Over the years, the banking industry has changed its strategy to put customers at the heart of the business. With competition intensifying among providers of financial services, the focus has fallen firmly on the quality of the customer experience. We ask Ken Burrows, channel manager for online identity-verification company VIX Verify, about how to balance a good online customer journey with watertight security.
Never has it been more vital for banks to have robust systems in place for the verification of customers’ identities. Regulation is one reason for this but another is the potentially disastrous damage to a brand that fraud can cause. At a time when banks are competing more than ever on the basis of customer service, they must ramp up security measures to unprecedented levels in order to not only secure their customers’ money but also their brand capital. The growing importance of customer service, however, poses a dilemma. Customers want access to their funds and banking services to be tightly controlled to prevent fraud, but, at the same time, they want to be able to deal with banks easily and swiftly. Knowing your customer in the digital space is essential, but the processes to enable identity verification cannot compromise the quality of the customer experience.
The solution that many banks are reaching for is biometrics. There are many different biometrics solutions that are applicable in different contexts – fingerprint identification and face or voice recognition – but they do not rely solely on the front-end technology. The back-end capability in terms of data integration is equally important. Vendors have been working hard to ensure both ends of the equation match up and some have had remarkable success in the banking sector.
“Biometrics will steadily replace passwords and PINs. A biometrics system is easier for customers to use and less vulnerable than the alternatives. Banks may prefer one type of biometrics over another but ultimately they will have a choice. Banking is the industry where that technology will take off first. We are seeing that with banks in the southern hemisphere, which are quite innovative,” says Ken Burrows, channel manager for online identity-verification company VIX Verify.
Headquartered in Australia, VIX Verify is the company behind greenID, a software as a service (SaaS)-based solution that enables businesses to validate the identity of their customers – and onboard new customers – in real time. Easy to implement, secure and privacy compliant, the system eliminates the need for in-person verification. It improves the customer experience while maintaining compliance with know your customer (KYC), anti-money laundering (AML) and counterterrorism financing (CTF) requirements.
The solution works by integrating identity data on individual customers, global document authentication, biometric verification, mobile onboarding and regulatory requirements. Consumer identification data is captured through various methods including document scanning, document uploading, biometric capture and manual data entry. This is then verified using a range of electronic ID data sources that include government, commercial, credit and utilities records. This data can be managed through a web based administration portal, although there is an option to perform manual back-office verification. So far, greenID has been implemented by more than 250 organisations worldwide and a growing number of them are banks.
“When I joined the company ten years ago, it was known as Edentiti and it was building software to enable people to identify themselves, but the focus was on voice biometrics. I was talking to small and medium-sized banks about that technology, which we successfully demonstrated, but AML regulation was coming in and banks wanted to wait. Then a gaming company came to us to talk about electronic identity verification. That is where greenID started. Deloitte became interested and showed the technology to its large clients,” says Burrows.
“At that time, National Australia Bank was creating UBank with a model that had no branches. Customers could only create an account through electronic identification verification. They selected us to provide that technology and it has been a resounding success. UBank signed up 200,000 new customers in just a few months. That put us on the map; Edentiti was acquired by VIX Verify and we started to go beyond Australia,” he adds.
Willing to comply
Initially, the demands of AML compliance drove interest in the solution. Now, its ability to streamline the cost of onboarding customers is just as powerful a force behind its growth.
“Its ability to reduce dropout rates helps to keep onboarding costs down. A few years ago, we moved into the Asian market with greenID and we found that AML legislation was very different. It required in-branch, face-to-face verification to prove that customers are who they claim to be. Our focus is on remote identity verification, so we needed to adapt the technology to be as good as that face-to-face process,” Burrows explains.
“We extended greenID to a mobile platform, so a bank can onboard people through a mobile app – built by the bank but using our core technology. Customers can scan a passport or a driver’s licence, for example, and the solution extracts the data and photo image. It asks the person to take a selfie and to blink twice to prove they are alive. We can check the data and the facial image against other data sources to enable identity verification without that person having to come into the branch. Usually, it would take many vendors to achieve all of that, but this is all in one system from one vendor.”
UBank’s implementation of greenID has gone from strength to strength. Its strategy of operating without any physical branches and serving customers exclusively through digital channels was in line with its reputation as one of the most aggressive and innovative bank in Australia, as was its presence among the first to use electronic verification for opening an account, to use technologies such as Skype to communicate with customers and to provide 24/7 call centres.
This led to a tidal wave of new account applications that generated a huge number of copies of identity documents that would take a long time to process and verify manually. The greenID solution, which was developed in collaboration with UBank, integrated into the bank’s existing IT platform and enabled new customers to enrol within two minutes of registering. Since implementation, more than 300,000 customers have successfully verified and opened accounts online, and electronic verification services have been extended to support products such as term deposits, self-managed super funds and home loans.
GreenID was successfully launched in Europe in 2015 and is currently being expanded into South-East Asia. Full biometrics solutions are due to be launched in the UK and New Zealand in the near future. The technology has also evolved further and voice biometrics has been integrated to expand the scope of the verification process. Furthermore, the software can help banks to run checks for sanctioned individuals and politically exposed persons (PEPs) to ensure that regulatory compliance is maintained at all times.
In fact, regulatory drivers are increasingly playing to the strengths of biometrics systems with robust back-end data integration capability. In Europe, for instance, the revised Directive on Payment Services, also known as PSD2, has been adopted with the aim of harmonising the fragmented European retail payments market. It encourages the use of systems that are simple to use but that have strong authentication processes for online payments.
“Going forward, the development of the technology will continue. Requirements are emerging from the telecommunications market. Identity verification is increasingly required, mainly because terrorists use mobile phones and regulations are changing in regard to how industries tackle terrorist activity. That market is looking at doing identity checks on SIM cards using, for example, facial recognition. After all, there is CCTV in stores that sell mobile phones, so that technology could also be used to create a blacklist of fraudsters. In banking, too, onboarding is about capturing as much data as possible to ensure that devices or services are not being used fraudulently,” notes Burrows.
“Biometric systems increase security, and reduce the time required to onboard new customers or access services. We are likely to see the technology grow in many countries. In Europe, for instance, where regulations increasingly require multifactor identification, identification through biometrics fits very well.”
Banks will no doubt lead the adoption of biometric technologies and have the expertise in data integration to make such systems a success. The world is catching up with biometrics and soon customers may come to expect their financial services providers to use it.
Originally published on Future Banking