access to their accounts and are responsible
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for keeping this information and the access to it confidential. Popular Bank, for example, asks
their clients to keep their information private by not sharing it with anyone. This bank, like most
others, also gives instructions on password security and client account monitoring. There is no
longer a need to physically be at a computer to log into online banking to check an account or
transfer funds. With smart phones, customers can access their bank accounts anytime and
anyplace.
This ease of banking has also been extended to business banking clients. They can submit
wire transfer requests to their financial institutions electronically, a convenience that has
inadvertently created an opening for scammers. Business customers are being victimized through
email compromise scams also known as BEC. This ploy involves an email being intercepted or
hacked with wire transfer instructions to a vendor. The account information in the bank’s email
is changed to the account information belonging to the hacker. It is usually noted that there has
been an update to the account information due to an error in the original wire instructions. If the
account holder opens the link from the scammer, the wire transfer is sent to the scammer instead
of to the business’ financial institution.. These transfers can range from several hundred dollars
to millions of dollars.
They can also pretend to be one of the company executives in an email to human
resources. The email will be a request for a list of employee information. This will include
personal information such as addresses, social security numbers, and pay information (AARP,
2019). This information is considered valuable and can be sold or used to file the victims tax
returns fraudulently. The personal information can also be used to obtain credit and loans in the
victims name. The goal is to find someone in the company that has access to important
information and get them to forward that information or release company funds.
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According to the Federal Bureau of Investigation (FBI) victims have suffered a loss of
$10 billion due to business email compromises (BEC) since 2013 when they started monitoring it
(FBI, 2019). The businesses may have suffered the loss, but the wire transfers were conducted by
the financial institutions. These crimes can have a negative reputational effect on the banks and
Another way victims are targeted is through social engineering. This is when criminals
use human connections to obtain information about a business or a person (CISA, 2019). The
goal is to find a vulnerable individual within a company and trick them into providing non-public
business. Social engineering preys on human emotion making people a weak link in fraud
prevention. Norton lists six types of social engineering as: baiting, phishing, email hacking and
contact spamming, pretexting, quid pro qou, vishing (Norton, 2019). And the goal of all six is to
retrieve information from an unsuspecting employee or getting that employee to take some type
of action. Although there are six types of social engineering a closer look will be taken at
phishing.
The FBI states that phishing is, “Unsolicited emails purportedly from a legitimate
company requesting personal, financial, and/or log in credentials” (FBI, 2019). Consumers may
receive an email that they believe is coming from their financial institution or another reputable
business requesting their account number, social security number, and online banking log in
credentials. The emails are fraudulent but appear to be valid. They will ask that personal
information is verified for some reason or they will request that the recipient click a link within
the email.
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There are different types of phishing and Cisco (the worldwide leader in IT, networking,
and cybersecurity solutions) defines four of them: Deceptive phishing, Spear phishing, Whaling,
and Pharming. Deceptive phishing, the most used tactic, is when scammers request personal
information from their victim. The fraudulent email discussed above is an example of deceptive
phishing. Spear Phishing is when scammers go after a set victim instead of a random group.
They take the time to research and collect information on their intended target prior to contacting
them. Whaling is when scammers attack a company and go after a high-level executive. They are
targeting Chief Risk Management. And finally, Pharming is when victims are routed to
Retail bank customers can transfer funds, pay bills, and deposit checks to their accounts
through online banking. Customers are also scammed into giving out their log-in credentials
when they apply for what they believe are valid online loans. They are putting their personal
information into generic fraudulent loan applications. These applications request their social
security number, name, address, employment information, driver’s license information, bank
routing and account numbers, and the username and password for their online banking account.
With the information provided on the application the criminals can make counterfeit check
deposits through remote deposit capture or transfer funds between the customers’ accounts. The
goal is to get the customer to purchase gift cards or send Western Union funds to the criminal.
The criminal also has possession of the victim’s personal information to use later. They can use
this information to apply for credit cards, loans, and open fraudulent bank accounts.
Clients have also given out their personal information and online log in credentials under
the guise that they were applying for a work from home job. Online job ads are answered by
consumers hoping to become secret shoppers or personal assistants. Personal information may be
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given on the job application and online log in credentials may be given so that the consumer can
receive a “direct deposit.” This behavior creates losses for the banks and their customers. In
educating consumers about employment scams, the Better Business Bureau (BBB) warned that
consumers, “May need to provide their personal banking information to run a credit check or set
up direct deposit.” They then went on to explain how to spot and report employment scams.
Through research this paper will attempt to determine if financial institutions offering
customers an incentive could empower customers to protect their personal information. Many
other industries such as credit card companies and grocery stores use rewards and incentives to
elicit certain behaviors. These behaviors benefit the company and the customer. Credit card
companies offer cash back rewards when their customers make a certain number of purchases.
Grocery stores offer buy one get one free for those customers that participate in their rewards
program. This entices the customer to use the card more in order to earn the cash back and the
The purpose of this paper is to evaluate if the current methods used by financial
institutions to educate clients on fraud prevention are effective and if incentives can help. This
1. What current methods are banks using to educate clients on fraud prevention?
2. Do learning styles effect how the information provided by the bank is received?
7. What is the cost to the financial institution to continue to educate in the same manner?
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8. What does the discipline of psychology say about reward vs punishment?
Multiple financial institutions will be researched to determine how they are educating
their clients on fraud prevention. An assessment will identify any trends among the various
methods being used. Financial institutions will be studied to compare how they are interacting
When discussing fraud and consumers, education is always listed as the preferred method
of prevention. However, everyone does not learn the same way. Nancy Chick the University
Chair of Teaching and Learning, and Acadamic Director of the Taylor Institute for Teaching and
Learning at the University of Calgary tells us that there are a multitude of learning styles and
individuals have the most success when they learn in their preferred style (Chick, N., N.D).
These styles will be researched to understand if the methods being used by banks are the most
effective.
Incentive and reward programs are very popular these days across different industries
from car insurance to healthcare. They have been around for years but what exactly are they? An
attempt will be made to define incentives and reward programs. A better understanding of
reward programs can help determine if they would be useful to banks as a tool to help prevent
fraud.
programs they offer their customers. The industries reviewed will be credit card companies, car
insurance companies, health insurance companies, and a selection of retail companies such as
restaurants, clothing stores, and supermarkets. The goal is to gain an understanding of the
various types of programs being offered and how they affect those businesses and their
customers.
