The Future of Identity Verification: Building Customer Digital Trust Simply and Seamlessly
The COVID 19 era has forced many businesses to conduct business remotely, with digital verification solutions now playing a critical role in customer onboarding. RFi Group and GBG brought together industry leaders to explore how their organisations are addressing this challenge and the opportunities ahead in building a secured digital trust framework.
There is no doubt that banking today has become digitally focused with a raft of innovations introduced across all parts in banking. In the COVID 19 era, the impetus to digitize banking was amplified. RFi Group and GBG, a UK-listed global technology provider of identity verification, location intelligence and fraud and compliance management solutions, recently also recognised by Chartis Research as a KYC/AML category leader, brought together industry leaders to explore the issues.
GBG regional general manager Carol Chris set the scene for the discussion highlighting the continued real world challenge faced by Australian financial institutions in identity verification. Fifty three per cent of financial institutions rated the gap in identity verification inhibiting their digital growth and 70 per cent believe providing faster KYC and straight through process during digital onboarding is a competitive differentiation. The findings came from GBG’s “Future-proofing Fraud Prevention in Digital Channels: Australia FI Study published in June this year.
RFi Group managing director of Consulting Alex Boorman presented the consumer perspective of the increased migration to digital channels. RFi Group’s data points to an acceleration of digital engagement across all generations due to the COVID pandemic. Even older consumers who have historically under utilized digital channels compared to younger consumers, are getting more comfortable with managing money via digital channels and mobile devices.
Boorman also outlined a number of pain points confronting banks and financial services firms as banks continue to transform. According to RFi Group data, increased digital engagement levels are translating into heightened appetite for online applications “While there is growing appetite for online applications, poor application experiences have lasting effects – getting the application experience right should be a priority,” Boorman said.
The RFi Group research also found that online applicants report pain points including the speed of the process and ease of providing documents, aspects that digital ID verification could address.
RFI Group’s research points to different behaviours towards digital products and comfort levels with digital verification in each generation. Younger consumers particularly Gen Z and millennials exhibit elevated levels of switching financial products. Consumers in all age groups are showing a higher propensity to apply for both deposit and loan products online. Equally, both older and younger consumers are displaying a marked increase in their comfort levels with biometrics. Currently, a minimum of 50 per cent of consumers say that they are comfortable with the usage of biometrics for the purposes of identification for financial products.
The way organisations approached the customer onboarding process has become critical. At the same time, the Australian financial sector is confronted with the urgent need to implement safe harbour measures such as ‘Know Your Client’ (KYC), follow Anti-Money Laundering (AML) protocols, and strictly observe Counter-Terrorism Financing (CTF) regulations as they bring clients on board.
Heritage Bank’s roots go all the way back to 1875 and its key engagement remains face-to-face with its customers.
Heritage Bank operations lead, transformation Chris Watts, said his bank had introduced a “tactical solution” with its digital verification of identity (DVI) solution for mortgages but “our view of the ARNECC guidelines is that personal identification is safe harbour and we will only use digital when personal identification cannot be achieved.”
However, the bank is putting in place a new product origination system and this will mean that DVI will become a “forward looking tool” rather than as the tactical approach we have in place”.
Given the size of Latitude Financial Services as a consumer finance business and the many products it offers that are digitally originated, Latitude head of personal loans Amelia Taylor said Latitude is constantly looking for ways to accelerate its digital evolution.
"As organisations, we need to reimagine the way in which we currently approach some of the processes on customer onboarding and digital verification that could even emerge as a competitive advantage for institutions,” Albert van Wyk, GBG
“Latitude has been on a journey of uplifting our digital capability for our Lending products, (whether personal loans or motor loans) for some time and are focused on continuing to build a frictionless experience for both customers and partners. We have recently introduced a biometric solution that has helped us to continue to build digital trust.”
Whilst Latitude’s biometric solution assists with customer IDV, it also helps to mitigate fraud issues around the origination process and has been well received by its customers and partners.
Neo-lender Wisr has experienced rapid growth over the last couple of years and while Wisr chief operating officer Mathew Lu recognises it is a good challenge to have, a robust and seamless identity verification process is key in managing its growing book.
“It helps that our whole service model is digital from end-to-end including online ID verification. But are still quite old school with KYC in the sense that we want to know who we're dealing with because in an online digital environment, fraud is quite rife.”
“GBG is seeing financial institutions moving in the direction of an end to end platform to optimise the digital customer journey,” GBG regional general manager Carol Chris said. “Even on digital identity verification, the expectation is for KYC/AML providers like us to provide an integrated KYC solution complete with biometric, document and data verification and intelligence. Something which we are delivering with our greenID product.”
