Say goodbye to the photocopier. Say hello to increased trust, convenience and customer centricity. Marzena Sokołowska, Financial Services Product Lead at ITMAGINATION, tells us how banks can do themselves a favor – and put their clients’ minds at ease – by implementing digital onboarding and identity verification.
“I’m just going to make a copy of these and I’ll be right back.” Off goes the bank clerk, the sales assistant or the employee at the car rental office. They take your passport, ID card or driver’s license with the intention of creating a copy for their records. In the vast majority of cases, the action is harmless, and our documents are back in our hands in a matter of minutes. But what happens then? Do we really know what happens with the photocopied version of our documents after we’re gone? Are they stored securely? Is access limited to only employees with appropriate security credentials and who have passed background checks? How long will the document be kept? How can we be sure that the data in our documents is not used for purposes other than those we’ve consented to?
These days, we’re all somewhat exposed to the threat of identity theft and financial fraud. Are we risking too much by letting our ID documents leave our sight and allowing them to be photocopied?
From a regulatory compliance perspective, a digitalized onboarding experience will help banks comply with anti-money laundering (AML) and data-protection measures. From a customer-experience perspective, this solution also has the potential to accelerate the process of capturing important customer data. In turn, this should speed up the process of applying for new services for customers, and it should mean that no customer need ever let their ID documents out of their sight for any period of time, however short. And it’s not only banks and banking customers that stand to benefit – digital onboarding could provide major customer experience benefits to companies operating in retail and commerce, travel and many other industries.
In most cases, a bank or any other financial institution will need to verify your identity. For many years, taking a copy of your driver’s license, passport or national ID card and running the details through a system or registrar has been the most-effective way of doing this. In some cases (e.g. let’s say you’re applying for a mortgage) your details will be used several times throughout a process and having a photocopy of your document might seem like the easiest and most convenient way of accessing and verifiying your details. This in itself all seems fairly natural. And yet, with your details potentially being accessed by so many people, and without it being clear to you where the photocopy is being stored, how it’s being accessed and how long it will be held for, it’s only natural for consumers to be concerned. This concern is justified by the rise in identity theft and account takeover. In its Consumer Sentinal Network Data Book 2018, the Federal Trade Commission reported a 24% increase in identity theft being used for the creation of new bank accounts and credit cards.
Given recent advances in technology, there is really no reason to think that providing your ID documents for them to be photocopied and used by your bank or other institution is the best way of providing your personal details. Today, the entire process can take place online, digitally. Indeed, many FinTechs and ‘digital first’ challengers to traditional banks have gained a competitive advantage by using technology to simplify and accelerate the onboarding and identity confirmation process. How? Consider the following:
Let’s say a customer needs to have his identity verified by his insurance provider. Imagine if he could simply hold up his documents in front of his smartphone camera or his home computer’s webcam. The insurance provider could then ‘capture’ key data using OCR (Optical Character Recognition) technology. The company could choose to capture only the data it needs or it could keep a copy of the image, albeit in digital, encrypted form.
For an extra layer of validation, algorithms based on biometric characteristics could be used to achieve facial recognition and perform a comparison between a person’s face captured by a smartphone camera or webcam and the image on an ID document.
In these ways, it’s perfectly possible for an institution to capture key details and verify your identity, without the risks associated with a photocopy ‘floating’ around the offices of an organization. Where data is captured in digital form, it is encrypted and appropriate access rights implemented in a secure, automated manner.
Thus far, this blog post has largely focused on security and the possibility of eliminating the manual, potentially insecure process of photocopying important documents. Naturally, this will be the one of the biggest – if not the biggest – concerns for both institutions and their customers. But, in addition to strengthening security credentials, digital onboarding and digital identification verification can deliver many other benefits to organizations and their customers. For example:
In a highly digital world, where face-to-face interactions between organizations and their customers are fast becoming the exception rather than the norm, it’s important that customers are given reasons to trust their bank or whichever other institution they choose to patronize. Automated processes that don’t involve a stranger handling your ID documents and the certainty that data will be encrypted can be reassuring to customers, and can help build trust towards an organization. In its 2018 Global Fraud and Identity Report, consumer credit reporting company, Experian, found that 4 out of 5 consumers trust that protecting personal data is a top priority (banking). So, customers trust that banks and other such companies have good intentions, but it’s important that these organizations repay that trust with solutions that are both convenient and secure.