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Multiple financial institutions will be reviewed to see what types of services they offer
customers to protect their personal information in an attempt to see how customers are being
encouraged to keep their data safe. Are customers being told to protect their information; are
they receiving brochures; or are they being referred to a third-party monitoring service?
After finding out what banks are currently offering clients, the cost of banks to not do
anything extra will be assessed. Will these institutions incur more losses or fewer losses if they
choose to operate in the manner that they have been? If the banks choose not to incentivize their
customers to prevent fraud will the customers continue to lose money, and will they continue to
If financial institutions choose to adopt an incentive program, they will have to spend
money to do so. Research will be conducted to determine an estimate of the costs that the bank
would incur to incorporate a reward or incentive program. The research will evaluate whether the
expenses would be a one-time fee or payment or if it would be ongoing. Marketing would need
to be conducted to inform customers of the new incentive program. There will also be a cost for
whatever incentive or reward the bank will offer to customers in response to them being more
diligent.
Incentives and rewards are used as means to get people to alter their behavior.
“Traditional incentives can effectively encourage behavior change, as they can help to both
create desirable and undesirable habits” (Behavior Economics). A probe will be completed to
determine the benefits of banks adding an incentive/reward program. Will the program have a
positive effect on the customers, and will this benefit the bank in any way? Will the result be
worth the ongoing cost that the bank will have if an incentive/reward program is implemented?
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Incentives and rewards can be beneficial to businesses and their customers, but they can
also create issues. An inquiry will be conducted into the risk that could be acquired by a bank for
instituting an incentive program to prevent fraud. The types of risk that can be acquired by
financial institutions will be explored and identified. A determination will be made if there will
In the field of psychology studies have been conducted on the effects of rewards versus
punishment. The research has been done to explore the effects on people of being rewarded and
punished. Is one proven to have better results than the other? How do people react to receiving
rewards for good behavior as opposed to being punished for not exhibiting the appropriate
behavior? The paper will examine the effects of being rewarded and punished on bank customers
and which would be more useful in getting them to protect their personal information.
By answering the above questions this paper will seek to determine if fraud prevention
incentives can mitigate risk for financial institutions and their customers. Each question will be
researched in-depth to provide insight into the use of incentives and the manners that they can be
used. Banks say that the branch personnel is their first line of defense against fraud, but it
appears that the customer is, too. If each customer took a more proactive approach in securing
their information and monitoring their behavior and accounts, it would decrease the amount of
words of Michael J Formica, MS, MA, EdM, it is not a feeling, it is an action. An action that
allows individuals to stop being the victim and gives them a sense of control. By conducting
research on education and incentives this paper will attempt to evaluate if financial institutions
can empower their customers to take the necessary precautions to secure their information. It is
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an attempt to see if there is a way that both parties can benefit from getting customers to change
their behavior.
information cannot be the only option. Criminals are working together to gather information and
victimize more people so financial institutions and their customers should work together as well.
Financial institutions can use incentives to further include their clients as part of the fraud
detection and prevention process. Customers can become a bigger part of the solution and less of
a problem.
Customer involvement is already taking place in fraud detection but is it enough? Is there
something that can be done to get consumers to take a more proactive stance in safeguarding
their accounts? Are there additional steps that need to be taken to get customers to utilize the
Scams are the costly act that is relentlessly victimizing bank clients. The losses suffered by
customers and banks is growing. KPMG list some scams affecting consumers as romance,
support/remote access, and grandparent (KPMG, 2019). There are also work from home and loan
scams. A few of the scams listed have already been discussed in detail above to show how the
clients are engaged and conned. The KPMG Global Banking Survey is taken to obtain a view on
how banks across the world are dealing with fraud KPMG, 2019)
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Bank fraud is a global problem that will persist because it is profit bearing. People across
the globe are being victimized. According to the 2019 KPMG Global Banking survey, “Banks
globally are seeing an increasing trend in scams. Fraudsters are manipulating and coercing
customers into making payments to them, bypassing bank controls” (KPMG). This is one of the
reasons why the education of bank customers needs to be analyzed. Banks can use automated
detection systems to detect fraud, but human behavior can be used to prevent it. Customers are
the strongest defense that banks have against scams and the people behind them. They are the
targets of the scams and can mitigate risks before damage is done. According to the Global
Banking Fraud Survey conducted by KPMG customers are main the source for detecting
fraudulent activity. The second source are the automated systems that some banks utilize to
detect fraud. The third way fraud is identified per the survey are manual systems which are
reports run and analyzed by employees. The fourth source shown is the whistleblower. A
whistleblower would be an individual that knows of wrongdoing or illicit behavior and they
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report it. Fifth on the chart is internal/external audits and those are reviews conducted by
someone within the organization or a paid outside entity.And the last source listed was third
parties which are any persons are vendors that are not direct employees of the banks. The survey
also states that “more can be done to educate customers and that criminals are choosing to target
them through scams because they are the most vulnerable ” (KPMG, 2019).
Figure 1 was used in the survey to show that most of the participants play an active role
in detecting fraud. In the figure customers identified fraudulent activity at banks more than
automated systems, whistleblowers, audits, and third parties. This is evident that banks should
allot more funds towards educating their clients on scams and fraud prevention because of the
role they are already playing in pinpointing the activity. With the proper educational tools and
knowledge the weakest link in financial insitutions can also be their greatest method of fraud
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Literature Review
The goal of this paper is to determine if the current methods used by financial institutions
to educate clients on fraud prevention are effective and if incentives can help motivate clients to
better protect their information. Clients are being educated by their financial institutions about
fraud prevention in various ways. Educational methods include websites, social media,
pamphlets, electronic communications, and conversations with bank employees. These methods
However, such communication means alone may not be enough as some fraud can be avoided
with reasonable attention to personal information or awareness. This is where incentives could
prove to be an asset. The use of incentives could persuade clients to monitor their information
more closely to better benefit both the client and financial institution.
