Banks have a delicate opportunity to earn loyalty while verifying new customers’ identities over digital channels. I choose the word “delicate” because friction, such as applying overly cautious verification methods, or a detour into a manual review queue (i.e., false positives) frustrates customers and jeopardizes their lifetime value.
Research shows that more than one in three consumers have abandoned a new-account opening over a digital channel because of the time required or difficulty in the process. Nearly 40 percent of consumers abandon a credit card after suffering a false decline, while another 25 percent decrease usage of the declined card. Identity verification sets the tone for customers’ feelings toward a bank. That’s important, according to Forrester’s 2019 U.S. Customer Experience Index, which shows “emotionally positive experiences” may be the primary means by which brands can differentiate their customer experience today. According to McKinsey, “companies that successfully deliver a remarkable digital experience, while also keeping customers’ data safe, can see a potential 20 to 35 percent boost in customer-satisfaction scores.”
Opportunity lurks in the status quo
Unfortunately for many banks, current digital identity-verification practices put a damper on what could be the most positive moment in the relationship. They impose too much friction and, if the verification attempt fails, force customers to prove themselves in an even more stringent manual review.
The days of relying on personally identifying information (PII) for verification are over; this data has been breached and divulged on social media for years. Likewise, email accounts and phone numbers can no longer be trusted without additional datapoints.
Requiring consumers to submit images or even videos of themselves holding their identification presents several problems.
First, consumers are wary. Only 25 percent of Americans trust most companies will handle their sensitive personal data responsibly, and many are uncomfortable with facial recognition.
Second, a selfie requirement has the potential to unfairly exclude the less tech-savvy. In late 2019, Pew Research Center reported that “Americans’ knowledge of digital topics varies substantially by educational attainment as well as by age.” A selfie requirement may take digital banking out of the hands of a sizable swath of Americans.
And third, banks invite risk by trusting identity verification methods founded on publicly accessible data. Documents accompanied with selfies were cracked by fraudsters years ago. Verification through video is also suspect. If fraudsters have the patience and organization to let a synthetic identity accrue credit over 12 months or more, they are also likely to be willing to invest in deepfake videos. By probing a video selfie requirement, multiple times if necessary, fraudsters will discover what’s required of a deepfake video to pass verification.
Brands that have invested in authentication, an analogous part of the customer journey, indicate that improving identity verification is worth the effort. McKinsey reports that “when consumers find the authentication process easy, they use digital services 10 to 20 percent more than customers who are frustrated by authentication. This is important, because customers who use digital channels regularly spend roughly 45 percent more than customers who use digital channels sporadically.”
Unlike authentication, banks have just one chance to get identity verification right.
Improve customer service using consumers’ devices
Banks can minimize false positives and customer friction by basing digital identity verification on signals broadcast from customers’ devices.
This approach—device-based identity verification — determines the identity of the device’s user by analyzing the strength of linkages between three sources: (1) the user’s offline data, which include identifiers such as name, home address, phone number, and email; (2) the user’s online data, such as IP address, cookie ID, and mobile advertising ID; and (3) data from the user’s device, such as prepaid status, IP behavior, and the presence of a VPN or the Tor browser in the IP address. Device-based data is much, much more difficult to steal or manipulate than online or offline data.
Device-based identity verification defines the gold standard for security and convenience. Consumers’ devices are uniquely attached to their owners and are likely to be replaced quickly if lost or stolen. They are trustworthy proxies for their owners’ digital identities. Device-based identity verification is imperceptible to customers and minimizes false positives by establishing high confidence in customers’ identities.
Surpass customers’ expectations
If a user’s offline and online identity data corroborates data associated with the user’s device, then her identity can be verified, and she can be served faster than is possible with other approaches. This process reduces the number of customers at risk for a false decline or undue friction.
Identity verification, which McKinsey calls “the highest-volume customer journey by far,” plays an essential role in customer service and experience. Banks that use digital identity verification—not just as a security measure, but as an opportunity to improve service—will be rewarded with happier and more loyal customers.
Adam Russell is vice president of identity and risk solutions at Neustar, a Sterling, Virginia-based information services and technology company providing identity resolution services.
The report includes insights from our recent BAI Banking Outlook: 2023 Trends survey that identified the top challenges ahead: gaining new customers, providing a more compelling digital banking experience and acquiring and retaining talent....
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