UK Banks Face Consumer Frustration Over Customer Identity Management

A new study by global analytics software provider FICO has highlighted the biggest barriers to digital interaction between bank and customer at a time when digital has become ‘king’. According to the data, based on a survey of decision makers by independent research firm OMDIA of 172 banks across 8 countries, including 27 UK banks, the inability to complete identity verification online is a stumbling block for banks.

“Historically, identity solutions were developed for face-to-face interactions and have since been adapted to the needs of new channels and products,” explained Sarah Rutherford, senior director of identity fraud marketing at FICO. “As digital interaction is accelerated by the impact of COVID-19, it exposes the weaknesses inherent in using identity verification processes that were not intended for digital channels.”

Consumers Want Fully Digital Account Opening

A FICO consumer study conducted earlier this year found that consumers have a strong appetite for digital interaction. Most people in the UK (82 percent) are prepared to open accounts digitally. But consistency of identity validation across channels is a challenge for 54 percent of UK banks.

According to the FICO-commissioned study, whilst 72 percent of UK banks use digital methods to capture identity for personal bank accounts, they are not integrated into a seamless experience. Only 36 percent of banks said they capture customer identities and verify them in the same channel. A lack of integration means that only 29 percent of document capture is integrated into the same channel, leaving clients much more likely to abandon an application, for example after being forced to download another app or scan and email documents.

Indeed, the FICO consumer study found that nearly one in three UK consumers (32 percent) said they would abandon an application process if forced to take action through a non-digital channel. Yet only about 7 percent of banks surveyed have adopted a streamlined approach with capture and verification methods fully integrated, in real time, into the digital application process.

Banks in the UK also noted challenges around authentication of existing customers, including complying with legislation. This was a concern for 54 percent of respondents, probably driven by the Payment Services Directive 2 (PSD2), which establishes technical and operational rules around verifying the real payer, both for banking and payment card accounts. The lack of integration between authentication systems across customer channels is a concern for half of UK banks.

Banks Missing Important Data

Lack of the right customer information is another big stumbling block for banks in the digitalisation arms race. Up-to-date contact information is crucial for one-time passwords (OTP) or codes for customer and payment verification, a common strategy for PSD2 compliance. Yet only 83 percent of UK consumers in a prior FICO survey said their bank has their mobile number, and a third of banks say they have contact data for less than 70 percent of their customers. When PSD2 forces the use of Strong Customer Authentication to secure e-commerce transactions, this could mean a failure rate that isn’t acceptable to merchants or their customers — who are likely to blame the bank that issued the debit or credit card the customer tried to use.

“Our new study shows that banks need to move fast to work out how identity fits into their digital onboarding and authentication strategies,” concluded Rutherford. “The fragmented approach is impacting the customer experience. The benefits of moving to a single identity infrastructure across all channels and product lines should be assessed as a matter of priority. This approach reduces unnecessary friction and confusion for customers, avoids multiple copies of documents being held across the institution and facilitates faster onboarding of cross-sell opportunities. Banks that still rely on processes first developed for branches will be disadvantaged.”