Not everyone leaves the game of hide-and-seek behind in childhood. Geocaching, a twist on hide-and-seek where items or clues are hidden and buried in remote locations around the world for others to seek out through an app that provides a combination of coordinates and location details, boasts more than 3MM players around the world. There are currently more than 3.4MM “geocaches” hidden around the world for people to find, with treasures ranging from simple trinkets to prizes such as fast-food gift cards. In 2022 alone, players recorded successfully discovering more than 83 individual geocaches.Much like geocaching has turned hide-and-seek into an attractive form of entertainment for adults and young people, the banking industry is also embracing the usefulness of digital geographic clues. In the case of the latter, however, it is no game. The Power of Knowledge The convenience of digital payments has been embraced by people around the world. Unfortunately, it has also been embraced by criminals and has led to a surge of fraud over the past few years. As financial institutions scramble to rein in fraud, geolocation is a tool that many are adding to their arsenal.
Geolocation is the real-time identification of a connected electronic device’s geographic location through digital technologies such as an IP address or GPS. By tracking customers’ typical spending patterns and the geographic regions where they routinely make in-person purchases, financial institutions can establish virtual perimeters and geographic regions for individual customers based on their historical patterns. Such information can then be compared against real-time purchases and transactions to identify suspicious activity. Targeted Fraud Control EffortsIn cases where transactions do not align with a customer’s historical behavior and appear suspicious, financial institutions can send a fraud alert to customers and ask for confirmation before allowing a charge or withdrawal to proceed. In some cases, banks are even adding artificial intelligence capabilities into the mix, allowing the information from geolocation to be measured against additional information, such as the databases that many financial institutions maintain of IP addresses known to be fraudulent. While banks such as ICICI Bank, Standard Chartered Bank, and HDFC Bank have already begun using geolocation to help with fraud prevention, many others have been focusing their cybersecurity efforts elsewhere. But there’s a chance that regulators could ultimately be a driver for widespread adoption of geolocation among the rest of the industry, as the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently taken action against both financial institutions and retailers who failed to utilize such tools for cross-border transactions. In the case of Tango Card, an electronic rewards company, the business was fined for allowing the transmission of close to 28K promotional debit cards and gift cards to people whose email or IP addresses were linked to places including Iran, Syria, Cuba, and North Korea. Security Benefits, Plus Targeted Marketing The benefits of geolocation extend beyond security, as well, providing financial institutions another way to enhance the customer service experience. Around 74% of Americans actively use at least one mobile banking app, according to Consumer Reports. As almost all of these apps include social media geolocation capabilities, some businesses have begun using this information to provide customers with special offers related to their physical location in real time. For example, CFIs (or their partners) could send customers texts with information about special offers from nearby stores or available services they have previously used that are close to their current geographic location. Another way to use this information is to contact customers who may have just used a competitor’s ATM and inform them of a nearby ATM from your organization or one that has lower fees. Since the findings of a recent survey from GoBankingRates found that lack of usability is a major reason people switch banks, trailing only higher fees, such real-time information for customers can be a good way to enhance the value they see in their financial institutions.Appeal to CustomersWhile the benefits of geolocation should be attractive to all customers, the technology can be particularly useful for CFIs when it comes to strengthening ties to members of Generation Z, who have grown up with digital offerings. Since members of this generation are heavily reliant on mobile banking and are active users of multiple apps, the ability to enhance their user experience can help you foster greater ties with customers within this demographic.Of course, there are potential downsides that CFIs need to be aware of. Since many people are particularly sensitive about how their personal information is used, particularly younger individuals such as Gen Z members, it is important to be transparent about how and why your organization is embracing geolocation and to outline the controls you have in place. But as long as your organization is clear about its usage of the technology and provides people the ability to opt in or opt out, such risks can be minimized. As CFIs seek new ways to enhance their fraud controls and strengthen ties to younger customers, geolocation is something they may want to consider. If used well, geolocation can be a good way to provide both a more tailored customer service experience and greater confidence in the security of your organization.
Geolocation is the real-time identification of a connected electronic device’s geographic location through digital technologies such as an IP address or GPS. By tracking customers’ typical spending patterns and the geographic regions where they routinely make in-person purchases, financial institutions can establish virtual perimeters and geographic regions for individual customers based on their historical patterns. Such information can then be compared against real-time purchases and transactions to identify suspicious activity. Targeted Fraud Control EffortsIn cases where transactions do not align with a customer’s historical behavior and appear suspicious, financial institutions can send a fraud alert to customers and ask for confirmation before allowing a charge or withdrawal to proceed. In some cases, banks are even adding artificial intelligence capabilities into the mix, allowing the information from geolocation to be measured against additional information, such as the databases that many financial institutions maintain of IP addresses known to be fraudulent. While banks such as ICICI Bank, Standard Chartered Bank, and HDFC Bank have already begun using geolocation to help with fraud prevention, many others have been focusing their cybersecurity efforts elsewhere. But there’s a chance that regulators could ultimately be a driver for widespread adoption of geolocation among the rest of the industry, as the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently taken action against both financial institutions and retailers who failed to utilize such tools for cross-border transactions. In the case of Tango Card, an electronic rewards company, the business was fined for allowing the transmission of close to 28K promotional debit cards and gift cards to people whose email or IP addresses were linked to places including Iran, Syria, Cuba, and North Korea. Security Benefits, Plus Targeted Marketing The benefits of geolocation extend beyond security, as well, providing financial institutions another way to enhance the customer service experience. Around 74% of Americans actively use at least one mobile banking app, according to Consumer Reports. As almost all of these apps include social media geolocation capabilities, some businesses have begun using this information to provide customers with special offers related to their physical location in real time. For example, CFIs (or their partners) could send customers texts with information about special offers from nearby stores or available services they have previously used that are close to their current geographic location. Another way to use this information is to contact customers who may have just used a competitor’s ATM and inform them of a nearby ATM from your organization or one that has lower fees. Since the findings of a recent survey from GoBankingRates found that lack of usability is a major reason people switch banks, trailing only higher fees, such real-time information for customers can be a good way to enhance the value they see in their financial institutions.Appeal to CustomersWhile the benefits of geolocation should be attractive to all customers, the technology can be particularly useful for CFIs when it comes to strengthening ties to members of Generation Z, who have grown up with digital offerings. Since members of this generation are heavily reliant on mobile banking and are active users of multiple apps, the ability to enhance their user experience can help you foster greater ties with customers within this demographic.Of course, there are potential downsides that CFIs need to be aware of. Since many people are particularly sensitive about how their personal information is used, particularly younger individuals such as Gen Z members, it is important to be transparent about how and why your organization is embracing geolocation and to outline the controls you have in place. But as long as your organization is clear about its usage of the technology and provides people the ability to opt in or opt out, such risks can be minimized. As CFIs seek new ways to enhance their fraud controls and strengthen ties to younger customers, geolocation is something they may want to consider. If used well, geolocation can be a good way to provide both a more tailored customer service experience and greater confidence in the security of your organization.