The use of incentives to help with fraud prevention will be defined and evaluated in this
section. Since the incentives could drive clients to use the information they receive from their
financial institutions about fraud prevention, incentives can also be a way to reduce the amount
of losses that the customers and the financial institutions are experiencing. There are benefits and
up to the financial institutions to determine if the benefits of implementation outweigh the costs
of an incentivized client-program for fraud prevention. The use of incentives would not
necessarily need to be permanent or monetary. This portion of the paper will answer specific
Fraud prevention can be described as the established process and measures taken to stop
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include all parties that fraud can potentially affect. This includes both business organizations and
clients, with respect to fraud affecting their tangible goods, electronic information, and currency.
Fraud prevention should be considered a top priority for consumers and businesses because it
negotiates how losses are prevented and mitigated. Fraud prevention decreases the chances of
fraud happening while increasing the chances of identifying and stopping fraudulent behavior
connectivity of people present fraudsters and scammers with the opportunity to exploit
unsuspecting consumers. Using secure websites, being cautious and knowledgeable of scams,
and keeping account numbers and personally identifiable information (PII) private are some
methods of fraud prevention for consumers. Financial institutions make provisions to prevent
fraud by educating customers with the above-mentioned strategies. Some institutions also make
fraud prevention provisions by evolving how personal information is accessed. Several of these
security questions, and images. For example, when the client of a financial institution attempts to
access their financial accounts, they may be required to authenticate using their username and
password, followed by identifying a preselected image, to access their account. In the event of a
client successfully entering their login information, but noticing an image different than what
they initially preselected, this could immediately alert the consumer to a hacking attempt or a
scam. This multifactor authentication measure allows banks to identify their clients properly
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especially when using digital platforms. It also makes it harder for criminals to gain access
(Britton, 2019).
Multifactor authentication leverages information that the client knows along with
something that they tangibly possess (Whitman, Mattord, Mackey, and Green, 2013). An
example of this would be the client knowing their pin number and using it along with their debit
card to make purchases or retrieve funds from an Automated Teller Machine (ATM). It can also
be a temporary single-use passcodes that are issued when using a new digital platform to gain
access to an account.
takes/3-ways-to-create-more-secure-passwordsTechnology
Some financial institutions have turned to technology to assist in both preventing fraud
and detecting fraud. Automated fraud detection systems are used to detect high-risk activity
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which signals bank personnel to review the account(s). This detection is done in real-time which
makes it easier to verify transactions with clients. This gives the client a better experience
because it reduces the amount of good transactions that are declined (Columbus, 2019).
Automated fraud detection systems monitor patterns about spending amounts, geography, and
vendors to combat potential fraud liability. For example, a client may experience declined credit
card purchases while traveling abroad because the financial institution recognizes the purchase as
something out-of-the-norm. The financial institution may call the client to verify if the purchase
is legitimate. This gives the bank the opportunity to verify questionable transactions with the
client within enough time to have them declined if they are fraudulent.
Security. Security is another method that banks use to prevent fraud. Banks accomplish
this through data security and physical security. Encryption is the main process used in data
security (Andress, 2014). Encryption is the process of encoding data so that only those with
authorization can access it. It is used to protect data that may be housed on portable devices that
can be stolen or lost such as laptops and mobile phones. Password protection is a secondary
information exchanged via email will require a password to open. That password is separately
Physical security entails “protecting data, people (customers and employees), and
equipment” (Andress, 2014). Usernames and passwords are used by employees to access
company owned computers, and limited access is given based on the job everyone performs.
Secure trash and shred bins are locked and placed in protected areas so that employees can
dispose of any documents that may contain confidential employee or customer’s personal
information on it. Access to these bins is generally restricted to disposal vendors. Keycards and
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identification badges are also used to control access to secure areas. Identification prevents the
public from gaining access to areas designated for just employees, and it also prevents
unauthorized users from having access to places like server rooms. Security guards, cameras, and
security systems are used to protect clients and employees from any physical dangers such as
Incentives originally had a negative connotation because they were used by authority
figures to wield authority over people who had less power (Grant, 2011). They are a tool that is
used to alter an individual’s behavior. This tool can be used to persuade an individual to achieve
an intended goal that is in compliance with the organization offering the incentive. Similar to a
bribe, incentives offer something pleasing to an individual in exchange for something that is less
desirable. The difference is that bribes are considered illegal and wrong, whereas incentives are
“A person is offered something of value to him or her in exchange for doing something
valued by the person making the offer” (Grant, 2011). The person has the right to decline or
accept the offer that is presented to them. Forced acceptance and coercion are not factors in the
exchange. This trade-off offers both parties a chance to receive a good, service, or outcome
deemed beneficial. Incentives appear to be win-win, or mutually beneficial situations for all
parties involved. This type of mutually beneficial situation that banks can utilize is a relationship
where customers are incentivized in preventing fraud while bank assets are protected.
Incentives are categorized into two fundamental classifications; monetary and non-
monetary. From these categorizations, they are further divided into four subclassifications. Those
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incentives are those that offer a physical and/or tangible perk. Moral incentives are based on the
belief that behavior or choice is acceptable and right in the eyes of many. Coercive incentives are
the threat of adverse action for incorrect decisions being made. Lastly, natural incentives are
feelings or goals that people use to help them make certain choices. (Subramanian, 2017). Prior
what type of incentive should be offered or which is most appropriate for the type of business
they might find less than appealing. They can be used as a source of encouragement or give an
extra push toward a desired behavior. Incentives are commonly used across various areas of life
including schools, homes, and businesses. For instance, a gold star, a special treat or new toy, or
monetary bonuses are some examples of incentives that are offered in the school, home, and
workplace respectively.
reward or honor for a job well done. Incentives are always an addition to the person it is being
offered to. Incentives certainly include money within its realm of possibility but are not limited
to strictly monetary offerings. Theoretically, the most effective incentives match the desire of the
opposed to monetary rewards, depending on the incentive receiver (L’Atelier BNP Paribas,
2012). It appears that consumers may feel slighted when they can place a dollar amount on the
reward/incentive being offered (L’Atelier BNP Paribas, 2012). In some cases, customers are
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more appreciative of rewards/incentives when they cannot easily assess the value, and it is
presented as a gift such as a plaque or public adoration (L’Atelier BNP Paribas, 2012).