Let’s say you want a loan to fund the purchase of a new car. Most banks or lending organizations will be happy to show you sample simulations online or talk you through your options over the phone. Now, let’s say that you’ve shortlisted two banks as your preferred options. The only problem is that one wants you to come in with your documents to sign some papers while the other one allows you to enter or scan all your details online, thereby saving you the time and hassle associated with a trip to your local branch. The choice becomes obvious.
We value our time, and we value convenience. With smartphones increasingly becoming our main interface with retail and service providers (not to mention that the idea of photocopiers and scanners is almost alien to many millennials), banks and service providers will need to digitalize as many customer-facing processes as possible in order to remain relevant and viable to customers.
By digitalizing processes such as data capture and identity verification, markets open up and new opportunities present themselves. Most of us are familiar with the services provided by companies such as TransferWise or Revolut. These are companies that have provided us with easier ways to move money around the world without being charged excessive fees (TransferWise) and travel confident in the knowledge that we can access local currency without needing to go through oft-exploitative currency brokers (Revolut). These service providers need to verify your identity, but they don’t insist on you presenting yourself at a branch and handing over your documents. As customers, the digitalization of the onboarding processes means that we’re not limited to choosing only those service providers that are local to us. For businesses such as those mentioned above, the digitalization of processes means that they’ve been able to scale, enter new markets and spread their reach quickly and cost effectively. With the advent of PSD2 and the opening up a digital market in regions like the EU, those banks and businesses that have been able to digitalize their processes will be better equipped to compete for more custom, while consumers will be free to enjoy even greater choice.
Consider the following statistics:
Source: Experian Global Fraud and Identity Report
What these statistics clearly illustrate is that fraud is an issue that businesses need to grapple with, and that customers understand this. The level of friction that customers are willing to experience in order to give their trust and custom to organizations is a critical-yet-delicate matter. It can be the difference between completed transaction or abandoned basket. Achieving the right balance of convenience and friction will be crucial for banks and other service providers in the post-PSD2 reality.
ITMAGINATION has developed a proprietary KYC (Know Your Customer) digital onboarding solution that can automatically conduct AML risk assessments of customers and partners in real time. This enables banks and other service providers to automate and shorten the customer onboarding process. Recognized forms of identification, such as passports, ID cards and driver’s licenses can be processed using OCR. The platform runs the data captured through a variety of different registers, lists, and databases – either public, proprietary or from approved third parties – and provides an assessment on risk, including the probability of identity accuracy.
And the potential benefits of these solutions don’t end after customers have been onboarded successfully.
The data used to verify an identity can also be run through data warehouses, CRM and transaction systems to build up sophisticated profiles of customers. Then, with appropriately constructed algorithms and application of Artificial Intelligence (AI), banks and other service providers can even be prompted to suggest products or special offers, or they can be furnished with next-best offers based on a customer action. In the case of banks and other providers of financial services, it’s then possible to build on this understanding of customer profiles and expand the range of services to customers. ITMAGINATION has developed an innovative ‘buy now, pay later’ payment solution that enables customers to scan a product in a store and then – based on what the bank or service provider knows about the customer’s financial situation and credit rating – be presented with a variety of different payment options (e.g. short-term loans, instalments). ITMAGINATION demonstrated this solution at Finovate Europe 2019 (check out the video from 4:25 onwards). Such solutions empower customers to make informed decisions. They enable retailers and service providers to appeal to more customers (especially for millennials), and they give banks the means to become more relevant to their customers.
By adopting these solutions, organizations can transform and enhance their capabilities across a variety of different functions, ranging from verifying the identity of customers all the way through to enhancing existing customer relationships with the introduction of micro-personalized services. In this way, ITMAGINATION empowers you to build trust, confidence and engagement with your existing and potential customers.
Learn it. Know it. Done.
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