Will our post-pandemic world stifle the transformation journey that many financial institutions have started?

Will our post-pandemic world stifle the transformation journey that many financial institutions have started?

GARETH NARINESINGH, Commercial Director at Yoti, considers how UK banking is emerging from the pandemic and what will be the driving areas of adaptation required to remain competitive as the next few years unfold.

On a live event video webinar in August, the Governor of the Bank of England was asked whether he supported the use of digital identity in light of Covid. His response was "Absolutely!" He followed on by saying that in the event of an economic shock industry resilience was paramount, particularly for the fintech start-ups. He was concerned that a negative effect of a shock could dampen innovation and he did not want to see this impact on the digital economy.

Throughout the COVID-19 lockdown, it is true to say that UK financial services interest has peaked in electronic ID verification as a solution for remote customer onboarding.

"Challenger banks who have invested in technology and better customer experience flows are winning market share considerably..."

Yoti's measure of whether UK financial services can move towards more widespread adoption of digital identity is not actually based on escalating interest, it is more whether the sector's plans for digital transformation remain on track and how much progress is being made. The progress of a firm's digital transformation journey can be the determining or the inhibiting factor as to whether they can successfully deploy digital identity technology solutions.

In order to make it work, a firm must have in place even a basic IT platform which makes integration possible with electronic suppliers for things like data services, AML screening, application fraud checks or digital identity.

Consideration has to be given as to how to handle onboarding customers' personal information (PI). PI has to be handled securely and confidentially and needs to be routed through to the right places: core banking systems, compliance applications, customer relationship management tools and sales tracker databases. This requires a basic level of architectural sophistication and planning.

Also let's not forget that the customer journey also needs to be mapped out and understood, in order to provide a good experience such that drop off rates are not excessive. Challenger banks who have invested in technology and better customer experience flows are winning market share considerably over those who have either chosen not to invest to the extent required or delivered only partial digital transformation.

Although the fintechs have established themselves through use of digital identity as a customer acquisition tool, the FCA has unfortunately had to take regulatory action in several cases where onboarding protocols have fallen short of compliance expectations. It is therefore of critical importance to link electronic ID verification to the entire end-to-end KYC onboarding process for that customer. This means thinking about not just UX and customer, flow but also linking this to quality and effective risk screening and risk assessment.

Platforms are being built today which deploy this comprehensive customer onboarding/compliance toolkit. One particular solution has recently come out of the FCA Sandbox this summer which gives full regulatory credibility to these types of tech solutions. One other solution coming to market as a pilot in the next couple of months will be the joint partnership platform provided by Yoti and Synectics.

We have decided to call our pilot Project Endeavour. This pilot promotes the use of portable, reusable digital identity as a concept, rather than one-time identity verification which is more common but requires the customer to prove themselves each and every time they make an application.

Endeavour will allow the customer to own their own KYC data as their PI and share it with whomever they choose. In this way Project Endeavour will permit real-time onboarding for customers through the Yoti app, which is integrated into best-in-class data services and risk screening through the Synectics platform. A customer risk score can also be yielded which is beneficial to the receiving financial institution.

"...[it] requires the customer to prove themselves each and every time they make an application."

Yoti absolutely sees consumers and firms adopting these solutions over the next 3 years and it will become the norm for customers to hold a KYC credential within their digital identity wallet as an app on their mobile device. It benefits the consumer to own their own data and to be able to re-share their PI to get an automated decision.

Eventually the UK will allow the use of this kind of tech to allow consumers access to all kinds of products, services and even for air travel and border control. But as a first step, UK firms need to be bold, innovative and invest in their IT platforms so they can pilot, adopt and deploy these tech solutions.

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In this issue:

• Is APP Fraud and Payee Authentication likely to be the most pressing fraud issue in 2021?
• How to build an effective CBIL/BBLS loan recovery strategy
• How are financial criminals using COVID-19 to adapt their operations?
• Discover the latest National SIRA fraud trends for 2020
• Find out how Allianz is using SIRA RTQ to create an award winning policy screening solution
• Yoti discuss the future of digital onboarding customers
• VRS' update on helping to identify and protect the financially vulnerable