Businesses often use incentives as a marketing tool to retain customers, obtain customers,
and excite customers about new products. Banks commonly utilize incentives to secure referrals
to bring in new business on the part of the consumer. This could appear in the form of a
monetary deposit into an account or fee waiver when a customer helps to secure new business for
the bank through referrals. The goal of consumer-based incentives is to get the customer to help
the business achieve its goals beyond the scope of the employee’s direct control. The consumer-
based incentive program is an inferred, mutually beneficial relationship between the business and
the client. The client benefits when they receive a desired incentive and the business benefits
when its organizational goals are met. Businesses need consumers to participate in the growth of
Incentives are a great way to motivate people to change their behavior, for the purpose of
achieving a desired result. For most, the thought alone of receiving a reward is enough to drive
people to act according to the desired behavior. This is proven by research supported by
Incentive Theory. Incentive Theory articulates that external factors and the longing for rewards
are motivating factors for behavioral changes in people (Cherry, 2019). People can be influenced
to better adjust or correct their behavior when appropriate incentives are offered from a person or
organization.
Customers want to feel appreciated and protected while conducting business. They do not
like to be under the impression that they are being taken advantage of (Mack, N.D.). This belief
is especially true for banking clients who are entrusting their life savings and personal
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information with financial institutions. When banks and investment institutions offer incentives
germane to the customer’s needs and wants, the potential result is the customer believing that the
bank is attentive to their needs. The customer wants to be the focus and priority for the business
they are entering into a relationship with. Appropriate incentives offered to clients can benefit
Incentives can also prove beneficial by providing a reputational boost for financial
institutions and any other organization that employs them. When customers believe they are
receiving extra perks or getting something for nothing they will share that information with
family, friends, and associates. Posts and reviews will be made on social media that can paint the
company in a positive manner and further build the brand. If the incentive program is beneficial
to the customers, it could excite consumers to spread the word to others, ultimately making the
company look good (Olenski, 2014). A good reputation can retain old clients and bring in new
clients as well.
New clients will create revenue for the financial institution, and keeping older clients
satisfied will maintain the revenue stream they already have. Customizing an incentive to meet
the needs of the client can boost sales for a company (Olenski, 2014). An incentive program to
promote fraud prevention can potentially get clients to use more of the bank’s other products.
Preventing fraud also protects the bank’s assets, which also maximizes revenue for the bank.
Being empowered and rewarded for protecting themselves can strengthen the relationship the
customer has with their bank. This allows for trust to be built and further encouraging the
While incentives may offer some benefits, they create risks and issues as well. The goal
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more diligent about protecting their information. The problem is that using incentives is only a
temporary fix. If the incentive is discontinued the customers will go back to their previous
behavior (Kohn, 1993). Fatigue from incentives can also become problematic if the advertised
incentive does not meet expectations. With this considered, clients will only closely monitor
their accounts and their behavior if the incentive is being offered, or meeting their perceived
expectations. If the incentive is stopped the clients would revert to depending solely on the bank
to protect them.
Bank clients should want to take extra care of protecting their accounts and personal
information because it benefits them more than the banking institution. However, the wrong
incentive could produce an adverse effect on the intended behavior. For example, offering
monetary incentives can possibly diminish the actual reason that customers are monitoring and
protecting their information (Kohn, 1993). The appropriate term for this behavior is called the
“crowding-out effect.” This effect occurs when an outside force changes the internal motivation
While incentives can be used to encourage customers to act in desirable behaviors, they
behaviors can be discontinued by offering something appealing to the person exhibiting the
behavior. However, the incentive must be of value to the person to be effective in correcting
unbecoming behaviors. For example, healthcare professionals use incentives in this manner to
When discussing incentives and rewards, intrinsic and extrinsic motivation needs to be
mentioned. Intrinsic motivation is when a person performs an action because they take pleasure
in the action. Extrinsic motivation is when a person performs an action because an outside factor
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is affecting that action. (Ryan and Deci, 2000). As it relates to incentives and fraud prevention,
ideally people should be intrinsically motivated to protect their assets and information. However,
extrinsic motivation is needed through incentives because everyone is not motivated to find joy
in protecting themselves from fraud. With this considered, incentives can prove to be
Incentives can create problems through manipulating behaviors because they can become
the dominative motivating factor in behavior, and adversely diminish intrinsic behaviors (Hidi,
2016). If people are constantly being rewarded for behavior or for completing incentive related
activities, the natural satisfaction people received for doing it begins to dissipate. This creates the
desire to only complete the task to be rewarded which is called “the overjustification effect”
plausible to think that too many incentives offered for menial tasks could present an environment
where people feel entitled to rewards for completing everything. Hence, the only motivation for
desirable behavior is reward. This is not an ideal scenario. However, if the person does not find
pleasure in doing something necessary or important, the incentive will have to act as extrinsic
motivation. Here negative effects are negated because there is no intrinsic motivation to
consider.
Banks are providing consumers with educational material on fraud prevention via a
plethora of communication methods. Sometimes that information is not used or understood and
the customer becomes a victim of fraud, their punishment is usually to suffer a loss in assets,
information, privacy, time, and resources. Many studies have been conducted to evaluate the
effect of rewards and punishment on behavior. This section will highlight how rewards are used
21
as a tool to motivate individuals, in comparison to how punishment is used to deter or stop
unbecoming behavior.
The human brain processes rewards and punishment differently in response to how
behaviors are viewed. The brain is positively receptive to rewards and encouragement than it is
to negativity (Sharot, 2017). In fact, individuals will choose to believe that negative information
does not pertain to them while welcoming positive information. Negative criticisms could even
be considered fair and true; however, the psyche will willingly dismiss the negative information
in some cases, in an effort to process only what is considered positive and rewarding (Sharot,
2017). This could explain how people receive and process the educational fraud information
provided by their financial institutions. They may fall prey to scams because they do not believe
that the prevention methods provided to them by the bank relate to them. Customers may also
feel as though they should not take any responsibility for fraudulent activity that has affected
from scammer and fraudulent activity. This need can be achieved through incentives because the
brain has established that in order to receive the mental reward, the person must make the proper
adjustment (Sharot, 2017). The rewards received are two-fold; there is the tangible reward from
receiving the incentive, and the intangible positive reward that the brain processes. The positive
comparison to how the brain responds to punishment. The fear of punishment can be paralyzing
causing a person to do nothing, and this is a hindrance in fraud prevention. Protecting personal
information requires action and it appears that the use of incentives and/or rewards can promote
that.
