10 Financial Processes to Digitize During COVID-19 (Part 2)
In these unprecedented times, digital banking and other financial services have become crucial for millions sheltering at home. Beyond digital self-service tools, however, are a raft of mediated financial processes that require the help of a front-line representative such as a wealth advisor, life insurance agent, or mortgage broker. These financial representatives have had to adapt rapidly from face-to-face interactions to a digital model, to ensure service continuity.
Forrester Research recently hosted a webinar on The Impact of COVID-19 on Financial Services and Insurance. In it, analysts advised that, “Demonstrating customer empathy, communicating service availability, accelerating digital transformation, and protecting employees are some of the key actions industry executives should be taking.” Ongoing and empathetic customer communications and protecting employees are clearly top priorities – but in parallel, the reality is many financial institutions have to fast-track aspects of their digital transformation in order to enable ongoing client services.
In this blog, we look at functional areas where e-signatures, digital identity verification, and authentication technologies can facilitate remote, mediated processes for both new customer onboarding and ongoing relationship management.
This article is the follow-on to part 1, where we looked at lending, remote bank account opening, and internal processes that require end-to-end digitization.
6. Wealth Management
In wealth management and private banking, there is nothing more important right now than being available to clients. J.P. Morgan communicates this well in a new ad about their financial advisors serving customers from their homes. CNBC reported that the ad is “intended to reassure its roughly two million existing clients that the company’s 4,200 advisors are there to talk about their finances.”
Around the world, wealth advisors are adjusting to the new normal by adopting digital tools to continue to deliver personalized service from home. Leading with a digital-first mindset is critical – but taking small, measured steps can have a big impact. For example, replacing paper forms and signatures with their digital equivalent is an immediate action that wealth managers, private bankers, broker/dealers, and call centers are taking to maintain continuity. E-Signatures apply to any process that requires a legally binding signature, such as transfers of assets, IRA and 401k rollovers, beneficiary changes, and account maintenance forms.
Even regulators are enacting emergency measures supporting e-signatures, which opens the door to permanent acceptance post-crisis. For example, FStech reported that in the UK, “The Financial Conduct Authority (FCA) has announced that fund management companies can now use electronic signatures to approve documents amid the COVID-19 pandemic.” Similarly, the regulator has said it is “prepared to relax rules on financial services firms accepting customer phone photo 'selfies' to check their identity, as one of several measures to ease the burden during Coronavirus lockdown.”
Security tip: While working from home is on the rise in general, the current crisis has certainly pushed wealth advisors more quickly into this new way of working. They now need to be able to access services controlled via firewalls and other internal IT security policies. Many did not plan to work from home, so they may need a second set of authentication keys to access the platforms they work with. For example, they may use hardware authenticators when they are in the office – but what happens if they forgot it in the office? This can open security holes. IT administrators might be tempted to lower security controls to allow users to access the same data they typically do (e.g., allowing them to use a static username and password while working remotely).
Banks and wealth management firms need backup security access plans. Wealth advisors should all have secondary secure forms of authentication. If an employee was using a hardware authenticator in the office, and they only have a mobile phone when at the home office, consider implementing a secure emergency activation process to allow them to use their mobile phone as a 2FA token.
- Video: Out of band authentication with push notification
- QatarGas employee authentication case study
7. Corporate Banking & Treasury Management
Beyond commercial loans, corporate banking and the treasury management department provide a wide range of cash management services to businesses. This function relies on dedicated sales teams, relationship managers, and commercial bankers.
While commercial banking processes can be complex, speed and convenience will make the difference for businesses under pressure to get their operations back on track. eSignature is one of the technologies that can make an immediate impact. This aligns with recommendations by Forrester Research, whose analysts have listed digital signatures among the initiatives the banking industry should prioritize at this time:
“Some banks offer this for retail customers – it’s time to expand to
business and corporate banking and leasing.”1
In corporate banking, no two clients are the same. As a result, most processes involve ad hoc, customized agreements and contracts. Many of these require signature authorizations and approvals for processes such as new service agreements, ACH authorizations, wire transfer agreements, and applications for corporate cards. Bank representatives can get up and running in minutes with a web or mobile e-sign application to ensure agreements can be enacted the same day they are requested.
As an example, Signature Bank leveraged an e-signature web app to streamline their onboarding process. In an American Banker interview, Anne C. Doligale, SVP and certified treasury professional at Signature Bank, explains the inefficiency of the paper process prior to e-signature:
“We were printing a tremendous amount of paper and FedExing it to different locations. Some of our customers have decentralized operations so they were signing it in one spot and sending it to the next person to sign; then it was coming back to us and we needed to get it to three different departments, but we were photocopying or scanning and faxing.”
