We are internet citizens, online consumers, remote workers. And a digital world needs digital identity. Now, businesses in countries everywhere must establish trust with customers online and build virtual relationships. This feels like an obvious thing to say today, but 10 years ago creating a new customer relationship would have been a “real thing”. Verifying someone’s ID would have involved physically looking at their passport and the whites of their eyes.
Equally, from a customers’ perspective, applying for a new financial product like an overdraft or a credit card might have involved a trip to the local branch, waiting in line and trying to impress a bank manager.
Those days are gone, and we don’t necessarily wave them a sad goodbye. Digital identity and verification is faster and vastly more convenient both for businesses and consumers alike. There is a universal desire for secure, seamless digital identity solutions.
First the bad news
3 in 5 businesses saw an increase in ID fraud over the past year, and fraud is one of the biggest drains on revenue. In the US alone it costs companies more than $42 billion annually.
But businesses also need to recognise the full economic impact of fraud beyond costs associated with the initial attack. Downstream costs are both expensive and long-lasting, including operational inefficiencies, lost customers, brand damage, increases in manual compliance reviews, and much more.
The need for robust identity and verification (ID&V) is clear, as is the business case for making an ID&V solution a digital one. A digital solution will support fraud prevention, it will help stop downstream costs and it will bolster better experiences for the genuine customers out there.
Now the good news
Digital ID&V solutions are out there and have been for some while. That means there are well established and trusted brands for delivering digital ID&V solutions that are as efficient at stopping the baddies as they are at letting in the goodies.
Despite the existence of RegTech solutions that can orchestrate automatic know your customer (KYC) checks, like ID&V, one of the biggest challenges facing financial institutions remains how to be certain of a customer’s identity.
Why is that? It’s not because the data and the technology aren’t available. So, maybe it’s because businesses aren’t sure which vendors to trust. Maybe it’s understanding who should pay for the solution. It could be that financial institutions aren’t sure how to integrate another solution into their FinTech ecosystem.
Whatever the reason, one thing is clear - as face-to-face identification declines and as online transactions grow in volume and complexity there really is no getting away from the fact a digital solution is needed.
Knowing your customer
Consumers (and business customers) are looking for an experience-driven, personalised, seamless and real-time service. Yet, 40% of customers abandon account opening during the KYC process. Reasons for this include checks taking too long, the process being too cumbersome, and an applicant losing trust along the way. People are after all sharing important, sensitive and frankly valuable personal data, so they may backout of sharing it if a process doesn’t feel kosher.
There is a significant trend in individuals taking ownership of their personal data, and in some instances monetising its use. Reports show around 88% of consumers want more control over their data.
KYC traditionally means firms going through a due diligence process, checking an individual out to establish they can be trusted. But, it doesn’t hurt to take a look at the other side of that coin - making KYC about understanding the customer’s journey, their experience of being verified and them being able to trust you - the financial institution - as well as you trusting them.
The RegTech ecosystem
Financial institutions and FinTechs need to know their customers. Meanwhile, regulatory requirements are becoming increasingly more demanding, and the risk of data breaches or identity fraud continue to rise.
Plenty of valuable solutions have emerged across the digital identity landscape, but ultimately our digital economy continues to rely on physical proof of identity - passports and driving licences - slowing down innovation in FinTech, but not grinding it to a halt, as facial recognition, geo-location and other developments continue to edge digital ID&V forward.
RegTech has emerged to support the FinTech ecosystem. It’s orchestrating KYC processes, automating compliance and linking distinct identity management systems together. Solutions that create a single source of truth for customer data and throughout the customer lifecycle mean firms don’t have to keep track of multiple credentials to identify new customers with different service providers.
With the right RegTech, the missing piece of the FinTech puzzle – ID&V - finally slots into place. The universal desire for digital financial products and digital identities is satisfied.
Get in touch
We are passionate about all things digital ID&V and would love to talk to you about how your managing the process and what you'd like to achieve using RegTech. Please get in touch any time, just email email@example.com