Bank Identity Verification: A Risk-Based Approach
Currently, the cybersecurity risks for financial institutions is high. In recent years, there have been over one billion cyber attacks on financial institutions. They have faced significantly more attacks than other industries such as healthcare, retail or insurance. The costs associated with cyber attacks can be tremendous including regulatory fines, legal problems, cybersecurity upgrades and losses in brand reputation. Creating cybersecurity procedures that follow a risk-based approach to customer friction is imperative for financial institutions. This is especially important as financial institutions switch toward digital-first banking, something younger generations demand. In this article we will explore how bank identity verification can assist in this process by improving customer satisfaction, lowering costs associated with fraud and meeting regulatory compliance.
The Case for Risk-Based Friction
Many financial transactions are moving to digital channels, increasing the potential for fraud and cyberattacks. Regulators are guiding them to use new technologies to increase fraud protection yet at the sacrifice of increasing customer friction. How can a bank ensure that it prevents fraud in its systems while also meeting the demands of its customers? The answer is risk-based friction.
With risk-based friction approaches to fraud protection, friction is only increased for a new customer if risk is detected. Honestly, most people are who they say they are. This means that in a risk-based system, most users will be able to pass through the system with minimal friction. It is only questionable characters, fraudsters or other cybercriminals, who will experience the increase in friction in these customer-not-present scenarios.
This type of process will have the positive effect of causing improved customer satisfaction. It will do this by showing customers that yes, you take cybersecurity seriously and want to prevent fraud at your financial institution. It will also do this by showing your customers that you have put thought into your user experience. Most users want simple online experiences that are easy to follow and fast. Friction-based fraud protection is still easy for legitimate people to pass through; therefore, catering to most of your customer’s needs.
Risk-Based Bank Identity Verification
A risk-based approach to fraud prevention can be directly implemented during digital onboarding processes. Using bank identity verification solutions, financial institutions can begin creating digital onboarding processes that assist them in meeting regulatory compliance—Know Your Customer mandates—with minimal friction to new users. They will help banks mitigate risk and detect fraud in customer-not-present onboarding channels and become an integral part of a broad KYC banking strategy.
Digital identity verification services allow users to go through the onboarding process on their own time anywhere in the world. The process is also fast; many digital identity validation providers can approve users within seconds of uploading their information. Plus, features like mobile form fill can be integrated into the process as well, making onboarding even easier for new customers.
Digital identity validation solutions offer a way to detect risk during the onboarding process. For example, if a new user fails to verify that their ID is legitimate, then this is an indication of risk. From there, a financial institution can increase the friction in the onboarding process and require further information from the user to validate their identity. Legitimate users would not experience this friction because they would not be inputting inauthentic information into the identity verification platform.
Benefits of Risk-Based Identity Verification
Risk-based friction is an approach all banks and financial institutions should implement as they move toward digital banking. As cybercriminals become more adept online, risk-based identity verification offers a way to prevent illegitimate users from entering a financial institution online. Financial institutions must tread a fine line between creating robust cybersecurity processes and creating great digital customer experiences. Risk-based friction offers a way for financial institutions to increase the quality of their security processes while minimizing the effects of these processes on their legitimate users. Plus, risk-based identity verification is an important tool within a robust KYC and AML compliance strategy.
Build Your Risk-Based Identity Verification Strategy
To create a robust risk-based identity verification strategy in 2019, you must look for online identity verification providers that focus on these three pillars: user experience, fraud prevention, and compliance. Financial institutions are poised to face many cybersecurity burdens in 2019, especially as they increase the robustness of their digital banking channels. Risk-based identity verification helps combat these potential face offs and is an important tool in a broad cybersecurity strategy. Leveraging these solutions can become a part of a central strategy to build digital trust and long-term customer loyalty.
IDMERIT can help you meet your digital banking strategy goals. To learn more about our solutions and how they can benefit your financial institution, please contact us for more information.