The US banking revolution starts with digital identity

March 22, 2022 Mike Tuchen

This article originally appeared in Forbes.

Though the Covid-19 pandemic forced many industries to accelerate their digital strategies over the past 18 months, the U.S. financial industry is still operating in the dark ages in some ways. Given that the United States leads the world in many technology areas, it's remarkable that it's falling behind other countries, like the United Kingdom, in an area as important as banking.

If a customer decides they want to open up a new bank account or make a high-risk transaction like a wire transfer, they'll often need to physically travel to their local bank in-person to wait in line, meet with a teller and then fill out several pages of paperwork. But most customers find this process no longer meets their needs. Even pre-pandemic, more than 160 million people were already using online banking in the U.S., and over 56% of customers said the primary way they access their accounts is through a mobile app.

In a digital world where convenience, time savings and instant access reign supreme, a physical-first banking experience is no longer viable.

Fraud, Privacy And Customer Experience Challenges

Digitizing the banking experience isn't as easy as making sign-up and money management services available online. Making the digital leap comes with a slew of new challenges — from online fraud to user privacy and friction in the customer experience. 

For example, fraudsters can easily set up fake bank accounts using leaked SSNs and identity documents bought on the Web, with estimates suggesting that global losses from payment fraud alone were $32.39 billion in 2020, triple what they were in 2011. And fraud prevention isn't the only challenge. Consumers need to trust the onboarding process — my company's research has shown that 44% of U.S. customers will abandon an onboarding process if they feel their data is not secure, the process is too invasive or onboarding takes too long.

Protecting businesses and customers against fraud while providing a frictionless customer experience has never been more challenging — or important — than it is today. There's a growing market offering solutions.

The Identity Factor

By putting digital identity at the center of their digital strategies, banks can focus on transforming and growing their business to meet the demands of the modern consumer, while safeguarding the business and its customers. This starts with a robust digital identity verification process that confirms the user is who they say they are to grant them initial access and re-authenticates users throughout the customer journey.

In Europe and the United Kingdom, digital identity verification is already allowing banks to go digital faster and more securely. Banks like RBC as well as fintechs like Revolut, who is one of my organization's customers, are able to speed up the onboarding process, keep fraudsters at bay and grow their business by leveraging biometrics-based identity verification.

Getting Identity Right

So what can U.S. banks learn from their EU counterparts? It starts with making sure that their customers are at the center of their digital journey, that they know who their customers are and that they can verify their customers in a completely digital environment. 

Modern approaches pair a government-issued document (i.e., passport or driver's license) with biometrics (i.e., selfie face scan or fingerprint) to make this a seamless — and preferred — process for customers. My company's recent study found that almost six in 10 (58%) of consumers would use biometrics in lieu of a password for all of their accounts if the brands and services they used offered it. According to Gartner, 80% of organizations will be using document-centric identity proofing as part of their onboarding workflows by 2022, which is an increase from approximately 30% today.

So what should you look for in the right identity solution?

  • Does the vendor meet your obligations for Know Your Customer/Anti-Money Laundering? Financial services is one of the most heavily regulated industries. Ensure any vendor you are dealing with has experience providing these services to established banks.
  • Can the vendor scale with your business? Ensure you select a provider that has both the reach and wide functionality you may require as you grow and adopt new use cases and expand to new global markets. For example, you may want onboarding now, but also later realize you need a step-up authentication service for password resets or to authorize high-value transactions.
  • Ensure your product roadmap takes into account market trends. New technologies like NFC are emerging to provide yet another robust identity signal. Over 150 passports worldwide and some national ID cards now contain identity data which can be extracted digitally by simply holding up a phone to the document. Also, several vendors now offer the ability to take a video of a document rather than a static image which provides better assurance of its authenticity. For example, video analysis can do a better job of checking the Kinegram (or similar hologram elements) than static image analysis.

The Path Forward For U.S. Banks

As the U.K. leads the way in increasing their digital banking customer base and, likewise, maintaining fewer physical locations (there are currently about 113 bank branches per million people in the U.K. compared to 300 branches per million people in the U.S.), U.S. banks can take a page from their counterparts across the pond and tap the power of identity to move their digital transformation forward.

Banks should not have to make compromises between security and a seamless customer experience along their digital journey — and with the right biometric identity strategy, they no longer have to.

To learn more about how Onfido can help transform identity process, check out Forrester's Total Economic Impact™ study of Onfido.

About the Author

Mike Tuchen

Mike is the CEO of Onfido. He's a highly experienced executive with an established track record of scaling technology and software businesses globally. He most recently served as CEO of Talend, a leader in cloud data integration, which he took public in 2016. Prior to Talend he led Rapid7, a security software startup, and founded a marketing analytics startup in between senior management roles at Microsoft and Polycom. He holds degrees in Electrical Engineering from Brown and Stanford and an MBA from Harvard Business School where he was a Baker Scholar.

Follow on Twitter Follow on Linkedin
Previous Article
What do businesses and users think about identity verification?
What do businesses and users think about identity verification?

Learn what challenges businesses face with onboarding, and how users feel about identity verification.

Next Article
Countdown to Data Privacy Day
Countdown to Data Privacy Day

With more people accessing online services, here we explore why Data Protection Day remains important.