First appeared in The Paypers Web Fraud Prevention and Online Authentication Market Guide 2016/2017.

Written by Emma Lindley.

During the 2008 recession, financial services’ customers became more selective about the brand they chose to save and spend their money with. This created the start of a power shift between institutions and their customers, which meant that the winning brands emerged as the ones who treated their customers with great service and customer experience. This trend, coupled with the shift to online and mobile, means that customers now have the technology at hand which will allow them to review and select a new brand more easily if they feel they are not getting the service or price point they require. It has also opened up the new possibilities for fintechs to start disrupting the financial services space through mobile and apps, alongside innovative products. Additionally, customers can switch their accounts with financial institutions due to regulation, but on the other hand, institutions find it harder to on-board customers due to the same rules (4th Money Laundering Directive, PSD2). These trends are really shaping and disrupt the industry today.

Why identity matters

Identity is like plumbing. None of us are particularly bothered about it, until it goes wrong and we realise it is a fundamental part of our environment. We have all had the bad identity experience, the one where we have had to send rafts of identity documents off in the post, or worse where our identity has been stolen.

For organisations, it is the difference of being able to bring on-board more customers easily, with a good customer experience, increasing revenue and reducing fraud. For consumers, it is the difference of being able to get to the products they want faster, safely and securely. And if those products do not satisfy their needs, they switch to another provider quickly and easily. In some markets this has been solved for now, for example the NemID in Denmark which can be used to open a bank account, transact with Government and open an online gambling account. For some of those markets that have a solution, flaws are being exposed. For example, the Philippines where the entire citizen identity database was breached, and they have to start from scratch again. The most important thing about identity ecosystems is that they need to evolve with the new opportunities and threats. So what is happening to move us forward?

Secure identity re-use

In the UK there are a number of initiatives to allow users who have created a secure digital identity, to re-use that identity across other services. The re-use of a non-centralised secure identity improves the customer experience and should (if set up correctly) improve privacy and security. Through the Open Identity Exchange there are a number of projects looking at the re-use of secure identities. The main benefit these project bring is that they start with the user in mind and test the user journey, rather than starting with technology. The Financial Service Reuse project, led by Barclays, is looking at how a digital identity could be re-used across multiple financial services companies.

This project comes to completion in November 2016, you can read about the results here. Furthermore, the Tax Incentivised Savings (TISA) Project also analysed how digital identities would improve the customer experience, comply with Know Your Customer regulations, and make it easier for people to open accounts and start saving.

Key findings from the project include: 1.  Almost half of participants had abandoned a savings account sign-up process as it was too much hassle 2.  Participants were positive about using digital identities as it was convenient 3.  The time taken to register for a digital identity was worth it as the identity could be re-used later

Selfies, social and secure login

Across the globe financial services companies have started to leverage the evolution of technology to their advantage, allowing users to create logins using face, voice and social sign in, alongside or to replace the traditional password processes.

Whilst these methods can improve the user experience, companies need to be clear about their privacy policy and procedures when implementing these new security methods. After all, a data breach of people’ s biometrics (such as face and voice) will not leave us with many other options.

Self-sovereign identity

And then there is the B word and the variants like Swirlds. There are many KYC solutions being built around distributed ledger technology. Without a framework (legal and commercial), blockchain it is not the one stop solution to identity. Once we cut through the hype and see some actual implementations of blockchain for identity in financial services, with real users using it, we will understand what place it has in the identity ecosystem. It is safe to say the marketplace is changing and traditional solutions are being replaced. However, when market adoption happens I can safely say that an identity revolution is coming to a financial services sign up process near you.