Fact or Friction? Top Challenges in Digital Banking
Benchmarking the Industry’s Quest for a Fast, Secure Customer Journey
Demand for digital banking has exploded in the past year, boosting penetration and highlighting the importance of frictionless transactions to consumers of all ages.
From Gen Z to baby boomers and beyond, consumers now expect a seamless, user-friendly experience throughout the customer journey. Of course, they also expect financial institutions to protect their financial data in an increasingly complex landscape of threats.
Financial institutions have explored a variety of technologies to balance these requirements — including identity verification, authentication and risk management solutions — without compromising their regulatory compliance.
Where are the latest challenges and opportunities? HID Global and FStech surveyed financial services leaders in the UK and Europe to assess key trends. Here’s what we discovered.
Automating the Onboarding Process
Digital banking has radically changed customer expectations of the onboarding process. Rather than presenting proof of their identity in person, at a branch, consumers now expect efficient digital onboarding — without slow regulatory checks or excessive friction.
The majority of financial institutions we surveyed have made significant progress towards automating their onboarding process. However, while offering a fully digital onboarding and account opening journey remains a top priority, only 11% have achieved full automation from start to finish. The process is often lengthy and drawn out, with the majority (59%) of institutions requiring more than half a day to onboard customers.
Authenticating Digital Transactions
Authentication methods for accessing financial data and verifying transactions are also changing rapidly. Biometric authentication technologies and behavioral identifiers like keystroke patterns are among the most secure, efficient solutions on the market.
However, our survey suggests that most financial institutions have been slow to adopt these technologies. The leading authentication method among the companies we surveyed is multi-factor authentication with an SMS sent to customers’ phones — in spite of the security risks it entails. More traditional authentication methods like secret questions and answers and email password resets are also still widely in use.
Meanwhile, 23% are using hardware or software tokens to generate One-Time Passwords (OTPs), and only 6% are using biometrics like facial or fingerprint recognition to authenticate customers.
The Basics of Digital Banking
Conventional wisdom says the development of digital services is driven by the desire to attract younger customers. However, our survey suggests that more companies are hoping to capture operational benefits like fraud prevention and risk management. Given that ensuring data privacy emerged as the top challenge for institutions that are seeking to implement digital customer journeys, perhaps that’s not surprising.
When it comes to investment priorities, a combined 60% of respondents are either planning to invest in more technologies in 2021 or target specific business areas for tech upgrades. The top areas of investment uncovered by the survey include digital basics like ensuring fast payment and transactions, enhancing chatbot support and streamlining the account opening process.
The Customer Perspective
Though one study found that 42.4% of millennials have left a financial services provider due to a poor mobile experience, our survey suggests that consumers are comfortable with limited friction as long as it contributes to the security of their data. This suggests that authentication methods that are integrated into a seamless customer journey can not only reassure customers as they transact online, but form a key pillar of engagement.
The financial services industry is responding to profound technological disruption. Listen to our podcast to learn more about these challenges and the key trends we are observing with top financial institutions.