22
Rewarding an individual for completing a task is called positive reinforcement and it
creates a pleasant consequence for an exhibited action. In contrast, negative reinforcement gives
the opposite effect. It diminishes the behavior because it offers an unpleasant response (McLeod,
2007). In the banking sector, negative reinforcement would be the client suffering a financial
loss. Since negative reinforcement may not always stop the behavior, positive reinforcement may
be a better alternative for financial institutions. Rewarding clients for not having fraud
perpetrated on their account may be more effective opposed to punishing clients for allowing
Like discussed earlier in the motivation section, there are two different types of rewards:
extrinsic and intrinsic. Extrinsic rewards are financial benefits that promote certain behaviors.
Intrinsic rewards are non-monetary offerings used to elicit a behavior. (Wei and Yazdanifard,
2014). Financial institutions currently use extrinsic rewards when they offer incentives to clients
for referring family and friends. They use intrinsic rewards by offering verbal thanks and
appreciation to the customers for their business. Currently, intrinsic and extrinsic rewards are not
used by financial institutions for fraud prevention, but given the cost of fraud losses with respect
to how consumers can help alleviate the problem, it may be a program worth researching.
manner that reaches the masses. This could be accomplished by maximizing reach through
effectiveness in information retention. Every customer does not learn in the same fashion, so
financial institutions should make provisions and consider learning styles when they are offering
educational material. There are numerous tools and ways to teach people and no one method is
23
superior to the other (Bransford, 2000). Communicating effectively through multiple channels,
with respect to the learning styles, could maximize how fraud related information is disseminated
to clients, and how that information is retained for asset protection. Below is a visual of the
Figure 2. Knowledge of How People Learn. From How People Learn: Brain, Mind,
Experience, and School by J. Bransford, 2000.
Lecture Based Training. Lecture based training is a learning technique that has a
teacher or any other individual verbally explaining and instructing a class or group of people on a
subject. This style works best for audible learners (Fleming, 2018). In a lecture, the
teacher/presenter has authority over the information being presented because they are only ones
in the setting with a thorough knowledge of the subject (Kelly, 2019). Banks could offer lecture-
based fraud prevention classes in their branches or record one and post it on their websites for
24
their auditory learning clients. This information could also be communicated through tellers or
private bankers as clients are completing tasks while physically in the branch or office.
The downside of lectures is that it is up to the audience to take notes and determine which
points are important. Another issue is that there may not be much time for questions and lectures
are one-sided in that the instructor is presenting the information without much interaction from
their audience (Kelly, 2019). In an example with the teller or private banker, casual lecture
would be problematic if a branch is busy or a waitlist/line has formed. Additionally, this method
of learning/teaching may not be stimulating or interesting to some people so it may not draw in a
materials to teach its audience. The materials can be accessed on, “the Internet, intranets, satellite
broadcasts, audio and video tape, video and audio conferencing, Internet conferencing, chat
rooms, e-bulletin boards, webcasts, computer-based instruction, and CD-ROM” (Koller, Harvey,
and Magnotta, M., N.D.). Financial institutions are already using parts of technology-based
training to educate their customers. They are offering videos and reading materials on the
organization’s websites. This material can usually be found under the fraud awareness tab that
will also include phone numbers and links to other websites that the clients can use if they
People have constant access to the internet using laptops, mobile phones, and other
personal devices that offers them wireless access. This allows them to learn any pertinent
information at their convenience and pace. A great example of technology-based learning would
be colleges offering online classes for students to obtain degrees. Advantages of using
technology-based learning is that it is easy to access, can be updated faster to offer the latest
25
version of the information being provided, can be tailored for its audience, and allows the user to
learn and review the material at their own pace (Koller, Harvey, and Magnotta, N.D.).
Technology can maximize reach through social media and applications (apps) with ease and
convenience. Videos, alerts, and fraud information can be communicated easiest through this
means.
The problem with technology-based learning is that some people are not technologically
savvy, and this method can alienate them. One group that this might have a negative effect on is
the elderly. Groups that are impoverished and those who live in areas with limited access to
communication and social media have rapidly evolved within the last 15 years. Learning
technology is a task for some. With this considered, some people would have to learn how some
of learning.
Another issue is that due to the lack of personal contact people using this method may not
put as much effort into learning and/or using the material because they feel their activity is not
being monitored (Koller, Harvey, and Magnotta, N.D.). An example of this would be when
organizations offer their employees computer-based training and instead of reading through the
material they navigate directly to the test at the end of the training. The use of technology is
powerful. However there is no guarantee that everyone can access it nor retain what is
Skills Based Learning. Everyone possesses skills that they are innately born with that
can be expounded upon to learn new information that is being taught. Skill based learning
leverages the knowledge that the person has previously obtained to build a knowledge base in a
26
specific area (ICDAdmin, 2018). With respect to learning, banks can take the knowledge that
their customers already have and use it to further their knowledge on fraud prevention. Those
skills could be put to action by challenging the clients to protect their personal data and account
information. The purpose of learning is to be able to put the new information to use and skills-
The biggest drawback to teaching fraud prevention via skill-based learning is identifying
the skills that people possess. Banks would be disadvantaged in utilizing this method without the
prior use of a poll or survey. While an appropriate strategy to garner this information is plausible,
it also appears tedious to extend the bank's resources to research an area with such an
unpredictable landscape.
learning something new and actively participating in the process (Pedaste et al., 2015). The
individual comes up with theories and concepts about what they are learning. They are
formulating questions and doing the work to answer those questions as part of the learning
process. It is a method that is used by scientists and offers the person a new set of skills to use.
