Secure and reliable identity verification is always going to be a top priority in financial services, but as digital advancements occur, consumers become more and more demanding of convenient processes. With an abundance of digital data available, is there really any reason to rely so heavily on traditional paper sources anymore?
Rising identity fraud
Identity fraud is on the rise, with Cifas finding that almost 500 identities are being stolen per day. While the emergence of the digital age has brought risks along with it - including the popular illegal online marketplace known as the dark web - the majority of financial companies have yet to leverage digital data to combat resulting fraud. On the dark web, criminals buy and sell personal identification information, including forged and real documents such as driving licenses, passports and bank card details. Given that many service providers only require these details in order to make a payment, transfer money, or to open an account, this begs the question: what is really being done to ensure that the consumer is the legitimate owner of the identity that they are using?
While it’s true that many financial service providers do integrate additional verification processes for high-risk transactions, these are usually unnecessarily long and complicated ID checks, such as Knowledge Based Authentication (KBA) like “what is your mortgage value?”, or “how much did you spend on your last phone bill” often results in incorrect answers because who can remember their mortgage details, and who pays that much attention to know their exact last phone bill? These inefficient methods often mean customers, particularly in banking and telecoms, end up having to go into branch and spend a significant amount of their little ‘free time’ finding proof of address and their passport, heading into town, queueing, and finally verifying their identity. Even consumers who order online shopping to store (be it clothes, food, electronics) have to remember to bring ID when they collect it, feeling disappointed when they forget and there is no alternative but to come back another time, driving licence in hand. This entire process is one that should take minutes, instead it often ends up costing more time and more money than necessary.
A potential solution to this would be to offer consumers the opportunity to use their digital footprint to verify their identity alongside other payment and verification information. Given that the average Briton spends around 9 hours per day online, it is necessary for ID verification processes to catch up with efforts in other business areas. Providing the option to connect existing accounts to verify identity offers consistency and familiarity to consumers while acting as an additional level of security.
Banking with the unbanked
Financial institutions need to consider the evolving needs of consumers, predominantly Millennials and generation Z, who both typically lack traditional data such as credit history. Millennials reportedly earn 20% less in salaries than the Baby Boomer generation, and as a result, many are putting off significant purchases that would actually help them to build credit such as houses and cars. The lack of credit history means that a large amount of this generation - and possibly even more of Generation Z - class as thin-file and, as a consequence, find themselves unable to access services such as traditional loans, rental agreements and mortgages. Huge amounts of digital data are created daily, therefore a continued reliance on the same traditional sources as twenty years ago risks restricting access for consumers who could otherwise be verified.
So what does the future hold?
Balancing Customer Convenience & Security
Customer data is extremely important to keep safe, and with fewer and fewer people finding themselves adequately covered by traditional sources alone, it is important to take into account alternative ones that we have available to us in the digital age. Consumers have become used to being able to access goods and services within a few simple swipes and clicks, and any requirements for more vigorous physical checks adds friction and can result in high drop-off rates throughout the process.
This is how leveraging a multi-pronged approach to analyse digital data in real-time (assessing the quality and quantity, as well as looking for corroborative data) can robustly verify identity quickly and efficiently all online with less friction than traditional methods. Harnessing alternative data sources throughout the verification processes – such as through connecting existing accounts as mentioned above - can help boost inclusion and increase access for those currently excluded or restricted, helping them to invest in business and property and, in turn, the economy.
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