Banks Emerge as the Digital-First Leaders Other Industries Will Emulate

Will LaSala,

There is no doubt that the Covid-19 pandemic will have long-lasting impacts on all industries both now and into the future, radically transforming the way we conduct business transactions and deliver services. One of the most significant outcomes of this era has been the emergence of a digital-first business model as organizations across all industries have had to quickly pivot and adapt their operations to digital channels in order to continue to deliver their products and services.

One industry that is emerging as a leading example of how to make this transition is financial services. Over a few short months, banks have made tremendous progress in digitally transforming themselves. By focusing on adopting technologies that digitize processes and services while ensuring strong security, banks have been successful at capturing a new wave of online and mobile customers. I believe they will be the model that other industries emulate in the post-pandemic world.

The Pandemic Accelerated Digital Plans, But Security Is Key

Even before the pandemic, consumers wanted more digital banking options from their financial institutions, including the ability to open new accounts, secure a mortgage or get approved for a loan. Yet, banks struggled to deliver these complex services through digital channels due to the high risk of fraud and cybersecurity threats.

For example, banks are required by know your customer (KYC) and anti-money laundering laws to positively verify customer’s identities. Traditionally, this has been difficult to do in digital channels because fraudsters use people’s personally identifiable information (PII) that has been exposed by data breaches to create synthetic identities and file false applications. A survey of banking professionals conducted by my company prior to the pandemic showed that at the majority of financial institutions (59%), new accounts were opened in person, at the bank branch, in order to verify the customer’s identity.

Banks recognized the need to digitize these processes — in our survey, 80% of bankers said improving the digital customer experience was a priority in 2020, but they couldn’t do it without strong security. Facing more than $16.9 billion in losses due to new account opening and account takeover fraud last year alone, banks could not simply transition their products and services to digital channels without first ensuring strong security.

After the pandemic hit full force in March, digital banking shifted from being a convenience to a necessity. By leveraging emerging technologies that enable secure and convenient digital transactions, banks have been able to digitize processes that had previously remained manual — and other industries are beginning to follow their lead. Here are a few examples:

1. Digital Identity Verification With Facial Comparison

To comply with KYC laws during new account opening, banks have turned to digital identity verification solutions with facial comparison technology. New customers snap a picture of their government-issued ID using their smartphone camera and take a selfie. Advanced computer vision and biometric facial comparison technologies with liveness detection can verify that the document is authentic and that the individual submitting the documents is the person pictured on the ID. This eliminates the growing problem of fraudsters using stolen or synthetic identities to fraudulently open new accounts. These technologies could also be useful in other industries, such as in stopping the fraud in unemployment benefit applications that many states have been experiencing.

2. E-Signatures And Remote Online Notarization

Banks have found that e-signatures are one of the fastest and easiest technologies to implement in order to keep business running and following social distancing orders. The use of e-signatures and remote online notarization technologies has grown rapidly during the pandemic, enabling banks to digitize processes that previously required paper. Since the start of the pandemic, 19 states have adopted emergency orders to declare remote online notarization legal, in order to keep lending and mortgage servicing happening. E-signatures and remote online notarization technologies have been fast-tracked not only in the financial services industry, but also in real estate, auto purchases, legal contracts and procurement processes in businesses across all industries.

3. Behavioral Biometrics For Secure Mobile Apps

As people increasingly use their mobile phones to conduct personal and professional transactions, cybercriminals and fraudsters have also turned their attention to this channel. The use of mobile banking has surged 50% since the start of the year, and account takeover fraud, which is largely conducted through the mobile channel, has increased 72% over the past year. To prevent account takeover, banks have adopted advanced technologies like behavioral biometrics, which continually monitor the mobile user’s behavior (such as navigation and swipe patterns, finger pressure and more) during their mobile banking session. The technologies look for anomalies that could indicate someone else is logged in rather than the legitimate customer and trigger additional authentication requirements. We’ll likely see behavioral biometrics and continuous authentication technologies used to prevent fraud in other types of high-value mobile transactions, including mobile payments and m-commerce.

4. Real-Time Fraud Detection Powered By Machine Learning

To combat rising fraud rates, banks have emerged as leaders in the adoption of real-time risk analytics powered by machine learning. By examining data from the user, their device, the app, the online or mobile session, and third-party sources — all in real time — banks are able to identify suspicious behavior and stop fraud before it happens. Such technologies will likely be increasingly adopted by e-commerce sites and payment platforms, which are also top targets for fraud.

Traditional banks and financial institutions have been using this time of disruption to reinvent themselves, and businesses in other sectors would be wise to follow. While the pandemic has accelerated digital transformation plans of many businesses, security remains the cornerstone to successful digitization. Without strong security, online and mobile processes become overrun with fraud. By adopting technologies like e-signatures, digital ID verification solutions, mobile application security and real-time risk analytics, financial institutions can quickly digitize their services while striking the right balance between convenient and secure digital experiences. These are the banks that are emerging as the digital-first leaders that other industries will emulate.

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This article was first published on Forbes on August 19, 2020.

Will LaSala is the Director of Security Solutions at OneSpan.  He joined the company in 2001 and brings over 25 years of software and cybersecurity experience. Since joining OneSpan, Will has been involved in all aspects of product implementation and market direction within financial institutions.