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Disruptive digital-only banks, innovative regulations, and shifting consumer demands have made today’s banking digital-first — but the benefits of digitization are being held back by identity verification challenges.
Identity verification underlies many of the core processes associated with financial services, with banks required to subject their customers to strict identity checks, both to protect those users’ finances and to meet regulatory compliance demands.
There have been a plethora of efforts aimed at streamlining identity verification online, but these attempts have largely failed to address the issue in its entirety. For example, customers are often required to create unwieldy passwords and verification details that can be difficult to keep track of to access their accounts. Not only have these efforts created new points of friction for users, but they’re also expensive for banks, with each password reset costing up to $70 according to Forrester Research estimates.
These issues run deeper than password reset costs, though: Banks spend billions annually on compliance requirements related to identity verification, while agile and technology-first players are snapping at these players’ heels by streamlining how they offer services to banks’ customers.
However, digital ID solutions can help iron out these identity verification headwinds, in the process providing a foundation for banks to bat away the growing threat to their core business from industry insurgents. Digital IDs, when done right, can help banks ease identity verification pain points for their customers while also helping them slash operational and compliance costs.
These reasons alone are sufficient for banks to take the lead in developing digital ID schemes. But the identity verification challenge isn’t limited to financial services, and banks that are successful in developing their own digital ID solutions can tap into new business opportunities as trusted providers of identity solutions across a whole range of industries, from e-commerce to healthcare and public services.
In the DIGITAL IDENTITY AND THE FUTURE OF BANKING report, Business Insider Intelligence defines digital ID and discusses the technologies used to deliver the solution, and lays out the case for why banks have a compelling reason — and are best suited — to take the lead on digital identity. This report will illustrate how these players can go about developing scalable and effective digital ID solutions to solve genuine pain points in their own business and take advantage of the opportunities that digital identity infrastructures open up.
The companies mentioned in this report are: Barclays, Belfius, BNP Paribas Fortis, Capital One, CIBC, Danske Bank, Desjardins, First American Corporation, Handelsbanken, ING, KBC/CBC, Mastercard, Microsoft, Orange, Proximus, Rabobank, RBC, Scotiabank, Signicat, SkandiaBanken, Sparbanken Gripen, Telenet, TD Bank.
Here are some of the key takeaways from the report:
- Digitization — driven by agile and innovative fintechs, regulations, and falling costs of technologies like smartphones — has transformed how customers interact with their banks.
- But efforts to realize the full benefits of digitization are being stymied by inefficient identification processes, which are creating new pain points for banks and their customers.
- Digital ID solutions, which contain the set of information that can be used on digital channels to accurately identify a person, can help solve these pain points for consumers.
- If done well, banks will be the biggest beneficiaries of digital IDs, because these solutions can help them slash onboarding and compliance costs while also allowing them to tap into new revenue opportunities.
In full, the report:
- Details the key challenges with existing identity verification solutions.
- Identifies how digital IDs can help eliminate existing identity verification pain points.
- Explores how digital IDs can unlock new revenue streams for banks.
- Canvases a number of successful digital ID efforts undertaken by banks, and provides an example of a failed project to highlight the role banks can play in solving the vexing identity verification challenge.
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