Banks of all stripes must simultaneously take steps to streamline the onboarding process and combat fraud. Philipp Pointner explains how banks can find the right balance between the two.
While lockdown restrictions may be easing in some countries, the COVID-19 pandemic has drastically changed all aspects of our lives, from the way we work to how we socialise. This is certainly true of the way we think about financial services.
With the spotlight now on online banking, traditional banks need to consider ways to allow their current and prospective customers to conduct the same kinds of activities remotely while keeping them safe from the increase in digital fraud and cybersecurity threats.
Today, banks of all stripes must simultaneously take steps to streamline the onboarding process and combat a variety of fraudulent schemes from new account fraud to synthetic fraud to account takeover. This comes at a time when cases of financial fraud in the UK are rising, with an increase of 33% in April compared to previous monthly averages.
Starting with onboarding
Experian’s 2020 Global Identity and Fraud Report reveals that 57% of businesses report higher fraud losses associated with account opening and account takeover than other types of fraud. Accounts less than a day old make up nearly half (48%) of all fraud value, highlighting the vital need to verify the identity of a customer right from the outset.
To do this, fraud detection needs to be prioritised. However, this has typically created friction and nearly 40% of potential new accounts are abandoned at the onboarding process due to being too onerous and time-consuming. This results in massive lost potential for financial institutions, especially given the high customer acquisition costs associated with modern marketing campaigns.
Solving the issue
Like many of us, banks are creatures of habit: they often follow a common set of steps when onboarding new customers. While this is part of their necessary due diligence in meeting KYC and AML requirements, many of the onboarding steps required in-branch can be automated and simplified to deliver a seamless customer experience.
This is where face-based biometrics can save the day. By incorporating face-based biometrics and AI into digital identity verification, banks can pinpoint the optimal equilibrium between customer experience and fraud detection.
It all starts at the account onboarding stage where banks instruct the new customer to take a photo of their government-issued ID (e.g. passport or driver’s license) via their smartphone or webcam, then take a corroborating selfie.
This process often includes a liveness detection check to ensure that the online customer is physically present during the process and not using a spoof (e.g. a picture of a picture or a deepfake video) to bypass the selfie requirement. Then, a definitive decision will be made within seconds and banks will have one happy customer and have stronger confidence in their digital identity.
Biometrics won’t let it crack the system
Face-based biometrics can be taken a step further to help traditional banks update their ongoing authentication methods to safeguard the accounts of existing customers.
Here’s how biometric-based authentication works. It starts with the new account onboarding and the liveness check. While there are a number of different ways to perform liveness check, one method gaining traction is to have the customer position their face within an oval on the screen and then move a little closer.
During the few seconds it takes to complete this step, a 3D face map is created which is a digital representation of the user’s face and contains over 100 times more liveness data than a 2D photo.
This face map is stored in the system as the user’s benchmark, so in future instances where authentication is required ( e.g. a wire transfer or a password reset), the customer simply needs to take another selfie which is then instantly compared to the original 3D face map created during onboarding.
This is a quick and seamless process and within seconds, the user’s digital identity is unlocked and the transaction is authorised.
Digitalisation may well have been something that challenger banks have previously excelled in, coupled with a sought-after customer experience. However, as we move forward, this is something that the traditional banks need to master too, and in such a way that neither customer experience nor security is compromised.
Face-based biometrics holds the key to this conundrum, allowing all financial services providers to balance these often-conflicting demands.
Philipp Pointner is Chief Product Officer of Jumio.
The views and opinions expressed in this Viewpoint article are solely those of the author(s) and do not reflect the views and opinions of Fintech Bulletin.