PCM Vol.2 - Issue 6

expert interview
Understanding the
Total Cost of Friction
Armen leads worldwide marketing strategy and
execution for ThreatMetrix. Previously, he directed
the go-to-market strategy for IBM’s $1B portfolio of
100+ SaaS solutions. Armen joined IBM through
the $440M acquisition of DemandTec, where as VP
of Corporate Marketing he built a modern demand
generation engine and repositioned the business
supporting a 3x increase in revenue over a 5 year
span.
Armen Najarian
CMO, ThreatMetrix
Tech-savvy millenials are
becoming the predominant
demographic as customers as
well as employees. We talk to
Armen Najarian from ThreatMetrix,
about the right balance of remaining the
competitive with new tech innovation
whilst not compromising the customer
experience.
PCN: When you talk about ‘Digital
Transformation’ in the Financial
Services industry, what does that mean
to you?
AN: Digital Transformation as it relates
to fraud and security breaches is no
longer just an IT issue, it’s a business
issue. Banks don’t typically measure
the cost of friction but the tangible
losses are in the billions. Banking and
Commerce transactions are increasingly
done online or via mobile devices and
we’re putting our personal information
out there at an accelerated rate. This
creates greater opportunity for fraud
and security breaches.
When fraud occurs two things happen: 1.
the industry responds by implementing
stricter authentication measures -
passwords, captchas, verification
codes - that end up hampering the
user experience, and 2. customers lose
trust. Adding more hoops for users to
jump through degrades their experience
enough that they can be willing to walk
away - creating financial loss. On the same
hand, loss of customer trust means that
they won’t be recommending services to
friends and family, and that also results
in financial loss. Digital transformation
effectively addresses business concerns
and IT concerns, minimizing customer
friction while tackling fraud.
PCN: In March, 2016, First Annapolis
conducted a study* on behalf of
ThreatMetrix on controlling friction
while tackling cybercrime. What
surprised you most about the data?
AN: There were a couple of things. The
sheer volume of individuals using digital
means for important transactions, and
the high cost of loss due to fraud and
friction. In our study, 38% of people
reported experience with banking and
payments fraud within a 3-year period.
66% had their payment card information
compromised, while 45% said their
information was used to make online
or mobile purchases. Because of fraud,
90% took actions to secure their account
and 34% changed their behavior, but
10% actually left their bank. Of the
demographics, millennials were more
inclined to take action as a result of real
or perceived problems.
Let’s talk about that 10%. Assume that
of 215.1MM banked consumers, 9%
experienced fraud in the last 12 months.
That’s 19.4MM fraud victims, of which,
the 10% that left/will leave amounts to
around 1.9MM relationships lost. No
matter what the dollar value of those
relationships, that’s a staggering loss.
PCN: As a consumer, wouldn’t you
rather go through challenges than risk
compromising your identity and data?
AN: The Catch-22 for the industry is that
the cost of fraud and fraud prevention
is significant, but so is the cost of
friction created by customer-facing
step-up challenges. The study shows
that fraud and the customer response
to it don’t vary much by geography
or demographics. The majority of
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