Touching on areas of opportunity for improvement in the digital ID world, Wisr flagged that there are pockets of underbanked consumer groups in Australia, who have traditionally found it hard to access credit and this also starts with the challenges of ID verification for these consumer groups.
“For many indigenous Australians, traditional forms of ID are difficult to access. This is an area where there is plenty of opportunity to improve.”
GBG’s Chris, believes this is a challenge that must be tackled at the industry level. “It’s definitely an area that we have been very focused on. We have been driving this agenda with the Department of Home Affairs. Industry wise, it is an issue we need to lobby for to ensure [the unbanked and underbanked] population have access to relevant documents that will help address the gap in identification and verification.
Assessing the solutions
Indeed, GBG has taken a minority stake in a fintech CredoLab which essentially looks at alternative credit assessment processes using permissioned smartphone metadata to assess the credit worthiness of a person.
There could be lessons for Australia’s financial services on how they can verify other forms of ID including using analytics.
“Whether or not someone has an identity document, or whether or not they do or don't have a bank account detail, we can gather specific analytics and attributes from their interactions online, or through their interactions and use of phone accounts,” GBG’s Chris said.
For Travis Tyler at 86 400 the benefit of a rigorous onboarding process gave the neobank the ability to screen potential customers as well as the ability of the bank to choose who not to serve.
By focusing on targeted services, 86 400 can provide a “relentless focus on the customer experience”. “The biggest advantage is being able to choose who not to serve. Having the right verification in place allows us to assess which segments are riskier to service. Identity verification should enable better experiences, not make them worse,” Tyler said.
“It really is important to think about what identity means in each moment you interact with a customer,” Travis Tyler, 86 400
While Tyler believes the bank is not “groundbreaking on AML and KYC” it has introduced biometrics in both the deposit and lending side of the bank.
Interestingly, the bank is now moving into the behavioural space – an approach also adopted by Wisr. “Similar to what Mathew’s business has adopted, we are looking at services that can assess the way a person hold their phone, or how quickly they are talking – a whole bunch of interactions that can fit into the algorithm which allows us to make a number of decisions around people onboarding,” Tyler said.
“We want to make sure we can continue to deliver an awesome experience and not put effectively hurdles in the way of good people just so that we can find the bad people. That is a big focus for us.” Finding ways for customers to make payments for everyday transactions with cryptocurrencies is the niche currently occupied by RelayPay. Given the high risks associated with cryptocurrency, getting the onboarding right is a key challenge for RelayPay CEO Charlie Karaboga. “Around 400, 000 Australians currently hold cryptocurrency, but we expect that this number will grow. Our position is to bridge the gap between digital currency,gold, and the traditional finance space. It's a very high-risk product,” Karaboga said.
To manage this risk, Karaboga said RelayPay has additional measures. “For example, we use biometrics, because we need to make sure we onboard the right people on to the platform.”
Towards a digital consent framework
Balancing historical processes with the need to innovate and upgrade user experiences in the onboarding process is a challenge BT has addressed as part of its program of transformation; the wealth manager has continued to digitise its processes on its flagship BT Panorama platform and will imminently migrate old products to the new operating system.
“For us, the challenges in the digital process was how do we help our clients build on a reputation that is based on service and not lose that by moving towards digital,” Chris Mather, BT Financial Group
“For us, one of the challenges in the digital process was how do we help our clients build on a reputation that is based on service and not lose that by moving towards digital,” said BT head of distribution Chris Mather.
A wealth management business also must ensure its advisers are on board with the right verification tools. “When you’re dealing with wealth – superannuation and investments – you are also dealing with not just the onboarding and the initial verification of the client, but also the speed of execution and the consent that's needed to execute,” Mather said.
Here he sees the ID verification process to be a key enabler where “you could be changing someone's financial position for the better, just through executing better and faster.” The majority of BT Financial Group’s ID processes on BT Panorama involve a licensed intermediary.
“But we also use that to our advantage by helping the adviser set up the ID process with a really fast and elegant experience. “As part of that process, the advisers need to do plenty of verification, KYC and AML themselves. We leverage what they have already collected and then we get back to the end consumer, to validate what the advisers told us, as opposed to duplication of process,” Mather said.
As BT continues to develop its platform technology to meet advisers’ needs, the wealth manager is harnessing compliance requirements to build digital trust. “A great example is our digital consent and digital records of advice capability. Launched in 2018, these features have become among the tech essentials for advisers in the COVID-19 work era, with usage doubling during the first half of 2020,” Mather said.
