Veridium: Digital IDs are the foundation for a streamlined secure banking experience
Jason Tooley, Chief Revenue Officer at Veridium, and board member at techUK, comments on how digitally authenticating consumers plays an integral role in supporting the growth of mobile financial service offerings to consumers:
Digital IDs are the foundation for a streamlined secure banking experience
Digital banking is now firmly embedded into everyday life in Europe. In data revealed by a recent MasterCard survey customers value security and convenience as the most important factors in managing their money online, emphasising the opportunity banks have in leveraging consumer confidence in their personal technology. Of more than 11,000 people quizzed across 11 European markets, 84% use digital banking at least once a month and 38% at least once a week. Nearly two thirds are using banking services from traditional providers, but digital-only banks are on the rise and are now being used by one in five customers. The consumer’s own digital technology is at the heart of the engagement with financial services organisations for the long term.
New banking services can be established quickly today with the rise of fintech capabilities and the expansion of open banking strategies; but gaining acceptance and broader usage relies heavily on the combination of a secure user experience and accessibility from the consumer’s own devices. This is the balance between accessibility, user experience on one side of the coin and security on the other with added regulatory compliance for the consumer and the bank. Without both areas being addressed, adoption will accelerate due to the rise of mobility but the risk of loss of confidence associated with fraud will damage the brand and ultimately revenue for the bank. Brand damage due to the risk of cybercrime and fraud is likely to have an increased impact in the open banking, post PSD2 world.
The increasingly millennial population, having grown up immersed in technology, expect to leverage their consumer technology to create a frictionless experience. One area being adopted heavily by consumers is the ability to create a digital identity on their own device and use this to access their device and applications. Consumers recognise this creates a good user experience and makes them highly productive on the move; but how do banks ensure support for this requirement in a world of cybercrime, fraud and identity theft?
The traditional method of creating secure authentication of identity for a consumer has been to use passwords as a primary mechanism, with a One Time Passcode (OTP) type technology as a second factor for authentication. It is widely recognised that a password based approach is fundamentally challenged by the ease of compromise if passwords are simple to steal or detect, or through methods such as phishing. In cases where highly complex passwords are implemented, then the likelihood of password lockouts and reduced productivity for consumers creates a negative user experience. When consumers are faced with the additional need to use an OTP, either hardware or software based, or through SMS, this adds friction into the end user experience.
From a bank’s perspective, creating new digital services in the cloud rather than on premise in the bank’s data centres also creates regulatory challenges for the bank. Banks need to ensure both its employees and the cloud service employees need to be reticent of who can access their customer information. Satisfying the regulator therefore becomes a full-time task for many banks as they drive towards greater agility. Adding to the regulatory challenges, the constant changes in the financial services sector necessitate new ways of proving identity, including GDPR and the upcoming PSD2 deadline coming into force in September.
Solving this problem is imperative for the banks, both global and digital; payment service providers and the FinTech community in general; the balance of great user experience for the consumer and strong, secure experience delivered by the enterprise is the winning formula. The use of digital identities to authenticate access, transactions creating a non-repudiating, auditable approach is the innovation that banks are looking for.
With Open Banking creating new services and an added need for accountability in the process of authenticating identity, it’s an ideal time for financial services organisations and FinTechs to build a digital authentication strategy into their Open Banking environments to match the expectations of consumers and the regulator. This will create an approach where banks and FinTechs can develop a consistent strategy around interoperability with digital authentication implemented as part of the launch of new services. This approach will, undoubtedly, be focused on the user experience and mobility requirements; but now adding the security and requirements by the bank and regulator will be imperative.
It’s incumbent on all areas of the financial services sector from global banks to the FinTechs to be working collaboratively to create the combination of a secure experience and great digital experience. This is where a bank’s digital transformation journey integrates with a successful Open Banking or PSD2 strategy.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.