Rethink the Trade-offs Between Fraud Prevention and Account Opening Speed
By Caroline Hroncich, Contributor at The Financial Brand
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Every application that stalls at an identity check costs a bank or credit union a customer it paid to attract. Yet most institutions judge instant verification by the fraud it stops, counting only the bad applicants it catches and ignoring the good ones it wrongly turns away.
Those numbers leave out a big part of what verification is worth. Speed at that step also decides how many applicants go on to fund their accounts. Standard fraud measures, borrowed from cybersecurity, only look at people who got through verification, so they miss everyone who quit along the way. Counting the drop-offs at each step and the accounts that get funded turns the same data into a record of whether verification is winning customers — or driving them away.
That shift gives fraud controls a bigger role. “If you can get to this place where we don’t catch our good customers at fraud traps, your fraud controls can actually become a growth lever,” says Jeff Scott, general manager of fraud intelligence at Q2, which provides digital banking and fraud prevention software to banks and credit unions. Getting there starts with rethinking when verification happens and what gets measured once it’s done.
Key insight: The data fraud teams already collect can measure growth once it includes the applicants who quit and the accounts that get funded.
Need to Know:
- Digital checking applications were abandoned 3.36 times for every one completed in 2025, according to Cornerstone Advisors’ benchmark study commissioned by Alkami.
- Standard fraud scores leave out applicants who quit mid-application, so a step that drives people away can still look like a strong control.
- The most abandonment happens at document or photo upload steps and when applicants face repeated step-up checks, says Q2’s Scott.
- Direct deposit and routine debit card use help confirm a new customer is legitimate after the account opens.
Fraudsters Navigate Your Controls More Easily than Real Customers
The front door is the first stretch of the application, the identity and document checks an applicant hits before an account opens. It’s where both pressures meet: fraudsters attack there, and good applicants decide whether to keep going.
Certainly, attacks are getting harder to stop. The checks institutions relied on for years, a document scan, a credit pull, out-of-wallet questions, are easier to beat with breached data and cheap tools. Entrust, an identity verification provider, analyzed more than 1 billion verifications it ran between September 2024 and September 2025. Digital forgeries made up 35% of document fraud attempts, and deepfakes accounted for a fifth of biometric fraud attempts. Injection attacks, which feed fake images or video straight into a verification system, rose 40% year over year. “In this world of AI, we’ve essentially made the cost of perpetrating fraud $0,” says Scott.
Moreover, fraudsters usually arrive prepared, with stolen identity data in hand, says Scott. “The real customer is the one that gets stuck re-uploading the blurry photo of his or her license,” he says. He sees the most abandonment at the photo upload step and when applicants face one step-up check after another. “Once the applicant walks away, especially from a digital application, they rarely come back.”
Hal Lonas, chief technology officer at identity verification provider Trulioo, sees the same risk from the institution’s side. “I don’t want to hold them up too soon in the process because they might get disenfranchised and go away,” he says.
Adding checks doesn’t solve this. Many legacy fraud tools return one of three answers, approve, reject or try harder, says Sean McElroy, chief risk officer at Lumin Digital, which provides digital banking software to banks and credit unions. Each “try harder” passes the applicant to another tool. “Just piling up checkpoints sort of puts the burden on good customers without stopping much fraud,” says Scott. McElroy agrees. “As those technologies become better at fooling the front door, you don’t want to add more front doors,” he says.
Fast Approval Can Be Where Verification Starts, Not Ends
Instant verification speeds up the front door and still checks who the applicant is. Lonas starts with device intelligence, which flags phones tied to known fraud, then matches the applicant’s name, date of birth and address against third-party and credit data. It takes seconds, and depending on how an institution is regulated, it can be enough to approve someone without a document.
On the account side, instant verification lets applicants link an existing account at another institution. “A lot of people are now thinking about, let’s put that at the very front, because it’s a very strong signal,” says McElroy. “You’re not asking them to do much more than maybe open their password manager and connect an account.”
The goal is an account opened by a legitimate person who funds it and keeps using it. Fraudulent accounts and abandoned applications both stand in the way, and instant checks help with each. They screen applicants early without slowing down genuine ones, and a linked account gives new customers an easy way to make their first deposit.
Post-approval, Institutions still need to confirm the customer is who they claim to be and learn how they use the account. Lonas recommends a document check later if a transaction tops $10,000 or the profile changes. Some institutions open the account right away but hold back riskier features, like small business invoicing, until the account shows signs of everyday use, says McElroy.
Two kinds of activity point to a legitimate customer. Direct deposit shows there’s an employer behind the account. Routine debit card purchases, like groceries, are the other telling sign, says McElroy.
Key insight: Instant checks get good applicants approved and funded quickly, but verification continues after that. Early direct deposits and card spending keep confirming the customer is legitimate, and that same activity turns a new account into an active one.
- Add instant identity and account checks near the start of the application so applicants can get approved and fund their account in one sitting.
- Leave direct deposit and debit card ordering open from day one and withhold features with the most fraud exposure.
- Define activities, like a first payroll deposit or routine card spending, that unlock each next tier of access.
- Set step-up checks tied to large transactions and profile changes.
Fraud and Growth Teams Need to Look at the Same Numbers
A verification step can post strong fraud scores and still cost an institution good customers. McElroy gives an example: an applicant whose phone can’t take a clear photo of their driver’s license gives up. That person never gets scored, so the document check records no false rejection and looks like it’s working. “Your metrics are way off, and you may not even know it,” says McElroy.
Scott measures verification on both sides. “The fraud loss here matters, but it’s only one part of the picture,” he says. He also tracks how many good applicants got flagged, where applicants walk away, how long it takes to clear someone who got flagged, complaints and calls to the branch, and accounts that never get funded. Those numbers show how many checks an institution can add before lost applicants cost more than the fraud the checks prevent.
At many institutions, those numbers sit with different teams. Fraud and compliance track how much fraud gets caught, and growth tracks completed and funded applications. Lonas says the two sides rarely talk regularly and often meet only when a problem arises.
The volume of attacks makes that split harder to manage. Institutions used to have time to review suspicious activity and staff to do it, says Scott. Now attacks come too fast for people to keep up. He says institutions need automated tools that can add a check, block an applicant or limit what an account can do within seconds, with an analyst making the final call. “AI can watch all the screens all the time, and all at once,” he says.
Key insight: A verification step costs an institution in two ways: fraud that gets through and good applicants who don’t. Both belong on one scorecard that fraud and growth teams read together.
- Put step-level drop-off, funded accounts and fraud losses on one dashboard.
- Track how long flagged applicants wait to be cleared, plus related complaints and branch calls.
- Trace every confirmed fraud loss to the step that missed it.
- Hold a monthly review where fraud, compliance and growth leaders go over the numbers together.
