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Confidence 2.0: Authentication in the Now Economy

Rupert Spiegelberg, CEO, IDnow explains how video identification is helping fintech companies gain customer confidence

In a world where data breaches are so commonplace they barely make the news, persuading a customer to share their personal and financial details online requires two important things: trust in the institution and a positive user experience.  Fail on either of these levels and the customer will likely terminate any transaction before signing on the dotted line.

This is particularly true for the financial sector, which experiences the highest number of failed sign-ups – known as ‘leakage’ in the industry – mainly due to stringent legal requirements for identity verification. Ultimately this makes for a long-drawn-out process for the customer.  While transactions within this sector have to remain understandably airtight, they nevertheless need to factor in convenience for customers. This, after all, is why they’ve chosen to sign-up online in the first place, rather than visit a traditional institution. 

In the Now Economy of instant interaction and gratification, buying, selling, booking, renting, applying, publishing and account opening are all possible while on the move, or from the comfort of a customer’s home. Banks who can win customers over with their online offering and maintain their confidence to the end of the sign-up process will be rewarded with a closed deal and a happy customer. However, online banking is governed by special regulations, such as the Know Your Customer (KYC) standards set out in the EU’s Third Anti-Money Laundering Directive. This means that handling online transaction processes in the financial sector is considerably more challenging, than it is for example in retail. 

KYC, and regulations like it, mean that financial institutions must verify their customers’ identities appropriately, and this significantly increases the number of steps in the transaction process, making the online sign up process quite extensive. As a result, customers seeking to open a bank account online find that they are required to provide considerably more sensitive information than they would, say, when shopping online.

Customers of the Now Economy: price-conscious and discerning

The factors that lead to customers to abandon the signup process – or that determine what they are prepared to put up with in order to see the process through – vary depending on the customer profile, the type of transaction they are looking to carry out and other, more personal considerations. For example, if customers discover, at the end of the identity verification process, that they are required to visit a post office or a branch of the bank to confirm their verification, the extra effort needed for this is likely to cause millennials – a demanding customer group – to abandon the process.

On the other hand, older people are often inherently mistrustful about sharing sensitive information online, and are more likely to abandon a transaction at the first obstacle due to a lack of confidence. The lesson for banks lies in recognising that customers are not simply looking for the best-priced product; they also attach significant value to a signup process that they trust and that offers maximum convenience.

Building online trust: authentication by videochat

In January 2017, the financial market authority created a way of addressing this problem: it authorised the use of video identification procedures as a valid method of authentication in the financial sector. These semi-automated procedures, which are usually offered in the form of software as a service, significantly enhance cost efficiency while, at the same time, ensuring that customers have a user-friendly experience. The application first provides the customer with a brief and simple explanation of the identification process. Using videochat, a support worker then takes the customer through the various steps in the online procedure. Any questions that arise can be answered immediately. The real-time dialogue with an actual person boosts customer confidence in the process. Plus, the accelerated on-boarding process enables companies to increase their conversion rates. However, to achieve the desired results, the following points should be taken into account when choosing an identification solution:

  1. Availability on all end devices

Some customers will want to signup on their desktop, others on their phone. Banks should try to find a solution that supports all devices, as to not alienate any potential customers.

  1. Integration capability

Switching to a separate app from an unknown service provider for the identification process can make customers hesitant and may result in abandonment. Integrating the solution into the company’s application interface, so that the process continues seamlessly, creates confidence and makes it more likely that the customer will see the process through to the end.

  1. Supporting ID documents worldwide

More and more people are now spending time abroad. If customers are unable to open an account with a bank because the authentication solution cannot handle their ID documents, customer satisfaction is at risk. If, however, the company can handle such issues quickly and easily, it is likely that customers will turn to the bank for other services in future and even recommend it to colleagues and friends. As customer groups become increasingly international, it is essential for companies to consider a solution that supports all ID documents.

  1. Data security

Regulatory standards like GDPR require the use of sensitive personal data to be controlled. End customers, too, are increasingly emphasising the importance of being able to request information on how their data is being processed and stored. Transparency and the ability to obtain information about the verification process is becoming increasingly important. Banks should, therefore, ensure that they choose an identification solution that gives them full control of the data collected from their customers. 

  1. High-quality support

High-quality, friendly advice is an important factor in online business. This means that the chosen identification solution needs to offer a variety of language options. Depending on the company and the customer structure, it may also make sense to employ advisors with a knowledge of various languages, possibly including some less common ones.


Case study: Commerzbank and video legitimation

Commerzbank is a leading international commercial bank located in more than 50 countries.  Its core market is Germany. Commerzbank operates one of the widest branch networks of all German private banks with approximately 1,050 branches and more than 90 corporate customer advice centres. It looks after more than 16 million private customers and 1 million business and corporate customers.

Commerzbank began its transformation with a strong digital strategy at the beginning of 2013. It has since then gradually evolved from the formerly pure branch bank into a powerful and future-oriented multichannel bank. Becoming a Commerzbank customer should be quick and easy for prospective customers, regardless of their location or the time of day.

Until April of 2016, prospects were required to post a paper account application form to Commerzbank, even after video ID verification. Since then, however, and working with ID verification provider, IDnow, video legitimation has become the foundation for paperless account opening in real-time.

The possibility of being able to open an account immediately and then use the online account straightaway has led to a further marked increase in the acceptance and successful implementation of video ID verification. Above all, video ID verification has significantly improved the conversion ratios from account application to actual opening. Commerzbank has increased its conversion ratio by almost 50% with a simultaneous reduction of ‘unverified’ account applications by more than 20%.

By integrating a verification application into their online signup processes, banks can dramatically reduce the amount of customer signup fails. The right verification application will instil trust in the customer and make the on-boarding process smoother, so that both customers and banks can reap the rewards of the online banking process.



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