Why financial institutions must address digital identity in 2022

According to UK Finance, there was an 84% surge in “impersonation scams” at the start of the pandemic as fraudsters looked for ways to capitalise on COVID-19. With our financial lives now heavily online, accelerated by the pandemic and 100 bank branches shutting every month across the UK, financial organisations are under increased pressure to keep people’s finances safe and ensure those accessing funds are who they say they are online.

The pandemic is likely to leave a lasting legacy on how people manage their finances and what they expect from financial organisations. In order to meet new consumer demands, the financial sector will have to focus on its digital identity and KYC practices. This will allow businesses to build trust with their current customer base and open the door to new users.

Consolidating identity verification vendors

Historically, organisations with identity verification needs have used countless solutions to verify user identity, examine their identification and supporting documentation, authenticate them after every visit, ensure they aren’t on any watchlists by conducting ongoing screenings, manage investigations, monitor their transactions and report suspicious activity. However, this approach is not only costly and complicated, but it also cannot adequately spot financial crime and properly verify user identity.

For this reason, organisations are moving toward a single, comprehensive platform that consolidates these capabilities to confirm user identity and maintain compliance effectively and efficiently. This is something we’ll see continue at pace in 2022 as financial organisations grapple to keep hold of strong digital identity management. Gartner projects that by 2023, 75% of organisations will leverage a single vendor with strong identity verification capabilities and connections instead of using various other third-party solutions for identity proofing and affirmation, an increase from fewer than 15% in 2020.

Putting consumer experience at the centre of the identity verification process

In the past, businesses have treated every consumer equally when onboarding. That is, treating them with the assumption that every consumer is a threat and subsequently putting lengthy onboarding processes in place to ensure low risk. Unfortunately, this causes friction more often than not, and is one of the greatest causes of abandonment during the sign-up process. In fact, drop-off rates can be as high as 75% during onboarding if the customer experiences too much friction.

Rather than treating all users as potential threats, organisations will need to put consumer experience at the centre of the verification process. This will enable a more seamless consumer experience and smoother business operations, which in turn means higher conversion rates for businesses. In 2022 and beyond, we can expect organisations to invest heavily in finding ways to reduce abandonment rates and retain good consumers through the onboarding journey.

Prioritising strong data privacy safeguards

Consumers today are calling for more control over their online data and how it’s being used by companies. Next year and beyond, financial organisations that prioritise user data privacy and that are transparent with consumers about how their data is being collected and used will have a competitive advantage over businesses that don’t. For instance, Apple has put its stake in the ground at the forefront of this movement to protect consumer privacy, updating its privacy policy and controls. This move by Apple has increased the awareness of the general public, hence putting more pressure on other businesses to improve their privacy standards, especially when it comes to the sensitive domain of identity management and financial information.  

Strong identity and access management controls to manage permissions are critical for enterprises to provide users with better control over how their data is used. For instance, providing customers with the option to tailor which of their personal identifiable information (PII) is shared with the company’s website or app and for how long. In 2022, we will see more enterprises moving toward Apple’s approach to privacy to appease consumer’s rising privacy concerns and build meaningful customer relationships built on trust.

2022 will be an important year for financial institutions with increased regulatory control, more competition from challenger banks and higher levels of activity taking place online. With this in mind, we will see banks and financial organisations embracing technology to get the digital identity management process right, putting customer experience at its core and ensuring security at every step.