Remote Reality?: Demand for secure, remote customer onboarding

The financial services industry is facing an unprecedented changing landscape of customer expectations and technology. There has been a significant rise of branchless challenger banks (such as Starling), as well as an increasing need for large incumbents to offer remote onboarding as they prune their branch networks. These changes are driving a rapid growth in the percentage of accounts being opened remotely on a mobile device as opposed to in-branch.  

Further, financial services firms (including banks, wealth management firms and Fintechs) are also looking at the potential disruptive opportunities that Open Banking and the Revised Payment Service Directive (PSD2) may bring. Both of these drivers are paving the way for an increased demand for remote onboarding services. Yet some firms are struggling to efficiently perform these remote onboarding checks in a timely and secure manner, often relying on manual processes in stark contrast to the efficient and slick experiences that today’s end-customer now demands.

PSD2 & Open Banking: Escalation of checks

Two key pieces of regulation in the EU and UK have recently opened up bank-held customer data to trusted third parties in an attempt to level the playing field for new market entrants. The EU PSD2 came into force on 12 January, 2016 and required banks to make shared data available through open APIs by the implementation date of January 2018.  In the UK, the Competition and Markets Authority (CMA) introduced Open Banking to facilitate communication between banks and third-party providers on a standard basis, with major banks required to make open data available through open APIs from 31 March, 2017.

Given this legislation was designed to stimulate competition in the financial services sector, it is expected that people and companies will be more likely to switch accounts, leading to an escalation of new account onboarding transactions.

The challenge of regulatory compliance

This manifestation of an increase in account openings, more of which are remote account openings, has raised concerns about security and fraud in relation to the onboarding process. This makes the onboarding of companies in particular quite a challenging process. Today, more than ever, firms need to check a larger number of people against an increasing number of regulations. Not only does an identity check need to be performed for each and every director, controller, and beneficial owner of the organisation, additional checks need to be made against financial sanctions lists and "politically exposed persons" (PEP). Those companies subject to these regulations need to simplify their onboarding processes for clients, institutions and individuals, while meeting anti-money laundering (AML) requirements, as well as ensuring Client Appropriateness guidelines are met under MiFID II. As a result, client appropriateness checks have become a crucial part of the onboarding process in certain sectors.

Onboarding through a single API

In recent years, an increasing number of technology providers have been active in the development of easy-to-use applications that can perform all the identity verification (IDV) and ‘know your customer’ (KYC) compliance checks through a single API. For example, NorthRow has developed an API which cannot only conduct traditional checks, but also incorporates artificial intelligence capabilities for both facial and voice recognition to provide the additional security required for remote onboarding. For those entities subject to MiFID II, a single API that has embedded client suitability and appropriateness checks, in addition to the KYC/AML verification solution, is a powerful new tool. Overall, such APIs make it easy to onboard a large number of people needing to perform the stringent checks from the comfort of, not only their own home, but from their own mobile device, all taking place within a few minutes.

Making remote a reality

Customers want the convenience of opening an account in minutes from a mobile phone, and firms need to efficiently respond to this increasing customer demand for remote onboarding. These same firms are also beginning to see opportunities arise with the advent of Open Banking and PSD2. Thanks to the innovative solutions coming out of the FinTech sector, the challenge of remote onboarding and answering complex compliance, identity and security demands can be solved simply, in one place, via one API.