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UK banks face consumer frustration over customer identity management

UK banks face consumer frustration over customer identity management
Justinas
Baltrusaitis
2 years ago
3 mins read

A new study by global analytics software provider FICO has highlighted the biggest barriers to digital interaction between bank and customer at a time when digital has become ‘king’.

Customers now want a fully digital process, but the integration of identity systems is a concern for more than half of UK banks.

According to the data, based on a survey of decision-makers by independent research firm OMDIA of 172 banks across 8 countries, including 27 UK banks, the inability to complete identity verification online is a stumbling block for banks.

Sarah Rutherford, senior director of identity fraud marketing at FICO explained to Finbold:

“Historically, identity solutions were developed for face-to-face interactions and have since been adapted to the needs of new channels and products. As digital interaction is accelerated by the impact of COVID-19, it exposes the weaknesses inherent in using identity verification processes that were not intended for digital channels.”

Consumers want fully digital account opening

A FICO consumer study conducted earlier this year found that consumers have a strong appetite for digital interaction. Most people in the UK (82 percent) are prepared to open accounts digitally. But consistency of identity validation across channels is a challenge for 54 percent of UK banks.

According to the FICO-commissioned study, whilst 72 percent of UK banks use digital methods to capture identity for personal bank accounts, they are not integrated into a seamless experience. Only 36 percent of banks said they capture customer identities and verify them in the same channel.

A lack of integration means that only 29 percent of document capture is integrated into the same channel, leaving clients much more likely to abandon an application, for example after being forced to download another app or scan and email documents.

Indeed, the FICO consumer study found that nearly one in three UK consumers (32 percent) said they would abandon an application process if forced to take action through a non-digital channel. Yet only about 7 percent of banks surveyed have adopted a streamlined approach with capture and verification methods fully integrated, in real-time, into the digital application process.

Banks in the UK also noted challenges around the authentication of existing customers, including complying with legislation. This was a concern for 54 percent of respondents, probably driven by the Payment Services Directive 2 (PSD2), which establishes technical and operational rules around verifying the real payer, both for banking and payment card accounts. The lack of integration between authentication systems across customer channels is a concern for half of UK banks.

Banks missing important data

Lack of the right customer information is another big stumbling block for banks in the digitalization arms race. Up-to-date contact information is crucial for one-time passwords (OTP) or codes for customer and payment verification, a common strategy for PSD2 compliance.

Yet only 83 percent of UK consumers in a prior FICO survey said their bank has their mobile number, and a third of banks say they have contact data for less than 70 percent of their customers.

When PSD2 forces the use of Strong Customer Authentication to secure e-commerce transactions, this could mean a failure rate that isn’t acceptable to merchants or their customers — who are likely to blame the bank that issued the debit or credit card the customer tried to use.

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Justinas Baltrusaitis
Author

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.

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