Digital consent proved to be highly valued at the height of market volatility with an 80 per cent increase from March to June. “It’s about more than just a digital signature; it’s a complete digital consent workflow that assists in seeking, receiving and then executing client instructions.
This is a significant timesaver for financial advisers and a superior experience for advice clients, that can be used anytime, anywhere,” Mather said.
Similarly, Latitude also works with intermediaries – brokers. “We're fortunate that Brokers are well-versed in terms of identify verification. They have their own requirements for what they need to obtain from a customer. Latitude has recently embedded research and design capability into its core teams to help shape the originations experience with Brokers to ensure we are helping them meet their obligations whilst creating a great customer experience,” Taylor said.
A digital utopia
86 400 has also garnered some learnings from its mortgage brokers on how to make the neobank’s onboarding process even better. “We have made over 100 changes since we first went live. Now our brokers can submit an application and get an approval in as little as 2 hours through digital verification,” Tyler said.
Digital ID and the adoption of digital verification as a seamless approach for consumers that would allow business to focus on delivering services for the consumer rather than competing on which firm offers the best digital ID solution.
Wisr’s Lu spoke about a “digital utopia”. Here he believes there should be a platform where digital ID is solved at an ‘industry level’. For example in the Nordics, in countries such as Sweden, there is a system where digital ID can be shared.
“This can be achieved in a trusted way. Rather than businesses competing on who does ID verification better, because that should be baseline, they can look at delivering better services for consumers,” Lu said.
For GBG regional director Albert van Wyk, the need for a robust digital ID check goes beyond just document checking in order to verify a customer. “We have spoken about biometrics but identity checking still seems to be document-based.
How does digital identity become more holistic rather than it being simply about compliance checks,” van Wyk questioned? 86 400’s Tyler picked up on van Wyk’s point adding that “it really is important to think about what identity means in each moment you interact with a customer”. He said 86 400 sees its customers’ device as part of them and so when contacting the call centre customers don’t need to be asked about the name of their first puppy or their mother’s maiden name.”
“We know who our customers are straight away which allows us to create a great experience that is also very secure, ensuring that we understand our customers at each touchpoint and then keep bad actors out who are always looking for a way in, Tyler said.
Emerging trends around fraud were also tackled. The prevalence of mules being used to open accounts for money laundering was discussed.
Heritage Bank’s Chris Watts noted that there is now the widespread use of prepared scripts and multiple phones for mules to receive instructions as part of the account opening process. Being a global fraud management and identity intelligence vendor, GBG has the benefit of speaking to many Australian, regional and international organizations, according to van Wyk.
In both New Zealand and Australian markets, van Wyk is seeing a shift of fraudsters applying for loans, once those loans are received, there is no intention by the person to repay that loan. This type of fraud is then often perceived as a credit risk which presents additional challenges for both bank and non-bank lenders.
As business in the cryptocurrency sector, Karaboga uses a “non-custodial solution”. “Basically on both sides [of the transaction] we use a unique PayID for each customer to send the funds to deliver the cryptocurrency. They have a unique address to transfer the funds. And once we get the confirmation on blockchain, we can administer funds,” Karaboga said.
Regulatory challenges were also addressed at the roundtable. For Heritage Bank’s Watts, the divergent approaches of AUSTRAC and the Australian Registrars' National Electronic Conveyancing Council (ARNECC) must be tackled.
“The approach to KYC and AML by AUSTRAC and VOI by ARNECC is very different. For example, AUSTRAC has agreed to the framework around digital licenses but not ARNECC. These differing rules can make it an inhibitor to the digital approach to areas like mortgages,” Watts said.
Other initiatives on regulation could also pave the way for a greater need to embrace innovations in digital trust and verification, most notably open banking.
IMB Bank head of member experience Gary Anderson, sees open banking as a means to making the onboarding of clients a smoother, less bureaucratic process.
“The beauty of open banking, I think, is that it's going to make the identity process actually more efficient, more effective and safer,” Anderson said.
Importantly he notes it is also an opportunity to drive trust between the institution and the customer. “Trust really happens as customers come to share data, consume data, and give consent to share.
I think open banking is going to transform the industry. It will move away from screen scraping, because ultimately trust will come in sharing data. It will come from identity.
I think we'll see a heightened level of expectation,” he told the roundtable. For GBG’s van Wyk, trust will be key going forward. “Ultimately verification is about knowing who you are dealing with. Trust here is the underlying factor,” van Wyk said. “If an organisation can really ensure that trust with their customer, it leads to a longer-term relationship that helps drive other factors like a greater share-of-wallet.
“As organisations, we need to reimagine the way in which we currently approach some of the processes on customer onboarding and digital verification that could even emerge as a competitive advantage for institutions.”