As credit default and fraud rates rise, 70 percent of financial services executives are not confident in their ability to modify risk decisioning quickly to keep pace with shifts in consumer behavior and the economy. Additionally, 43 percent say identifying fraud is a top challenge, yet only 7 percent report their anti-fraud measures are completely effective, according to a new survey conducted by Provenir, a global leader in AI-powered risk decisioning software.

Risk decisioning is especially crucial as credit policies tighten and there is a need for financial institutions to closely monitor portfolios to understand and manage risks associated with extending credit and mitigate the probability of default. Additionally, it’s an essential component of financial inclusion – making financial services accessible to and affordable to all individuals and businesses.

Provenir surveyed senior decision makers at financial services providers and fintechs to understand their risk decisioning challenges, customer management priorities, and confidence in the accuracy and flexibility of their risk models. This is the second year the company has fielded the survey.

The full report of the survey findings can be found at: https://www.provenir.com/resources/collateral/global-risk-decisioning-survey/

Almost 40 percent of respondents say their risk decisioning is only “somewhat” or “not at all” accurate, compared to 83 percent who responded this way in last year’s survey. While overall confidence has improved year-over-year, there is marked room for improvement in decisioning agility to keep pace with shifts in consumer behaviour and the economic environment.

Data orchestration and risk decisioning processes spanning identity, credit and fraud are imperative to enable financial institutions to put in place strong anti-fraud measures; however, 43 percent say identifying fraud is a top challenge, yet only 7 percent are completely confident that their anti-fraud measures are completely effective. This is concerning at a time when financial institutions are facing increasing financial fraud. A TransUnion study found the percentage of suspected global digital fraud attempts in financial services has increased significantly in recent years. 

When asked about top risk decisioning challenges, almost half of financial services providers cite managing risk across the customer lifecycle (49%) and developing and deploying risk decisioning processes (48%) as their biggest challenges.

Globally, managing customers post-acquisition was the primary focus for more than half of all financial services providers when asked about their key objectives over the previous six months.

Credit risk management is key to helping financial institutions redefine business models, offer new products and services, and transform customer interactions. But data challenges and an inability to execute real-time decisioning stand in the way of hyper-personalization of offers, promotions, and service for financial services providers. This may be why only 10 percent of organizations surveyed report growing customer wallet share through cross/upsell tactics is a priority.

“In a challenging economy, it becomes even more critical to proactively manage and mitigate risk,” said Geoff Miller, Chief Commercial Officer at Provenir. “If an organization can do this well, they improve customer retention, reduce defaults, and maximize financial inclusion and revenue opportunities. Decisioning – to support credit, fraud, compliance and product decisions – is the foundation for long-term success, growth, and profitability in the financial services sector. Organizations can gain tremendous competitive advantage with AI-powered decisioning complete with case management, data, and insights, to support smarter, faster risk decisions across the entire customer lifecycle.”

The survey was conducted in September 2023; 314 respondents based in North America, EMEA and Asia Pacific regions participated, holding the titles of manager, director, vice president, or above.