The new hot ticket in town is identity—and the battle for the customer, and their data, has begun. With the GAFAM tech giants (Google, Apple, Facebook, Amazon and Microsoft) entering the payments space, banks feel the very real threat of disintermediation. Those who fail to innovate will very quickly lose market share to fintech disruptors and challenger banks. In this changing landscape, is there still room for traditional financial institutions?
Many believe—perhaps counterintuitively—that the answer is a resounding yes. The heart of the relationship banks have with their customers is trust. By leveraging this trust, banks will ideally position themselves to act as a single, secure authentication point for all digital services: an identity federator.
But in this era rife with cybercrime and identity theft, preserving and protecting the trust relationship is no mean feat. Synthetic identity fraud—where crooks cook up “people” who don’t exist as a way to drain credit lines—has become a real issue. More than two billion consumer data points resided on the dark web in 2016. Without question, this number has only grown in the years since.
Banks and their consumers need a way to know who they’re communicating with; banks also need to innovate and offer digital services to ensure they maintain their place in customers’ lives. At the same time, customers demand convenience and frictionless digital experiences on one hand, and expect their data will be kept safe on the other. So to stay relevant, banks must up their game by offering customers everything they want while staying on the right side of fraud, regulations and innovations from competitors and newcomers.
Convergence, convenience through mobile
Is there a simple, secure solution for banks? The answer lies quite literally in the palm of the consumer’s hand. One acknowledged way of ensuring trusted communication is through using the mobile device as a possession factor, coupled with a strong identity scheme. But what if banks could go further and offer much more than typical security measures? Could each customer’s mobile phone be turned into a convenient, trusted multifactor authenticator that works with in-mobile and off-mobile interactions?
The solution: converged authentication. In other words, the mobile phone becomes a single point of identity verification and transaction authorization for all the channels and experiences a bank offers its customers. Converged authentication saves the customer time and hassle but because the bank’s brand is now present in each digital interaction, it also inspires confidence.
From slick experiences to open banking
The North American authentication market has immense potential because here, a lack of convenience can be a deal breaker. Consumers in the U.S. and Canada demand rich services at the tips of their fingers that are easy to use, secure and accessible. To remain relevant to consumers, financial services organizations are providing slick, rewarding digital experiences that meet consumers’ changing needs. There’s a need to create products that play a meaningful role in users’ daily lives and help them achieve their goals. After frequent interaction with these products, consumers better understand where their money goes and hence avoid unnecessary fees and penalties. If banks succeed in this, they’ll offer a unique user journey that even tech giants will struggle to match.
IBM’s Future of Identity Study called the present a “crucial turning point in the authentication landscape,” as the study’s respondents said they valued security ahead of convenience, especially when accessing financial accounts. Additionally, the emergence of open banking puts even greater emphasis on security across the globe. While open banking gives consumers more choices, it also means more liability for banks due to increased flow of customer data as third-party providers access customer accounts. This makes security through customer verification and consent even more critical.
A customer-centric security process
At the risk of becoming irrelevant, no bank in the world can afford a complacent attitude to open banking. Now that banks’ direct competitors can access the same prized consumer data that banks have traditionally called their own, institutions must utilize forward thinking and build customer-centric experiences. Banks need to empower users to interact from anywhere, at any time, as a way to strengthen customer trust with each interaction. More than just another service provider, the financial institution needs to become the trusted keeper of its customers’ digital assets.
Secure consumers transact more frequently, act more loyal and try new services. These days, authentication processes must not only work to avoid fraud, but also to instill trust and give consumers more control. Instead of being forced to deal with declined legitimate transactions after the fact, customers need the power to authenticate and authorize transactions as they happen. New services such as these will boost banks’ bottom line.
The foundation is trust
The organizations that see increased customer acquisition, along with top- and bottom-line growth, have simplified their user experience and attracted the millennial market segment. Traditional banks face fierce competition from payment cards, digital-only disruptor banks and internet giants. But once banks earn a customer’s trust, innovation will then open the door to unlimited new digital services. The process of retaining existing customers and attracting new ones becomes more powerful with time. Building its application on the right digital security platform frees a bank to innovate faster—and gain a competitive edge in the market as a result.
When a financial institution puts the right level of user-friendly security in place, it can develop more features to enhance the customer experience. It will expand its digital service offering into payments, ecommerce, exchange trading and even insurance management: The potential is unlimited. More digital services means more customer touchpoints, and the more front-of-mind a bank is to the consumer, the stronger the bond of trust grows. And as trust grows, so does the wealth of banks and customers alike.
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Sherif Samy is senior vice president, North America for Entersekt.
Hear Sherif Samy speak at BAI Beacon in Orlando, Florida, taking place Oct. 9-11, as he co-presents “Making Consumers’ Identity Mobile and Safe.” To register for BAI Beacon, click here.