Snippet: In an earlier article by Entersekt’s chief commercial officer, Dewald Nolte, we explored the challenges and opportunities faced by banks to create a smooth, secure and successful remote onboarding process for their existing customers taking up new products or services.

In an earlier article by Entersekt’s chief commercial officer, Dewald Nolte, we explored the challenges and opportunities faced by banks to create a smooth, secure and successful remote onboarding process for their existing customers taking up new products or services. In this, the second and final part in the series, Jennifer Singh, Entersekt’s director of channel partnerships, considers the slightly trickier side of the story: remote digital account opening for new customers.

A 2018 study by Gartner, which focused on how banks should overhaul the process of digital account opening, introduced a bold strategic planning assumption in its first few pages: by the end of 2020, 20% of retail banks would be able to offer the ability to open a new deposit account in 10 minutes or less.

This would be welcomed by bank CIOs who often bear the brunt of complaints from employees and customers alike about the account opening process in general. According to the Gartner study, new customers often abandon applications due to a confusing process or the amount of time it takes, typically resulting in added pressure being placed on already burdened call centers and branches.

Of course, for “10 minutes or less” to live up to its promise, the process would have to be a wholly digital one. There’d be no place for a part-digital journey ending in a last-minute dash to the branch for a customer to supply the several pieces of paper-based information needed to comply with know your customer (KYC) and anti-money laundering (AML) regulations, among others.

A tall order?

While some banks, like TIAA Bank and Radius Bank, are already on board (TIAA says that consumers can open a basic banking account online in as few as five minutes, while Radius claims they can apply online for a new checking account in under three minutes), the above-mentioned fallback on manual branch processes is symptomatic of the current state of remote digital account opening for the vast majority of retail banks. And it’s having some rather undesirable effects.

Mostly, it plays in direct contrast to the demand by technology-driven consumers for an account-opening process that is convenient and non-invasive. A 2018 study of global retail banking commissioned by Oracle Financial Services found that 69% of respondents want their entire financial lifecycle on digital channels.

It also prevents retail banks from competing with their slicker counterparts, digital banks, that already use open APIs to create convenient, user-friendly, secure, and compliant processes to onboard new customers.

And then there’s the arrival of disruptive opportunities like Europe’s open banking and PSD2 regulations, which empower consumers to switch banks more easily. These requirements are impacting the US market as global banks roll out reactive innovations across all their geographies, paving the way for an increased demand for better digital account opening functionality.

Technology to the rescue

Times are changing, and innovative new technologies can – and must – play a big part in improving the process, especially where legacy infrastructure is to blame for the lag. In most instances, banks don’t need to reinvent the wheel either: they can learn just by looking at what successful competitors and digital banks have done.

But before this can happen, they need to inspect each of the steps involved in the account opening process to identify and remedy gaps in internal practices and resources, as well as points of abandonment. These are:

  1. Application and data capture
  2. Identity verification
  3. Decisioning and account approval
  4. Disclosures and consent
  5. Account funding

While steps 3 and 5 are mostly internal, steps 1 and 4 lend themselves perfectly to the functionality offered by mobile phones and tablets, for example, to facilitate the process. From obtaining paperwork and filling in forms, to the potential of biometric fingerprint sensors and built-in cameras to electronically gather data during registration, this class of consumer device holds the key to a superior user experience.

But it’s the matter of identity verification, or proofing, in step 2 that seems to be the biggest hurdle for most retail banks to overcome. Because, regardless of where in the world they are, stringent compliance checks requiring various forms of personal information almost always apply in one form or another, adding to the complexity of the challenge. There are options, however.

Centralized eID schemes

Many countries, including Sweden and Estonia, have adopted the use of centralized electronic ID (eID) schemes that allow users to securely identify themselves online using a smartcard, mobile or single login without having to jump through the usual, cumbersome hoops.

Unfortunately, identity within the US market is far more fragmented, relying on various states and agencies to attest to identity. As a result, domestic banks have been reliant on data aggregators like credit bureaus and other data companies to provide identity verification services. As banks transition to digital onboarding, these services haven’t always kept pace due to various factors including the amount of personal data requested and the challenge of reconciling disparate datasets. Fraudsters have taken advantage of these vulnerabilities by using stolen data from data breaches to commit identity fraud or even create synthetic identities (fictional identities) to steal from financial institutions.

While a centralized eID scheme is unlikely to materialize in the United States any time soon, some states and agencies are rolling out new digital services to significantly smooth out the digital account opening process as far as identity proofing is concerned. A new memo from the US Office of Management and Budget directs agencies like the Social Security Administration to create identity proofing APIs against their authoritative data sources.

Digital-first third-party players

While an eID scheme would take a substantial amount of time to implement and roll out, new players have come to market with simple, fast, and effective solutions to solve the “identity crisis”.

Companies like AuthenticID and Acuant, for example, use machine learning and facial biometric solutions to proof an identity using a mobile device and a government-issued ID. Other companies like Airside Mobile and Evident are building consumer-centric verification platforms that eliminate exposure to personal data.

These service providers can help not only financial services, but government, healthcare providers, and online retailers to streamline their processes when trying to determine whether a new customer is a) a real person and b) who they say they are.

The bottom line

Account opening is still the most critical process for any bank to perfect. New accounts and customers are, after all, their primary means of growth. But the trend is undeniable… Consumers expect more, and retail banks need to do better if they want to stay relevant in a world gone digital.

At Entersekt, we believe in the power of trust. Security is at the heart of our customer-first approach to digital banking experiences. Contact us today to learn more about how we can help you make the most of the relationship you already have with your customers.

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Jennifer Singh

DIRECTOR, CHANNEL PARTNERSHIPS: NORTH AMERICA

From strategy to execution, Jen makes innovative ideas become scalable businesses. Before joining Entersekt, Jen helped found the Digital Identity Solutions group at Thomson Reuters, an incubated business venture focused on the development of new identity verification and authentication services. Jen also volunteers as the City Director of House of Genius Atlanta, a community that helps entrepreneurs overcome challenges.

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Entersekt is an innovator of customer-centric fintech solutions. Financial services providers and other enterprises rely on our patented mobile identity system to provide both security and the best in convenient new digital experiences to their customers, irrespective of the service channel. With us, they can concentrate on their innovation roadmap, while delivering intuitive, low-friction digital experiences to their customers.