Why strong identity verification is becoming a USP for financial services

By Philipp Pointner, Chief of Digital Identity at Jumio

Accelerated by the pandemic, the majority of our financial lives now take place online. Tapping into the unprecedented rise of digital services across all sectors, the UK government recently revealed its plans to introduce digital identities to help tackle the “record high” levels of fraud in the UK that come with this new way of operating. As such, in an industry where so much is at stake, financial organisations are under increased pressure to keep their customers’ finances safe and ensure those accessing funds, making transactions or taking out loans are who they claim to be.

But it’s not just governments calling for this level of assurance — consumers are, too. Our recent survey found that over two-thirds of consumers globally (68%) think it’s important to use a digital identity to prove who they say they are when using a financial service online. What’s more, over half of UK consumers specifically (57%) say they would be more likely to engage with an online financial services provider if it had robust identity verification measures in place. Financial institutions therefore must ensure the methods they implement for verification build a complete ecosystem of trust across the full spectrum of services.

So with robust identity verification methods becoming a differentiating factor for financial organisations, how can they deliver this in a seamless and effective way?

Cashing in on digital identity acceptance

Typically, financial services have always erred on the side of caution when it comes to identity verification – treating every consumer as a potential threat and implementing lengthy verification processes to ensure low risk. As a result, consumers are regularly faced with clunky authentication processes, one of the greatest causes of abandonment during the onboarding stage. In fact, drop-off rates can be as high as 75% during the sign-up process if the customer experiences too much friction.

Digital identity verification solutions therefore present a viable option, particularly with consumers becoming more familiar with it. Our research revealed that half of Brits (50%) constantly or often have to use their digital identity to access their online accounts and verify their identity following the pandemic. And with the UK government moving toward the use of digital identities to tackle fraud, this is the most logical step for financial institutions.

Bringing biometric technologies into the mix

Using digital identity solutions for verification is grounded in biometrics, which is a positive start as the majority (71%) of UK adults say that they feel comfortable using biometric identity verification to use online financial services, from their fingerprint (52%) to their face verification (36%). Consumers say they’d also be happy to use biometric identity verification when carrying out a range of financial actions, from bank transfers to setting up direct debits, verifying purchases, and more. A third of consumers would even be happy to do this every time they log into their account.

Biometrics can significantly enhance security measures, without adding unnecessary friction to the process. For example, coupling facial recognition with liveness detection can not only prevent spoofing attacks but is also a secure and convenient way for users to verify their identity. Going one step further, adding an independent, app-based biometric allows for easy two-factor authentication, whilst simultaneously ensuring users continue having access to their accounts – even if they lose or switch their device.

Additionally, financial institutions with digital identity verification processes can also allow their customers to prove their identity without sharing unnecessary information, through privacy enhancing technologies such as zero knowledge proof. For example, when opening an account, customers can use their digital ID to accept “yes, I am over 18” rather than sharing the full details of their date of birth, further reducing the risk for identity theft and fraud.

In fact, combining biometric technologies with digital identity verification ensures customers are protected on all fronts. Financial organisations leveraging such assets as part of their identity checks can benefit from remote identification and verification without the need for human intervention, thus in turn reducing costs, providing an entirely self-service user journey and a fast, accessible and efficient experience.

Go digital or go home

There will always be a need to ensure identity theft and fraud risks are protected against, but what’s important now more than ever is that failing to embrace the benefits of digital identity verification can actually impact customer acquisition as consumers look to this as a key feature of financial services providers they engage with online.

With government and consumers both making noise that signal a shift toward digital identities, it’s crucial that financial services businesses stay one step ahead of the curve and start, or indeed continue, to embrace this form of technology to protect against fraud. While two-thirds of consumers (61%) believe their bank has done more to protect them against fraud and online identity theft since the pandemic, only a third (34%) say this is as a result of implementing more online identity checks. Now is the time for financial institutions to change that percentage and reap the benefits of digital identity solutions or risk losing consumer trust and, ultimately, loyalty.