With e-signature, “the whole process can take 10 minutes.”
Equally important, maintaining the momentum with digitization now will help increase customer loyalty and retention into the future. In research interviews with U.S. treasury executives, banking services provider Deluxe Corporation found that, “Demographic shifts mean a younger pool of CFOs and corporate treasurers demand intuitive digital experiences and seamless technology solutions. They expect services like remote deposit capture, integrated receivables, mobile apps and paperless onboarding.” To meet changing customer expectations, consider introducing mobile capabilities such as mobile apps, mobile authentication, and mobile app shielding. These represent areas of low-hanging fruit where banks can make gains in modernizing the corporate client experience.
Security tip: First, bank employees currently working from home are facing the same remote access security and authentication challenges as their wealth management colleagues (see previous tip).
Second, treasury advisors and sales representatives have an opportunity to raise awareness among their clients of the risk of business email compromise and phishing scams disguised as COVID-19 instructions. According to analyst firm Aite Group in a report entitled COVID-19: Challenges and Opportunities in Financial Services, “Frazzled, hard-working, and well-meaning employees will be more susceptible to fraudulent requests for money transfers. Commonly, these take the form of an impersonation of a CEO requesting a wire transfer to a bank account. With entire companies working from home, this type of fraud will be easier to do and be more prevalent.”
Third, commercial banks should deploy additional safety precautions because of the heightened risk of social engineering and malware attacks. Cronto technology can help thwart these by establishing a secure communication channel to protect the integrity of transaction data as it is transferred between the bank and customer. This is a user-friendly way to block bad actors that target online and mobile banking – using either a hardware device or mobile application as United Bulgarian Bank, Bank of Cyprus, Jibun Bank, Volkswagen Bank, and many others have done.
In addition, banks with fraud detection and prevention systems can further leverage their rules engine to manage fraud. Expert rules engines provide the flexibility to activate extra fraud rules during heightened risk periods. Such periods of increased risk demonstrate the need for dynamic fraud prevention solutions to allow banks to respond to the fast-paced nature of fraud.
- Strong authentication/MFA for employees and clients
- EagleBank’s migration to software authentication
- AI-based risk analysis to identify fraud before payments go through
8. Residential Mortgage
The mortgage industry has been greatly impacted by stay-at-home orders. In many regions, homebuyers, surveyors, and inspectors are unable to visit properties, either putting mortgage approvals and closings on hold or ushering in innovation through virtual tours. In other cases, homebuyers ready to purchase a property have lost jobs or been furloughed, delaying or canceling their borrowing plans. And for homebuyers who are able to proceed, some must still use ink signatures. In certain jurisdictions, lawyers and notary signing agents are still doing in-person mortgage closings with their clients – while following protocols on sanitizing and social distancing.
In an article entitled “Wet Ink Signature Requirements May Fade After Coronavirus”, Bloomberg Law cites Margo Tank, Partner and U.S. Co-Chair of DLA Piper’s Financial Services Sector practice:
“Tank said the question right now is how lawyers and clients can do business in the current climate if they can’t e-sign.
“She pointed to the example of online notarization, which has been ‘exploding’ in the wake of the virus. Before coronavirus, 23 states allowed remote online notarization. Now, at least 19 states have enacted emergency, short-term measures to enable RON.”
Once the crisis recedes, we expect to see greater adoption of digital mortgage closings and remote online notarization. The technology already exists to secure the remote process and safeguard against identity theft. For example, a new solution category, referred to as workflow automation, agreement cloud, or Secure Agreement Automation pairs secure electronic signatures with digital identity verification technologies such as ID document verification, facial biometrics, and artificial intelligence. Used together, facial biometrics and ID document verification can help ensure a remote user is in fact the person they claim to be.
According to National Mortgage News, "only 48% of U.S. institutions offer a digital mortgage experience, but another 35% could be ready to launch one within the next year." Elsewhere in the world, banks are making progress with digital mortgage. For example, in the State of Victoria in Australia, the Bank of Melbourne gave customers “the option to click-to-sign their home loan documents online, removing the need to provide handwritten signatures.”
Security tip: With e-signatures, look for a global solution that provides local trust – such as global data centers to satisfy data residency requirements; support for Advanced and Qualified Electronic Signatures; and digital identity verification that covers ID document types in your region. Additional security features to look for in an e-signature solution include comprehensive audit trails, support for a wide range of user authentication options, and digital signature tamper-proofing as each signature is applied to the document.
