Now more than ever banks want to ensure digital banking services are widely available to their customers while also keeping them safe from increasing digital fraud and cybersecurity threats.
In response, more banks and financial institutions (FIs) are offering a remote bank account opening process as part of their online and mobile banking channels. Whether a checking account, savings account, investment or other account, the number of accounts opened from smartphones is growing. Billions of dollars are being invested in digital challenger banks, which are focused on rapidly growing their customer base. Similarly, incumbent banks need to improve the digital customer experience in this area to attract new generations of customers who will drive growth.
With the increase in remote account opening comes potential fraud spikes too. Banks and other FIs also need to reduce fraud and losses related to application fraud, account takeover, and synthetic identities.
A recent survey of banking executives explored the challenges in remote account opening practices, underscoring the industry’s increased risk to fraud and opportunities around improving the customer experience. It’s clear from the survey results that banks are prioritizing both security and the remote account opening experience:
- 85 percent of banking executives surveyed said their institution experiences fraud in the digital account opening process, and more than 50 percent cited the process itself as the cause;
- 80 percent reported that streamlining the process to improve the customer experience was one of their objectives this year, and 60 percent agreed that poor customer experience was the top reason applicants dropped out of the process;
- 72 percent of respondents planned to reduce fraud and losses related to application fraud, account takeover and synthetic identities, given that 49 percent rated the security of their current digital account opening application process as only somewhat or not secure.
New Tools to Modernize and Secure Remote Account Opening
There is a tremendous opportunity for banks to capture new customers by modernizing their remote account opening processes. Yet, as consumers conduct more of their financial transactions through online and mobile banking apps, cybercriminals will increasingly target these digital channels. To solve this challenge, there are a handful of emerging technologies that are available today that can help banks acquire new customers while securing their digital product and solution offerings, including:
Digital ID Document Verification
The most common methods of customer identity verification have traditionally involved a customer visiting a branch and presenting their physical ID documents, or via banks using legacy knowledge-based authentication (KBA) methods. However, as the banking landscape has shifted, and with technology advances, both approaches are no longer adequate. Fraudsters and cybercriminals use the vast troves of exposed consumer data available on underground markets – including birth dates, addresses, social security numbers and more – to create synthetic identities or open fraudulent new accounts under legitimate consumers’ names.
During the remote digital account opening process, banks need to be able to verify identities without compromising the customer experience and security. It is not about achieving a better digital customer experience or a more secure process, but delivering both at the same time. One method of doing this is by implementing context-aware identity verification, which is a combination of digital identity verification methods, such as ID document capture and facial comparison, with risk analytics. This combination allows banks to achieve the “best of both worlds” while simultaneously lowering their new account abandonment and fraud rates.
E-Signatures
Customers manually “wet” signing contracts and agreements can be a time-consuming and friction-filled process, involving visiting a branch, or printing, or scanning documents, all of which carry a higher chance of human error. The pain-points associated with manual signatures only become greater if an agreement involves remote customers and employees. Given this, banks can adopt e-signature solutions for a more seamless and secure signing experience — a process that allows banks to acquire new customers quicker, and offer a higher quality service, no matter their location.
E-signatures also help banks remain compliant with GDPR and other regulations, by capturing a customer’s digitally signed document supported by a comprehensive visual audit trail detailing what the customer has agreed to, when and how they signed. There by, providing a legally enforceable contract that can be referred back to in case of a customer dispute or compliance audit.
Artificial Intelligence and Machine Learning
Artificial intelligence (AI) and machine learning are driving transformation across virtually all industries. For banks, AI and machine learning can have a major impact when it comes to fighting digital fraud.
Machine learning algorithms take into account several factors, including a customer’s location, device usage, and other contextual data points to build up a detailed transactional profile. These algorithms can analyze vast amounts of transaction data and flag suspicious transactions with highly accurate risk scores in real-time. This risk-based analytics approach can detect complex patterns of known and unknown fraud methods that are difficult for human analysts to identify, allowing banks to be more operationally efficient while detecting more fraud.
The digital era has shifted the way consumers engage with their financial institutions — away from in-person toward remote digital transactions. With newer technologies such as: digital identity verification, AI/machine learning and e-signatures, banks can mitigate fraud and increase security, all while providing an improved digital customer experience across digital channels.
