The future of financial services depends on institutions' ability to customize, understand, and expand digital identity offerings. That's according to Onfido CEO Mike Tuchen, who spoke on the keynote panel discussion of Fintech Nexus in New York City in late May.
Fresh off Onfido’s launch of the Onfido Real Identity Platform, Tuchen was joined on stage by Sarah Clark, Senior VP of Digital Identity at Mastercard, and Ahron Geminder Global Head of Digital Product at HSBC, to talk about the ‘Amazonification’ of the financial services industry — whether it’s possible for financial service companies to provide the same frictionless digital experience to clients they serve, as the Amazon’s behemoth marketplace provides.
Watch the full recording the session here, or keep reading for the highlights.
The state of play
Historically, traditional banks have been slow to adopt new technologies, leaving space for neobanks and fintechs to lead in digital account-creation services. Yet the pandemic spurred rapid change in the industry, pushing traditional banks to adopt more digital solutions for their clients who want to access bank services or open accounts without having to head to a physical location. Two years of digitization was compressed into the span of two months, noted Geminder, citing a McKinsey study.
It’s a transformation that won’t be undone, but still has a long way to go. The process of signing up new clients online can still be arduous at many traditional banks. Creating a new account may still need as many as 150 clicks, noted Tuchen, indicating a labor-intensive process for customers who are accustomed to quick and simple online experiences. After 50 clicks, customers tend to lose interest, and may abandon the onboarding process altogether.
Industry leaders, like Onfido client Revolut, have been quick to adopt seamless digital solutions that allow them to verify real people online, and now require just 24 clicks for customers to get set up.
What customers are looking for
While the pandemic was transformative for many reasons, fundamentally, it didn’t cause customer demand to change, Clark argued. Rather, it highlighted the gaps in access of both financial and government services.
In Estonia, digital IDs have been the norm for decades, while in the US and in other parts of the world, digital IDs are just beginning to be experimented with. In many cases, private industry has been pushing digital IDs forward, with Apple rolling out a digital ID, and Mastercard pushing to do the same. The potential for digital IDs are vast, providing a more secure ecosystem that can better eliminate digital fraud.
Yet as Onfido’s Tuchen pointed out, less than 1% of smartphones have digital IDs on them. Globally, there are over 6,000 recognized ID documents, of dramatically varying security and complexity.
To Tuchen, the future of digital IDs remains a barely-scratched frontier, akin to the early days of IP security. He recalled his early days at Microsoft, when every sophisticated large company had encryption experts that would spend hours doing reviews of the https encryption protocol for web sites, ensuring that it met their security requirements. Similar diligence will have to be done on the trust frameworks behind digital IDs until — like secure protocols — there are accepted standards.
In order to meet customer demand in the shorter term, financial services companies need to begin thinking about ways to create more seamless and frictionless processes.
“Nobody wakes up and says they want to open up a bank account today,” Geminder said. As a result, HSBC has begun to consider their internal policies, focusing on “straight-through banking” that optimizes the process to get a banking candidate from downloading the app, to opening an account and receiving virtual debit or credit card in minutes.
Security and privacy
For both Onfido and Mastercard, frictionless digital ID solutions will offer individuals not only a secure way to share information but in a privacy protecting manner.
“The other half of security is privacy,” Tuchen said. Customers should have the ability to choose how much information they disclose to who and when. In the future of digital IDs, Tuchen predicted people will have more than one ID, with each serving a different purpose for different levels of certification. An online payment persona, he offered, may be more useful in certain cases than in others. In other cases, a social persona that allows the user to maintain some anonymity may be more appropriate.
Even the current physical ID system is not without its shortcomings. To verify age, for example, individuals need to hand over an ID with a fair amount of personal information to satisfy a narrow use case such as buying alcohol online. To Tuchen, an ideal state would allow for a more customizable information transaction that allows for identity and age verification, without having to pass on all information contained within an ID to the retailer.
As the panel wrapped, Clark, Tuchen, and Geminder were asked to look ahead to forecast the future of financial services: could it get to an Amazon-like state? And if not, what would the ideal state for financial services look like?
In the shorter term, Tuchen proposed, there would be an influx of Digital IDs and wallets, as the marketplace floods and pushes groups to create policies around these new ID forms. To “Amazonify” financial services, banks need to create customizable, streamlined workflows that remove the complexity from the customer perspective. Banks need to choose the best of what’s available, while making an effort to ensure they’re ready to do things like verify 6,000 digital documents.
Geminder, meanwhile, argued that financial services couldn’t go down the exact same path as Amazon. Instead, the financial services industry needs to take the outputs they admire from the Amazon model, and emulate them in a way that works for their product — in part by becoming “obsessed” with customers and clients.
Clark had more succinct advice for attendees: increase trust, and share ID with one click.
Learn more about how our Real Identity Platform makes verification simple.