9. Life Insurance
Life insurance sales rely on the agent channel. Going paperless has long been a strategic priority in this segment as carriers and banks look to cut costs and modernize the client and agent experience, while also strengthening compliance.
Today, the need is even greater to digitize this paper-dependent industry. This is being echoed globally. For example, BNamericas recently reported on the effects of COVID-19 on the insurance industry in Latin America, with the CEO of an insurance brokerage explaining that, “the crisis was accelerating the digital transformation of insurers.”
E-signatures in particular are getting attention as an immediate enabler of digital transactions. As insurance analyst Amy Danise explains in a recent Forbes article:
“There should be no need to meet face-to-face with an insurance agent or sign a paper document. Agents can offer advice by phone and video conference. You should be able to do an electronic signature for documents, and receive your policies by email.”
While the primary focus area for electronic signature technology in insurance has been new business applications, e-signatures are also being used for e-disclosure delivery, agent licensing and appointment, e-policy delivery, and beneficiary changes.
In Canada, a global leader in the digitization of life insurance, a significant number of carriers of all sizes are adopting e-signatures. These include Desjardins Insurance, Assumption Life, The Co-operators, Equitable Life, IA Financial Group, Great-West Life, and others. In the U.S., one life and health carrier has successfully used e-signatures to reduce errors and time-to-completion for term, universal and whole life insurance applications, as well as disability insurance, Medicare supplement plans, and annuity policies. The company has seen 15 - 20% improvements in cycle times, depending on case complexity.
Carriers are taking different approaches to digitalization. For example, P&V Insurance in Belgium launched an initiative in 2016 to overhaul their tech stack, phase out legacy systems, and introduce improvements ranging from business process automation to e-forms and digital document repositories. The deployment of electronic signatures proved to be an important piece of this initiative, starting in the life insurance channel.
If not already underway, life carriers will need to address this depth of digital transformation post-crisis. In the meantime, small steps can make a big difference in helping clients right now. This technology can be deployed immediately to agents as a standalone solution, and later integrated with an agent portal, e-apps or core system.
Security tip: In a report entitled “Fraud in Life Insurance: Technology is the Shield”, Aite Group explains that, “The insurance industry, and specifically life and annuity, is not immune to the attacks of digital fraudsters. Similar to the issues surrounding the movement to simplified issue and direct-to-consumer sales channels, digital channels enable fraudsters to commit application fraud due to the lack of face-to-face interaction and the freedom to complete the forms without background and health checks.”
We are currently seeing an increase in inquiries from insurance carriers on how to use digital identity verification to mitigate identity theft online. When insurance agents or brokers can’t have a physical meeting with a remote applicant, we recommend facial biometrics and digital ID document verification.
The same Aite report also underscores the risk of account takeover fraud, explaining: “In addition to application fraud, digital channels provide self-service tools for agents and policyholders, which opens up opportunities for hackers to gain access to life and annuity accounts. With limited information required to access online accounts, hackers have the ability to make changes to accounts, take loans on cash values, cash out of policies, and more.” We recommend considering a fraud detection and prevention system that leverages AI and risk analytics to fight fraud in digital channels.
10. Auto Finance
Around the world, automotive lenders are digitizing the customer experience through technologies such as identity document verification, biometrics, and e-signature. The process of applying for a car loan or lease – even remotely – is becoming increasingly faster and more secure as digitization replaces paper forms and manual ID-checks. As an example, the auto finance arm of a major auto manufacturer in France plans to extend the auto finance process to remote applicants. Digital identity verification methods such as facial comparison are used to enable remote financing and leasing applications. The technology is used by finance companies and dealers to confirm that the remote customer is in fact the individual they claim to be – not a fraudster trying to pass themselves off as the owner of the identity document.
Accompanying financial services and banking customers during the COVID-19 outbreak requires that service providers rapidly adjust to enable remote operations. Continuing on the path toward digital innovation, albeit in ways adapted to clients’ immediate needs, will help build customer satisfaction, loyalty, and retention. It will also put organizations in a better position to minimize operational impact in the future as other challenges arise.
In parallel, it remains crucial to safeguard against fraud while enabling employees, advisors, agents, and call center representatives with digital capabilities. Heightened vigilance by security and fraud teams will be key throughout the crisis.
Thank you to all financial services providers delivering reassurance and guidance at this time. Stay safe and healthy.
What are the 10 Financial Processes to Digitize During COVID-19?
1. The Impact Of COVID-19 On Financial Services And Insurance, Forrester webinar, April 7, 2020