Today, retail and investment banks worldwide face a pivotal moment in their evolution, as banking transitions from a digital-first towards a digital-only landscape. The COVID-19 pandemic has reduced traditional face-to-face or high street banking and forced those previously resistant to or unable to access digital banking. This understandably creates significant anxiety and fear around fraud, identity theft and financial crimes in general.
As we approach nearly ten months into the pandemic, the world still faces unprecedented levels of uncertainty. A global recession even more severe than in 2008, the second wave of contamination, a vaccine that can prevent the disease: these are all up in the air. A thriving digital economy will be critical to ensuring as quick and robust an economic recovery as possible, and building online trust is therefore critical to future prosperity around the world.
A billion reasons to protect customers
The global banking system processes more than a billion transactions every day, and each represents an opportunity for financial crime, whether that’s money laundering, identity theft, bribery or the financing of terrorism.
New threats are emerging from COVID-19, with bad actors looking to exploit new opportunities. In particular, fraudsters are targeting first-time users of digital services, often the most vulnerable group. Citizens Advice warned that the most vulnerable people are often at greater risk of being contacted by a scammer. “While so many people have pulled together to help and support each other through the challenges of coronavirus, opportunistic scammers have instead chosen to prey on unsuspecting victims”, Dame Gillian Guy, chief executive of Citizens Advice, said in a recent interview with BBC.
Research that we recently commissioned in the UK and the U.S. found that concerns about online security are higher within financial services than in any other sector. More than half of people (51%) reporting that they are ‘very concerned’ about identity theft when using financial services sites. Crucially, 90% of people believe that banks have a responsibility to reduce cybercrime through whatever identity verification is necessary.
Building trust from day one
Of course, customers want online banking services to be responsive, intuitive and fast. But it’s important to recognise that people primarily want assurance that their money and personal data are safe. That’s why organisations need to approach Know Your Customer (KYC) and Anti-Money Laundering (AML) practices not just as tick-box compliance exercises, but as essential to building trust with new customers and driving consumer confidence across the digital ecosystem more widely.
Banks that are able to successfully demonstrate their commitment to security during the first engagements, delivering a fast, secure and seamless account creation process, will essentially have more meaningful customer relationships.
As many as 84% of consumers report having greater trust in financial services brands that use real-time identity verification during the onboarding process and 71% are more likely to share more personal data. Banks simply cannot afford anything other than optimal onboarding and identity verification – fail to deliver this and trust is immediately eroded and the customer walks away.
A layered approach to identity verification
By delivering a first-class onboarding process with compliant identity checks relevant to the customer’s geographic location, service and product selection, banks can limit their risk, whilst also providing an optimised digital experience to new customers from the outset.
This is why we are seeing a growing trend towards businesses using a digital identity network for their identity verification — this is a marketplace of hundreds of data sources, verification processes and tools. A layered identity verification approach provides flexibility and choice to apply the most appropriate checks at every stage of the customer journey.
For example, in customer onboarding, a bank may only need to perform a basic KYC check with an established government ID number or driving license. If that same customer then takes out a loan, the bank can run other verification checks for a higher level of assurance.
Building a global ecosystem of trust for the digital economy
To build and maintain online trust in such a complex and diverse environment is extremely challenging for banks. Despite rapid digitisation, the internet lacks a critical identity layer that would help address many of these complex problems. While there are layers of protocols and methodologies for transporting data over networks, there is no protocol for transporting assurance.
In online transactions, there is no standardised way to establish that an individual is who they say they are — the essence of identity. Clearly, this needs to change in order to drive trust, digital access and financial inclusion.
This post first appeared on Fintech Bulletin.