Banks (and Their Tech) Aren’t Getting Any Younger: Find the Fountain of Youth With Digital Identities

By Jim Close, Regional Vice President of Enterprise at Kofax

We live in a digital world. From shopping to entertainment and even chatting with friends, we spend the majority of our time interacting digitally. Naturally, we expect to do the same when it comes to banking. Many banks, however, are showing their age, failing to provide end-to-end digital workflows that meet modern customers’ needs and expectations.

Banks often lag behind when it comes to digital transformation for a number of reasons. One of the primary culprits holding banks back is legacy technologies, according to Forrester. Outdated, disjointed systems are costly and complicated to maintain, devouring IT budgets and leaving little to spend on innovative digital technologies.

New entrants to the banking space, however, aren’t tied down by legacy systems. These younger entities are embracing digital transformation and ushering in a new era in banking.

Traditional banks can become obsolete or get a digital makeover. Thanks to technologies like cloud computing, artificial intelligence and intelligent automation, banks have the potential to transform their infrastructure to support new ways of working.

One of the best places banks can start their youthful makeover is by adopting digital identities. Think of it as a much-needed facelift for your bank, contributing to streamlined operations, improved security, and a frictionless customer experience.

Get ready to turn back the clock and discover the banking fountain of youth.

A Nip and a Tuck: 4 Benefits of Digital Identities

1. Offer a seamless customer experience: We’re two years into the pandemic, and it seems safe to say in-person identification verification is a relic. Consumers are accessing everything online, from medical consultations to education. They’re not going to drive over and walk into a branch office to show proof of identity, age or residency in order to access bank services. They want to do it all through their mobile device.

Digital identity makes it possible through a combination of cognitive capture and artificial intelligence technologies. Data can be automatically extracted from all types of identity documents, including residency cards and passports through optical character recognition (OCR) or by leveraging the NFC reader on the customer’s mobile device for documents containing eChips. Customers can even upload a selfie from their mobile device. A fully digital process streamlines customer onboarding, as well as applications for loans and other banking services. Banks benefit from lower attrition rates and improved customer satisfaction.

2. Reduce errors and manual work: Consider the volume of labour hours bank employees spend manually processing documents related to identity verification. Then think about how much time customers spend waiting for approvals or driving to and from physical branch offices delivering paper documents. Simply put, the manual approach is outdated. Not only is it slow, but it opens banks up to errors.

Intelligent automation speeds the process up and improves accuracy. Customer waiting times are slashed, and employees can focus on more high-value work. This is an important benefit that’s quite timely given the droves of people leaving the workforce as part of the Great Resignation. Digital identity technology takes mundane, boring work away from employees so they can be redirected towards more engaging work, improving talent retention.

3. Improve security and compliance: Banking fraud attacks increased 159 percent when comparing Q1 2021 to Q4 2020, according to a 2021 Financial Crime Report. Account opening identity theft and impersonation scams were among the top five banking scams reported. Banks need an early-warning system to identify and stop the fraudsters.

When digital identity is implemented, an authenticity check matches the data on ID documents and even verifies the digital certificate in documents with the eChip against a list to prove the data was signed by the correct authority. Tampering checks monitor for headshot manipulation and text changes. Liveliness detection ensures customers are taking their picture in real time, which is matched against the face photo from the eChip to ensure the customer is the valid owner of the ID.

Additional features like SOC 2 Type 2 certification and ISO 27001 certification further enhance security, while extremely accurate identity proofing and fraud deterrence make it easier for banks to meet anti-money laundering (AML) and know your customer (KYC) requirements, as well as regulations like GDPR and PSD2.

4. Reduce costs: While it’s true there’s a cost in investing in digital identities infrastructure, banks cannot afford to get bogged down in a lengthy cost-benefit analysis. Father Time waits for no one, and traditional banks need to take action now to keep up with the younger, more agile financial organisations.

The wiser approach is to focus on the money your bank can save in the way of identity theft, fraud and regulatory fines. For instance, 80 banks were fined an estimated £2 billion for AML and KYC-related fines in the first half of 2021. Banks that embrace new digital identity technologies can reduce fraudulent activity and the costs associated with them and avoid the costly fines that come with compliance violations.

Before and After: Success Stories

Just how successful can a digital makeover be? We don’t have to look far to see pleasing results.

In South Africa, a bank was facing challenges with the account opening process. The challenge was to make it more convenient for customers to open an account and easier for those same customers to access bank services once they were successfully onboarded.

So the bank implemented mobile ID capture technology. Identity documents, proof of residence, and proof of employment can all be uploaded via a smartphone or tablet. As a result, the percentage of people completing the account opening process increased from 30 to 80 percent. Mobile ID capture technology has increased revenue, market share, and the bank’s competitive edge.

In the Netherlands, a cooperative bank wanted to create a better employee and customer experience. Employees were spending a lot of time on repetitive, manual tasks. The bank implemented cloud-based intelligent automation and put citizen developers to work using a low-code platform.

The bank managed to recoup 1.9 million hours of business value in just one year by automating manual, boring tasks, including KYC checks. Customers are happier, as evidenced by more positive ratings, and employees have time to spend on higher value work. Required KYC checks are completed more quickly and accurately.

Traditional banks may be old, but the advent of cloud-based platforms, intelligent automation, artificial intelligence, and citizen developers makes it possible for banks to keep up with the next generation of financial institutions. Digital identity technology can take years off a bank’s face, delivering efficiencies, cost savings, better security and compliance, and a modern customer experience. Is your bank ready to jump into the fountain of youth?