ID verification is core to personalization

An innovative, consumer-centric approach to protecting customers from identity fraud can help banking institutions build trust and loyalty.

Banks and credit unions are already under a great deal of pressure from fast-changing digital consumer dynamics, stricter compliance measures, stronger competition from existing and disruptive fintechs, and a level of criminal innovation not seen in other industries.

Another challenge is growing consumer expectations for engaging, personalized experiences.

Consumers are open to giving financial services providers a more significant share of their wallets, but with a catch: They are also open to leaving for a competitor when they become disconnected or disillusioned.

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Some financial institutions are taking a more strategic approach to identity verification (IDV). This is part of a larger interlocking puzzle of frictionless onboarding, fraud deterrence and regulation that will help institutions deliver personalization, maximize benefits and achieve competitive differentiation.

IDV regulation and personalization

Adapting to changing regulations—including “know your customer” standards, customer identification programs and anti-money laundering laws – is a perennial challenge. A high-performing IDV program can provide customers and regulators with visibility into how decisions are made. As a result, institutions don’t need to engage IT colleagues to update platforms, allowing them to remain agile and responsive to evolving regulations.

An end-to-end IDV approach that considers the entire enterprise – from branch to computer to mobile, as well as channels, lines of business and even cross-border functions – can also break through silos and keep the entire organization compliant. It can be a practical solution that works across systems to detect cross-department velocity attacks and weed out bad actions using “perfect identity” credentials that can protect the organization as a whole from fraud.

As consumers spend more time in front of screens, they expect more seamless and predictive digital experiences. Vetting and curating customers’ digital identities can allow institutions to personalize the consumer experience. Customer journeys and experiences are constantly being upgraded, particularly those products and services that are not bound by regulatory mandates. User experience-centric services set the standard that other businesses must meet, regardless of industry.

To that end, financial institutions must find ways to create seamless and meaningful customer journeys that build trust and foster loyalty. As we wrote in a recent research paper, financial institutions cannot deliver personalized and compelling products and services at the point of creation without in-depth knowledge of the customer that goes beyond basic KYC requirements. Identity verification with transparency forms the starting foundation for personalization.

Furthermore, financial institutions must prepare for an influx of digital newbies who intend or need to conduct more of their business online. According to our 2020 study, the pandemic forced consumers of all ages to move into the digital ecosystem, and 94% of them expressed a willingness to continue to use most or all of the online services they had switched to, even after in-person restrictions were lifted.

Staying ahead of fraud

Given the fractured nature of the identity framework in the US market, synthetic identity fraud (SIF) continues to rise, with one estimate projecting that SIF losses may reach more than $4.1 billion by 2023. Organizations should consider adapting their control frameworks to better address SIF, including using a multilayered detection strategy, segmenting the remediation approach for suspected synthetic fraud, and analyzing collection queues.

For new-account fraud in general, and SIF in particular, an ounce of prevention can equal a ton of cure. Using ID verification to detect and deter fraudsters can prevents the downstream costs of bountiful bust-outs and investigations of exactly how well a bank knows its customers.

As regulations grow in complexity and scope, achieving compliance while combating fraud, particularly synthetic identity fraud, remains a challenge. A high-quality IDV program relies on multilayered identity attributes to ensure consumers are accurately verified and have a frictionless onboarding experience. By thinking strategically about identity verification, along with IDV innovation, financial institutions can adopt an IDV solution that’s easy to implement and works across systems in real time to protect the entire enterprise.

Rapidly changing fraud dynamics require financial institutions to quickly adapt their IDV processes to meet evolving threats, deterring fraud without increasing friction and delivering the personalization that customers demand.

Christina Luttrell is the chief executive officer of IDology.