SAN JOSE, Calif.–FICO has released its latest Customer Identity Management Survey, which found banks across the U.S. and Canada are struggling to meet consumers’ digital banking expectations, particularly around identity management.
The impact of a bad digital banking experience can be “costly” to financial institutions, According to FICO, which pointed to an earlier consumer study it conducted that found 23% of consumers would abandon opening an account if forced to prove their identity via another channel.
The Findings
Among the study’s findings:
- Only 49% of North American banks presently use digital methods to capture or verify identity when opening personal bank accounts (i.e., checking accounts).
- 75% of banks in the U.S. and Canada are planning to invest in an identity management platform within the next three years.
Despite COVID-19 quickly turning online banking into an essential service, the survey found financial institutions struggling with how to establish practices that combat online identity fraud and money laundering, without negatively impacting customer experience.
For example, FICO said 51% of North American banks are still asking customers to prove their identities by visiting branches or posting documents when opening digital accounts. This also applies to 25% of mortgages or home loans and 15% of credit cards opened digitally, FICO reported.
A Rethinking
“The pandemic has forced industries to fully embrace digital. We now are seeing North American banks that relied on face-to-face interactions to prove customers’ identities rethinking how to adapt to the digital first economy,” said Liz Lasher, vice president of portfolio marketing for Fraud at FICO, in a statement. “Today’s consumers expect a seamless and secure online experience, and banks need to be equipped to meet those expectations. Engaging valuable new customers, then having them abandon applications when identity proofing becomes expensive and difficult.”
The study found only up to 16%of U.S. and Canadian banks employ the type of fully integrated, real-time digital capture and validation tools required for consumers to securely open a financial account online, FICO reported.
“Even when digital methods are used to verify identity, the experience still raises barriers with customers expected to use email or visit an ‘identity portal’ to verify their identities,” the company added.
The lack of automation when verifying customers’ identity isn’t just a pain point for customers, according to FICO, with 53% of banks reporting it is problematic for them, too.
Regulatory Challenges
“Regulation intended to prevent criminal activity such as money laundering typically requires banks to review customer identities in a consistent, robust manner and this is harder to achieve for institutions relying on inconsistent manual resources,” FICO reported.
Fortunately, said FICO, with three-quarters of banks in the U.S. and Canada reporting plans to invest in an identity management platform within the next three years, the resulting more integrated and strategic approach to identity proofing and identity authentication means banks will be able to meet customer expectations and deliver consistently positive digital banking experiences across online channels.