The participants of inquiry-based learning get the opportunity to investigate, access, and analyze
the information they are learning about it. This learning style best for retention of information
because a process was used throughout multiple stages of learning with intentionality. This style
The biggest problem for this learning style is the time needed for customers to devote to
learning in this fashion. Time is valuable to consumers, and devoting time to learning about
fraud may not appear enticing. In addition to the time needed on the part of the consumer, the
financial institution would need to provide the environment and for the learning to take place.
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With this considered, the amount of resources needed to implement consumer-based fraud
training would not prove beneficial. While this learning method may potentially yield the best
Conclusion. Fraud prevention is a methodology for protecting assets that may require a
maximized partnership between financial institutions and consumers to achieve desired effects.
Banks attempting to combat fraud strictly through their respective investigators and fraud
departments is a fair approach, but the banks could benefit from additional involvement from
their customers. The clients, while protected by the bank’s investigators, could benefit from
learning directly from their bank and take added measures in protecting their own assets. Both
parties would find it advantageous to create a mutually beneficial relationship that maximized
satisfaction for the bank’s financial standing and the consumer’s involvement. That process
incentive plan would be justified in money saved versus money spent and lost. It makes sense to
allocate resources to an incentive plan because the benefits would outweigh the costs. There are
fraud schemes and phishing scams that can be avoided altogether if the clients were made more
aware of the threats and were more diligent about protecting their information and accounts.
Incentives have been proven to help encourage a change in behavior to achieve a desired result.
Since banks desire to further include clients in the fraud prevention process, banks should
implement an incentive program for clients to encourage their involvement in preventing fraud.
The details of what an incentive plan could look like may vary according to the resources
available to the financial institution as well as the needs of the consumer. Any effective incentive
plan needs to keep the customer’s needs in mind because offering the incorrect type of plan
28
would result in discouragement and lack of participation. The bank’s clients need to believe that
they are properly being rewarded for their time and effort. Even though a client’s protected assets
should be enough of a reward, that alone has not been enough to motivate more people to take
more ownership in fraud prevention. Another extrinsic motivator is needed; that motivator can be
The correct incentive plan must also be accompanied with the correct means of
communicating the information needed for the plan to work. Special attention must be given to
the method in which consumers gather information and retain information. Banks will need to
evaluate both and begin to combine learning styles and communication methods to maximize
reach and retention. The information given to consumers about fraud prevention is just as
important as the incentive plan used with it. If banks decide to offer their clients an incentive
plan to combat fraud, they would be offering an customer experience unlike any other while
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Discussion of Findings
Fraud prevention is the method taken to stop fraud from occurring. For financial
institutions this means monitoring clients’ accounts and transactions, employing well trained and
knowledgeable staff, and having up-to-date detection systems. One major component that cannot
be forgotten is client education. Educating clients on how to protect themselves against scams
and safeguarding their information is an effective way to prevent fraud. Some of the current
approaches banks offer prevention information to their clients are discussed to determine if the
The effectiveness of the education of banking clients cannot be evaluated until research is
conducted on the approaches currently taken by banks. This section of the paper will attempt to
complete that task by analyzing multiple financial institution websites to identify the methods
they use to educate their customers on fraud prevention. Financial institutions are using their
business web pages to promote fraud awareness. There are entire pages dedicated to informing
clients about scams and protecting their information. The clients are provided with additional
resources including phone numbers and websites to report fraudulent activity or get answers to
JP Morgan Chase has a section on their page describing how clients can protect
themselves. The page advises clients to check their accounts for fraudulent activity and directs
them on whom to contact if activity is found. It informs clients to review their credit reports and
On their security page Chase offers several tabs under the titles: How We Protect You,
How to Protect Yourself, How to Spot Suspicious Emails, How to Report Fraud, System
30
Requirements, Identity Theft Kit, and Vulnerability Disclosure. The Identity Theft Kit is a
twenty-two-page pamphlet that the client downloads. It defines Identity Theft as well as other
terms that are related to the subject. It explains how to prevent identity theft and what to do if it
First Midwest Bank offers its clients prevention information on a Fraud Security and
Awareness page. They break down the page into three sections: Consumer, Commercial, and
Wealth. Under each of these headings are multiple PDF’s titled by fraud type. Once opened each
PDF explains to clients how they can protect themselves against that fraud. Each PDF is about
one to two pages long and is very descriptive. Outside of the PDF’s First Midwest Bank also
offers fraud videos. The first video is of an interview of the bank’s Head of Treasury
F&M Community Bank takes a different approach by offering its clients downloadable
brochures on Identity Theft and protection services through a third party. The protection service
used is called ID Theft Smart and will cost the client $4.95 per month. The website lists the
personal information that scammers target as social security numbers, credit card numbers,
driver’s license numbers, card PINs, and website user ID’s and passwords. Even though it differs
in the approach that it takes this bank is not as detailed with the information they provide as the
Financial institutions have also taken to social media sites such as Twitter to post about
fraud prevention. These sites allow banks to potentially communicate with more people outside
of their client base. The Twitter post will typically contain informative tips and/or
recommendations on fraud awareness and prevention. The post will also offer a way to link the
31
social media users/followers to the financial institution’s website. Once there they will be able to
access the bank’s fraud page to gain more knowledge. An example of a post is provided below.
Facebook is another social media outlet that is used by financial institutions. Social media
allows banks the ability to interact with their clients in real-time outside of a physical banking
center. Bank personnel can write posts and receive feedback from clients, nonclients, and other
businesses. It gives banks a huge platform to educate people which usually consists of videos and
written literature.
Banks are currently offering their clients a plethora of information on how to protect their
data but there is no follow up to see if the client understands what they have read or watched.
