May 30, 2018
A study of 22 banks (institutions + digital-only) across APAC, Europe, and the Middle East analyzing digital onboarding methods & eKYC techniques for opening bank accounts found that OTPs and selfies were the most prevalent modern identity verification methods for digital onboarding among those banks. Banks are leveraging modern technologies such as OCR, image analytics, computer vision, AI/ML/NLP, and biometrics to bring magic into onboarding.
Manual, paper-based onboarding processes are not only outdated but are also extraordinarily costly in comparison to fully digitized systems. In fact, 20X more so than computer-assisted, electronic document processing. Banks and credit unions can realize 40-90% cost reductions through careful deployment of workflow tools and digital onboarding capabilities for customers and staff.
The ability to bring innovative technologies and methods into generally inconvenient onboarding process is largely tied to availability and access to a trusted eID system, and European nations are experienced in building both the right regulatory environment and sophisticated systems breeding magic in CX in FinServ.
There are two examples to make a case for EU being a benchmark for onboarding practices: eIDAS and Estonia’s eID system.
The Estonian eID card system is one of the most advanced in the world and serves as the basis for all of the digital services that are available in the country. The system has been in service for 16 years already and represents a highly sophisticated digital access card for all of Estonia’s secure e-services.
Estonia’s eID card is used as the national health insurance card, as proof of identification when logging into bank accounts from a home computer, for digital signatures, online voting, accessing government databases to check medical records, filing taxes, and picking up e-prescriptions. The majority of the Estonian population uses the eID card: >98% of bank transactions are completed and 98% of prescriptions are prescribed online. The eID card also makes life easier when it comes to tax declarations and 98% of those are conducted online.
eIDAS is another important lesson to learn from Europe. eIDAS mandates two primary codes of practice: Interoperability of government-issued ID, and Single Digital Market.
The first section of eIDAS regulation mandates member states to mutually recognize each other’s eID systems when accessing online services. This cross-border recognition makes eID from any EU member state interoperable between all other member states.
While the eSignatures directive guaranteed the admissibility of electronic signatures, eIDAS is going a step further in defining and providing requirements associated with Trust Services – services, namely electronic signatures, seals, time stamps, registered delivery and website authentication as provided for in the eIDAS regulation, which enhance the legal validity of an electronic transaction.
With eIDAS, Electronic Trust Services (eTS) work across borders and have the same legal status as paper-based processes. The goal here is to increase confidence in the safety and reliability of digital transactions, which will lead to growing adoption and usage, Gemalto emphasizes.
More importantly, establishing the legal power and trust in electronic signatures and authentication methods, combined with a region-wide standardization and interoperability of identity systems allows for the private sector to build the next generation of experiences in a variety of sectors, including banking. And Europe is arguably way ahead of the world in this regard.
A number of European banks have adopted digitized onboarding practices, adopting advanced technologies for identity verification and authentication, with interesting examples including BBVA, HSBC, Bank of Scotland, Deutsche Bank, Metro Bank, Starling Bank, Monese, and more.
BBVA was the first financial institution in Spain to launch ‘Online Onboarding’ via mobile in 2016, which allows anyone to open an account in just a few minutes and start banking right away. This service uses a procedure that verifies a customer’s identity through a selfie and a video call.
The remote registration service asks for photo ID and a selfie. The bank can check to see if both the images match through an innovative face recognition process. In the last step, a BBVA representative verifies the new customer’s identity through a video call. BBVA’s ‘Online Onboarding*’* process only takes a couple of minutes and allows the new customer to access and use all the tools and functions the bank has to offer.
Spanish banks traditionally did this in one of three ways: by physically verifying the customer’s identity at the branch, by sending a messenger to a customer’s house or by checking their information against an account the customer holds at another bank. The bank regulator has authorized this video-call identification process a couple years ago.
The UK-headquartered HSBC allows its business customers to open new accounts with a selfie, requiring a passport or DL images as an additional security measure. Prospective clients are invited to provide a self-portrait shot on their phone, which the bank verifies using facial recognition software before allowing them to make deposits and withdrawals.
This January, Metro Bank launched instant online account opening for its current account. Just like the bank’s in-store account opening process, customers can use their account right away, with account details provided immediately at the end of a successful application. The use of innovative technology means identification documents, along with a selfie, are uploaded directly to the application. With verification and authentication taking place in real-time, accounts can be opened in less than 10 minutes, including setting-up internet banking.
Without comparing institutional banking to digital-only solutions (since those are often operating on money licenses, holding funds with a different institution), it is still worth mentioning how the new generation of banks approaches customer onboarding.
Starling Bank, for example, allows new customers to register an account entirely in-app, with applicants first having to enter their name, date of birth, and address. To verify their account, users have to record and submit a selfie video, which entails reading out a short, pre-determined phrase. Finally, an image of an ID document, such as a driving license, needs to be uploaded.
In 2015, Monese launched a full-fledged, 100% mobile Current Account. The company then created a customer onboarding process that accepts virtually every customer that applies – even if they are new to the country, don’t have a credit history, or don’t have a regular fixed income. To open an account, customers are asked to take a selfie using smartphone’s camera and to click a picture of an ID document (preferably a passport or ID card, issued by any country).
Monzo uses a photo of the customer’s passport or DL for identification and matches it to a video selfie; N26 uses passport/ID proof + video chat-based ID verification (in Germany, specific nationalities are also required to check at the closest post office to show their ID); similar to N26, Fidor asks for passport/ID proof + a video chat for ID verification.
With open banking and GDPR driving discussions around multi-factor strong customer authentication, these newer methods do present a vast opportunity for banks and FIs to tap into. These techniques, when combined with one another, can make the process of authentication much stronger. Some of these banks already use multiple methods of authentication and eKYC. While these newer methods are largely being used by digital-only banks, traditional banks are also realizing the need to innovate on this front; we can expect significant developments in the next few months and years. – Diwakar Mandal, MEDICI