Financial fraud has been rising dramatically in recent years, and consumer trust in the ability for banks and other institutions to keep their data safe is dwindling. Geolocation technology provides a bridge between the physical and digital worlds that has the potential to win back the trust of consumers, particularly Generation Z, with their particular brand of savvy-yet-skeptical banking habits.
It’s a non-negotiable today for banks to provide robust apps alongside their traditional offerings. Seventy-five percent of Americans use one or more mobile banking apps, according to 2024 data from Consumer Reports. That’s more than the 72.5% of Americans that use social media. Embedding geolocation capabilities, with the appropriate safeguards, can greatly improve user experience while combating fraud and other security concerns.
“For example, banks and credit unions can send notifications about nearby stores or relevant services based on the customer’s current location, significantly improving customer engagement and satisfaction,” explains Maria Echeverria, vice president of business development for Latinia, which creates real-time decision and communication software products for the financial sector. “And by tracking the location of transactions, banks can detect and prevent fraudulent activities. If a transaction occurs in a location far from the customer’s usual location or in multiple locations simultaneously, it can trigger an alert for potential fraud.”
Embedded geolocation technology can bring together the physical and digital worlds, tracking real-world location data to improve banking services digitally. A seamless digital experience should be a priority for bank marketers, as next to high fees, lack of usability is one of the top reasons customers switch banks, according to a recent GoBankingRates survey. Thirteen percent of respondents said they were considering leaving their bank due to concerns around online access, and 10% considered leaving due to accessibility both to physical locations and to online banking options.
“There is significant concern regarding the privacy of bank customers as geolocation data can reveal sensitive information about their whereabouts and habits. But these issues can be minimized via practices such as data minimization, for example, a concept by which banks only collect the data they strictly need to provide certain services and retain that data only for as long as necessary.”
— Maria Echeverria, Latinia
Financial crimes like check fraud and debit card skimming have recently been doubling year-over year, and these trends do nothing to ease the fears of American consumers who are already very uneasy about their data privacy. Most – 81% – are “concerned” about how companies use the data they collect; and 67% are “confused” and have little to no understanding around the use of that collected data, according to the Pew Research Center.
But it’s physical pitfalls – check theft, compromised ATMs, geographic regions with higher crime rates – not digital ones, that are of most concern when those areas of financial fraud rise at the highest rates. FICO found that most points of compromise for debit card breaches occur at physical ATM locations. Geolocation technology has the potential to combat these “legacy” forms of fraud. It’s the task of bank marketers to effectively communicate this to customers, building trust and customer loyalty.
Getting Consumers Comfortable With Geolocation
1. Provide undeniable value
While consumers might be concerned and confused by digital data gathering, they also love personalized experiences when it comes to their online activities. Data consistently shows this, despite concerns around how exactly those personalized experiences are achieved. Accenture’s last Personalization Pulse Check report (from 2018) found that 91% of consumers are more likely to shop with brands that recognize, remember, and provide them with relevant offers and recommendations.
“Geolocation provides banks with detailed insights into customer behavior and preferences, allowing for more accurate targeting of services and products,” says Echeverria. “Imagine a bank customer is visiting a new city and needs cash for services. Upon withdrawing money from the nearest visible ATM, the bank detects the transaction using the customer’s debit or credit card information. Immediately, the bank sends a real-time alert to notify the customer of the withdrawal and suggests a nearby affiliated ATM, identified through geolocation, that can help the customer avoid future withdrawal fees. This type of personalized advice enhances the overall customer experience.”
2. Communicate transparently
Do your customers know exactly how you are gathering their data, and what you are doing with it? Good customer experiences are undeniable, but transparency functions almost as a value-add in today’s climate of rising fraud and declining trust. While consumers are wary of how companies collect and use their data, Accenture’s report shows 83% are willing to share their data if businesses are transparent about how they will use it.
“There is significant concern regarding the privacy of bank customers as geolocation data can reveal sensitive information about their whereabouts and habits,” says Echeverria. “But these issues can be minimized via practices such as data minimization, for example, a concept by which banks only collect the data they strictly need to provide certain services and retain that data only for as long as necessary.”
One way banks can build trust through communication is providing privacy policies that are easy to read and understand. The benefit is twofold: Customers have insight into how their data is being collected; and they build trust in their financial institution that communicates with them. openly.
3. Implement consent and control
Building in as much choice and control over how users interact with these apps – with appropriate security measures in place – is a major opportunity for banks to build goodwill and satisfaction with their customers.
“Providing customers with the ability to opt-in or opt-out of geolocation services, and control over their data, can help build trust,” Echeverria notes.
This opt-out or opt-in option allows customers to see, in real-time, the benefit of geolocation services when turned on. Getting granular information about their data preferences allows them to operate more as partners in their online security, rather than confused participants in policies they have no say in.
Read more:
- Why the AI Revolution Is Being Led from Below
- For Gen Z and Millennials, Embedded Loans Beat Traditional Credit
- Are Banks Suffering From ‘Innovation Fatigue’ at the Worst Possible Moment?
Geolocation Could be the Key to Gen Z Customer Acquisition
The last two decades have seen financial institutions figure out how to cater to the millennial market. But in just 10 short years, Generation Z – true digital natives – are set to become the largest generational cohort in the U.S. Because of their unique digital and banking habits, geolocation could prove to be the key to Zoomer customer acquisition.
In their banking habits, Generation Z demands digital ease as well as easy access to physical locations, more so than their millennial counterparts. In fact, proximity to an ATM is the top factor Gen Z customers consider when choosing a new bank, according to a report from eMarketer. The majority of Zoomers (70%) have used physical bank branches to purchase banking products and services, while only 50.6% have used their mobile device. By 2027, 97% of Gen Z will be mobile bankers, totaling 52.5 million, according to eMarketer forecasts – a major customer acquisition opportunity ahead. Physical location data will be imperative to capturing this market, considering what is important to them.
There is also an opportunity here to mend consumer trust in data privacy. As digital natives, Generation Z have a certain savvy around data privacy that previous generations missed out on. In general, they are the least concerned about how companies use their data; but they are also the most skeptical of companies’ ability to keep their data safe, according to eMarketer. This is where transparent communication, and consent and control, can capture consumer trust.
And the good news is U.S lawmakers are taking data privacy seriously, especially given the rapid development of artificial intelligence in the tech sector. In April, the U.S. House of Representatives passed the Privacy Enhancing Technology (PET) Research Act, a piece of legislation that empowers the National Science Foundation to research how to mitigate individuals’ privacy risks, and supports research, workforce development, standard setting, and government coordination for the development of PETs. The banking sector should harness this legislative movement to their benefit and implement every safeguard they can to ensure their customers’ location data is protected – and then communicate that.
Ranica Arrowsmith is a freelance writer based in New Jersey, focusing primarily on the technology, finance and accounting industries. She has written for Accounting Today, MarketWatch Picks, and other publications in the medical technology space.