There is an abundance of material and no way to measure if it is being used. Fraud prevention
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for financial institutions appears to focus on getting the information to the client but does not go
further unless the client initiates it. Teaching is about more than providing data to a person. It is
also about making sure the person comprehends what is being told to them and ensuring that they
The healthcare industry has been using incentives to get people to schedule and/or attend
appointments, change eating habits, and exercise. The incentives are creating changes in people’s
health and wellness by encouraging them to change their behavior. Aetna Healthy Rewards
offers gift cards to incent clients for taking preventative measures like annual exams and
screenings. Other insurance companies such as Cigna and Blue Cross Blue Shield offer Wellness
Programs as an incentive. These programs give discounted premium prices and gym
memberships. The goal is to reward people for healthy choices such as losing weight, eating
Car insurance companies are using incentives and rewards to entice their customers to
drive safely. Allstate issues points to customers for safe driving and these points can be
redeemed for merchandise. They also offer a Safe Driving Bonus which issues checks every six
months to those customers who are not involved in any accidents. Drive Smart and Save is a tool
used by State Farm Insurance. A mobile app is used to track the customer’s driving and
depending on the activity they can receive discounts on their insurance payments. The app tracks
Grocery stores offer reward cards that allow members the ability to buy one item and get
one free or receive discounted prices on select items. Jewel Osco (part of the Albertson’s, Inc.
grocery company) has a program called Just for You that enables customers to earn points from
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the purchases they make. Those points can be used for discounts on groceries and gas. Walmart
previously allowed customers to scan their receipts and receive a rebate of the difference if they
found a lower price for an item at a different store. Customers could use the refunds immediately
Credit card companies offer multiple incentives: points; cash back; and consumer
protection. Some credit card companies are giving cash back to customers for purchases made
using the credit card. This entices the person to use the card more. Shanika Chapman discusses
how some credit card companies purchase protection. This allows customers to possibly receive
a refund from the card company for products they purchased that they are not satisfied with.
Customers can also receive discounts to merchants based on the rewards program they sign up
Restaurants are taking advantage of the rewards and incentives to obtain new customers
and retain the business of their old customers. Restaurants encourage customers to sign up for
their reward programs to receive perks that only members have access to. This can include free
meals or desserts on birthdays and discounts on meals. Starbucks has a very elaborate rewards
program which keeps their customers coming back. At Starbucks, customers can collect stars
from the purchases they make, and they can even accrue bonus stars. There are days when a
customer can receive double the number of stars. The program allows members to receive
exclusive offers and get free food and drinks. It is a system set up to keep the client frequenting
the merchant by making them feel special and appreciated by the company.
Use of Incentives
Research has determined that there are advantages and disadvantages to incentives. They
can generate business and inform clients of new products and services both of which have a
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positive effect on the business. However, incentives also have the power to create new problems
for the businesses using them. While the bank may consider using them to get clients to become
more proactive it could also create some unwanted behaviors. The clients may only safeguard
their information if they are benefitting financially for doing so. There is the risk that incentives
will only motivate people while they are being offered. Once they cease the desired behavior will
come to a halt.
Another risk of using incentives occurs if clients are not forthcoming about fraud, for the
sake of preserving their incentive. It is possible to consider that if clients are the victims of fraud,
they may not report it for fear of not getting the incentive. This could be harmful if it is a fraud
incident that the bank does not catch. Consumers are already underreporting fraud incidents due
to embarrassment so adding another reason for them to not disclose is not good for the client or
the bank. On a larger scale, this behavior is detrimental to the bank’s financial standing because
unreported fraud schemes could cause an exorbitant amount of unnecessary losses. This scenario
presents a domino effect of losses. First, the customer and bank suffer losses with respect to their
assets. Secondly, the bank loses out on the value of the incentive. Any incentive can feasibly
work for an organization when the return on the investment is greater than the actual incentive
investment. In this case, the return from the incentive investment is devalued because the bank
still suffered a loss from fraud, and the bank will still lose on the value of paying out the
incentive that the bank is attempting to protect. Thirdly, the bank will continue to suffer losses
until someone reports the fraud scheme and corrective action can be put into place to address the
fraud.
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Cost to the financial institution to implement incentives
Depending on the size of the financial institution and the type of incentive program
chosen the cost could range anywhere from thousands to millions of dollars. The marketing team
or department would need to determine what type of incentive or reward program the company
would like to use. Those individuals will receive their normal payroll package and there may be
overtime for any extra research conducted outside of regular work hours. Marketing will also
have to determine which customers they want to offer the incentive to and for how long.
The length of the incentive offered plays a major role in the cost. The longer the program
runs the more money the bank spends. The banks will have to pay for the rewards that are being
offered to the customers which can consist of gift cards, funds deposited to the client’s account,
or higher interest rates on savings accounts. A budget will also be needed for marketing to
promote the incentive program. This could be radio and television advertisement, flyers, posters,
and/or pamphlets.
Banks could flag the accounts in the system that are participating in the reward program.
This would determine if the account is free from fraud for the allotted amount of time so a
decision can be made to issue a reward for meeting the program criteria. The accounts would
also need to be monitored to ensure that fraudulent activity is not taking place in relation to the
incentive program. There will always be the potential of fraud in the incentive program and this
may lead to the bank having to spend money to prevent it or stop it.
If financial institutions decide to not make any changes to the way in which they educate
their clients on fraud prevention they would not incur any additional costs. They would only
spend money on the upkeep and updates to the information they are already providing. However,
36
there is a possibility that financial institutions would need to spend money even if they do not
make changes to the way they educate their clients. Extra funding may need to be spent on fraud
detection methods if the clients are not putting the material to use. Fraud detection systems may
The use of incentives would be an additional cost that some banks may or may not be
willing to accrue. Since there is no guarantee that the use of incentives will prevent fraud and
save the bank money the most cost-effective method would be to do nothing. Instead of using
funds to create an incentive program, existing funds expenditures could be used to enhance the
Financial institutions typically budget for losses. They forecast for expected losses for the
year or quarter. If the fraud department stays within that prediction the bank would not suffer any
unexpected losses and if the department stopped more fraudulent activity than anticipated the
bank would save money. This would allow them to continue to operate in the same manner
37
Recommendations and Conclusion
The only way to truly determine how financial institutions educate their clients on fraud
prevention is to examine the individual banks. From the research that was conducted for this
paper it has been determined that the education of bank clients is not being monitored or
measured. There were no studies conducted or articles written on the effectiveness of the current
Since education is the primary way for clients to protect themselves against fraud, studies
need to be conducted on what is the best method to use. The ways that are being offered by
financial institutions currently are effective but only for those that make the effort to look for the
information online or are connected to their banks via social media. More options should be
offered to clients of financial institutions since they are the primary resources in combatting
fraud.
held at their branches. They could also investigate having someone from their fraud department
visit senior homes and apartment complexes to talk to the residents about protecting themselves.
