The Balancing Act: Maintaining Digital Trust in Remote Financial Services

Adriana Pansera, April 7, 2021

We regularly host webcasts on topics such as digital transformation, fraud mitigation, cyber security, and mobile security best practices. If you missed our recent webcast, Closing the “Trust Gap” in Financial Services hosted by BAI, here is the 6-minute summary. The full presentation is available on-demand.

As the world adopts a digital-first policy in business operations, financial institutions (FIs) must focus on ensuring their clients are protected from the ever-evolving universe of fraud. The trust relationship between a bank and their customers is crucial in remote environments, as the loss of trust erodes customer loyalty, increases abandonment rates, and drives customers directly to competing institutions who can offer a more secure and frictionless experience.

Below,  we’ll share insights on how to overcome consumer frustrations and alleviate the trust discrepancies between in-person and online transactions and interactions. Adopting risk based authentication and digital identity verification techniques can help FIs reach strategic goals to minimize fraud losses, improve customer acquisition rates, and enhance their digital service capabilities.

Consumer vs. Financial Institution Expectations

Fifty-five percent of consumers say security is the most important factor in their digital experience, according to Experian’s 2021 Global Insight Report. From the perspective of your customers, a balanced sense of security in online interactions and transactions is expected. Banking customers understand that security requires the right amount of friction at the right time and under the right circumstances. When using digital and remote banking channels, they need a tangible sense of the security controls that are operating behind the scenes to feel safe in the knowledge that legitimate access is being granted while fraudulent activity is restricted. Trace Fooshee, Senior Analyst at Aite Group, says that “interactions must be consistent and predictable; inconsistency breeds uncertainty and uncertainty undermines their sense of security”. In the case of unauthorized or fraudulent transactions, users may hold their FIs accountable and weaken trust in the institution. These decreased levels of trust can lead to a higher probability of abandonment and customers fleeing to a different FI.

On the financial institution’s side, security policies and procedures need to be expertly balanced in order to plot an optimized path that satisfies most consumers while alienating as few of them as possible. Customers trust that their FIs have the ability to properly synthesize the information available to them to discern the veracity of the identity presented. An FI must be able to achieve this in a way that is repeatable, explainable, and highly accurate in order to maintain a strong relationship with their clients. Consistency and efficiency are key.  

The Challenges of Authentication

Many FIs still struggle with putting together the precise mosaic of a customer’s complete identity. Criminals often have a leg up, with access to more robust data and oftentimes an even more accurate picture of a consumer’s online identity than they have of themselves. Fraudsters do their homework and have  an enormous amount of compromised records and credentialing data leaked from security and data breaches that have exposed the private identifying information of millions of individuals. In the case of KBA (Knowledge-based Authentication) questions, many legitimate consumers may struggle to accurately answer questions concerning their credit history, while those in younger demographic groups like millennials may not have built up a credit score at all. For older clients, information regarding former addresses or ex-spouses may no longer be relevant and easily recalled. This leaves certain types of static authentication methods for identity verification open to vulnerability.    

Challenges: Environmental conditions as accelerants

Fraud is an industry, and it is growing faster in some ways than many legitimate forms of business. When analyzing fraud attacks for 2020, the types of fraud topping the list (account takeover fraud [ATO], synthetic identity fraud, and mule activity) were all forms of identity fraud. A recent Aite Group report which surveyed over 10,000 consumers found that identity theft increased by 42% over the last year. In order to mitigate these increased risks, FIs need to understand how to manage identity holistically and from a value and risk-based perspective.

Facilitating the Customer Journey

Typical customer journeys in banking include friction that necessitates authentication and identity verification at various points along the way. These steps could include the verification of a new customer’s ID and the capturing of consent during account opening or the issuance of authentication credentials for secure logins and authorized transactions. Many of these steps vary greatly by bank, channel, or region, but some similar challenges remain.

Pre- and Post-Onboarding Costumer Journey

Abandonment as a result of friction can occur at multiple points along the typical customer journey. If a consumer is faced with choices that are counter-intuitive, require too much information, or are overly time-consuming, they may choose to look elsewhere to complete their transaction. When users cannot complete the process in a single sitting or are forced to begin anew when switching to a different channel, they are prone to abandoning the activity. The results are worse still if the desired action requires a branch visit for a wet signature or the identity verification process is not automated and requires a long wait to be authenticated.

Due to the fact that most customers are now primarily engaging with their FIs via remote channels with fewer face to face interactions in the branch, additional hurdles put in place impinging on their ability to gain access to services is detrimental. Technology should be leveraged to digitize and simplify many of these processes along the way.

The Digital Identity Value Proposition

While the account opening process is the most important time to gather identity information from new customers, it should not stop there and instead must span the lifecycle of the consumer. Customers should not have to choose between security and convenience, and the onus is on the FI to provide the correct balance of both. By bridging this gap and being able to provide better digital identity verification throughout the entire customer journey, both the institution and the consumer will benefit. Dynamic, risk-based authentication determines the necessary risk level of each transaction therefore provides only the right amount of friction at the right time, ensuring customers receive the necessary authentication challenges during high-risk transactions. This not only results in lower instances of fraud, but also fosters a better overall customer experience. Less friction throughout the process means consumers can more easily apply for new accounts and readily engage with your FI via remote channels, cementing greater levels of trust and increased customer loyalty. Stronger digital identity verification mechanisms online can lead to cost and time savings, eliminating the need for manual document review and checks, and lowering associated fraud risks and increased privacy protections. 

A Multi-layered Approach to Authentication and Identity

A one-size-fits-all approach is no longer sufficient to satisfy the many complex interactions our remote environments engender. Solving the trust puzzle instead requires a dynamic approach in order to find the delicate balance between fraud mitigation and safeguarding the optimal customer experience.

Increasingly, the lines between identity verification, authentication, and fraud detection are blurring, as techniques that can be applied to increase trust and establish the veracity of a customer’s identity are encompassed within a broader, more holistic approach to digital security. Real-time checks proving the authenticity of ID documents, multiple checks acting as failover mechanisms, and intelligent adaptive authentication that dynamically adjust authentication requirements based on the risk level of individual transactions all work together. This results in an improved customer experience, reduced abandonment rates, and decreased instances of fraud.

Multi-Layered Approach To Stopping Digital Fraud

To learn more about digital identity verification, please watch the recording of our joint webinar, “Closing the ‘Trust Gap’ in Financial Services.” For more on how OneSpan can support digitization projects, please read our whitepaper Digital Account Opening: How to Transform & Protect the Account Opening Journey.

Trust Gap Webinar

Closing the "Trust Gap" in Financial Services

In this webinar, learn how risk-based digital identity verification and authentication techniques can be applied to increase trust in an identity claim at every customer touch point.

Listen Now

Adriana Pansera is a Marketing Specialist at OneSpan responsible for business digitization outreach and events. A digital storyteller with diverse industry experience, she leverages her BA in English to communicate how our experiences are shaped by our relationship with technology and the world.