This would give the clients the opportunity to ask questions about anything they are unclear on
or unsure about. These sessions could also be held on college campuses, at high schools, and
A great idea for financial institutions would be to have a fraud liaison. This could be a
single person or a department of individuals that focus solely on fraud education. They can
ensure that the branch personnel are equipped with the knowledge they need to answer client
38
questions and be a resource when fraud occurs on their accounts. They can also find new and
A major part of educating clients on fraud prevention is making sure that information is
reaching the client. Just making reading materials and videos available online is not enough.
Dedicating an individual or individuals to find ways to reach clients online and in person can be
very beneficial for the financial institutions and their clients. Clients should not speak with a
While providing educational reading material helps those that learn in that manner other
methods need to be used to reach more clients. Some of the fraud prevention learning should be
interactive so that clients get a chance to determine if they comprehend what they are reading.
One way to do this could be to offer clients computer-based training in the same way this
training is provided for bank employees. The classes can be offered to clients to take at their
leisure and an incentive could be attached for those that take advantage of the online courses.
However, there are negative aspects to incentives as well. Further research will need to be
conducted to determine if using incentives to get people to protect themselves and their personal
information against fraud is beneficial to banks and their clients. This can be done by having a
financial institution incorporate incentives on a trial basis and document how they are received
If banks offer computer-based training clients can receive gift cards or points for taking
and passing the training class. They could also be used to entice clients to attend any workshops
or classroom training that the banks could start offering to teach fraud prevention lessons.
39
Incentives/rewards could be offered to all those that attend the session and stay until the end.
This would get people in the door and allow them to ask questions and gain clarity on areas that
they are not clear on. Banks could use this time to determine just how much their clients know
about fraud prevention and the steps they need to take to protect their personal information and
accounts.
Once the clients have been given the tools, they need to protect themselves against fraud,
incentives can be used to encourage them to use what they have learned. Financial institutions
could offer incentives to all those individuals that maintain fraud free accounts for a certain time
frame. It could be six months, eight months, or even a year. The goal would be to get clients to
monitor where they are using their debit cards, safeguard their checks, update and protect their
username, passwords, and PINs, and monitor their credit reports to ensure that their social
banks could potentially see a decline in the number of fraud cases they are working. Bank
customers would become a first line of defense against fraudulent activity for the bank. In an
effort to keep their accounts fraud free clients may ask bank representatives questions before
applying for an online loan with an unknown company. They may call the bank to verify if they
should deposit the check that they randomly received in the mail or if they should send money to
These incentives could also be offered to business clients. They could be used in a way
that gets the clients to double check and authenticate emails and wire instructions. Instead of
offering gift cards or cash, businesses could receive a free service or a percentage off a product
40
“Clients want to know they can trust their financial institutions to be dependable and to
put their interest first” (Groenfeldt, T., 2017). This builds healthy relationships between the
clients and the financial institutions. Banks offering multiple ways to educate clients on fraud
prevention and offering incentives to get them to use the information can be a great way to
strengthen existing relationships and initiate new ones. It can also help to promote a positive
reputation for the financial institution that chooses to incorporate the clients into their fraud
prevention techniques. Clients get to feel that their bank cares about them and their business and
the banks get to add another layer of protection to their prevention and detection methods.
Criminals are using the latest technology and their counterparts to scam innocent victims
out of billions. If banks are going to stand up against them, they will need to use every available
resource that they have and their biggest one is the client. But before they can use them, they
must ensure that they are properly educated on fraud prevention. While finding new ways to
educate clients and offering incentives may cost the bank money it will save them and their
clients’ money in the long run. This strategy has the potential to create new revenue by bringing
Conclusion
Fraud will never stop and fraud losses to financial institutions will never be completely
diminished. However, it can affect fewer people and some if not most of the losses can be
mitigated. The problem is that banks cannot rely solely on their fraud departments to do all the
work. What is needed is a collaborative effort between the fraud department, the clients, and
other bank personnel. All these groups need to be included in fraud prevention because they will
all be affected when there is fraudulent activity. You are only as strong as your weakest link, so
41
Clients should not believe that it is solely up to financial institutions to protect them and
their assets. They need to become a part of the solution instead of being a part of the problem.
Financial institutions offer training and educational courses to their employees to ensure that
they know how to do their jobs and protect the sensitive information that they encounter daily.
They should want to do the same thing with their clients to create an extra layer of protection. If
clients can defend themselves against scams it allows financial institutions to focus on other
areas.
Clients becoming part of the solution would include understanding and believing that
they are being scammed. There are instances when banks inform clients that they are being
scammed and the client does not believe them. Banks will inform he client that the funds transfer
is fraudulent but the clients will insist that it is processed because they believe the transfer and
the person they have been dealing with is valid (KPMG, 2019). This behavior and belief on
Client education is important and what financial institutions are currently offering is
effective, but it is not enough. More methods can be used to reach and educate a larger number
of clients. Incentives can help financial institutions educate more people and prevent fraud, but
banks need to determine the best way to use the incentives so that they do not become a problem.
Expanding on the methods used to educate clients and incorporating client incentives into fraud
prevention methods could be just what banks need to mitigate their fraud losses because
according to the KPMG survey, “Over half of their respondents said fraud recoveries were less
Banks can suffer more than financial losses. If a client is scammed and suffers a financial
loss it is up to bank personnel to interact and work with that client. This can be time consuming
42
and emotionally draining for that employee (KPMG, 2019) because they have to deal with a
client that is possibly upset and frustrated. Bank employees are having to deal with the clients
once they find out they have been scammed and their money is gone, or they have to inform the
clients that the money is gone. This can turn into a very emotional and tense interaction between
This makes client education and incentives beneficial to the bank and the client. It has the
potential to save both parties money and time. It also can have a positive impact on the mental
and emotional well being of the bank clients and employees. Clients need a aclear understanding
of what scams are, who can become a victim, and how they effect people. Investing in new and
43
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