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The way incumbent banks onboard and verify the identities of their customers online is inconvenient and insecure, resulting in lowered customer satisfaction and loyalty, and security breaches leading to compensation payouts and legal costs.
It’s a lose-lose situation, as consumers become disgruntled and banks lose business. The problem stems from the very strict verification standards and high noncompliance fines that banks are subject to, which have led them to prioritize stringency over user experience in verification. At the same time, this approach doesn’t gain banks much, since the verification methods they use to remain compliant can actually end up compromising customers’ personal data.
But banks can’t afford to prioritize stringent verification at the cost of user experience anymore. Onboarding and verification standards are increasingly being set by more tech-savvy players within and outside their industry, like fintechs and e-retailers. If banks want to keep customers loyal, they have to start innovating in this area. The trick is to streamline verification for clients without compromising accuracy. If banks manage to do this, the result will be happier and more loyal customers; higher client retention and revenue; and less spending on redundant checks, compensation for breaches, and regulatory fines.
The long-term opportunity such innovation presents is even bigger. Banks are already experts in vouching for people’s identities, and because they’re held to such tight verification standards, their testimonies are universally trusted. So, if banks figure out how to successfully digitize customer identification, this could help them not only boost revenue and cut costs, but secure a place for themselves in an emerging platform economy, where online identities will be key to carrying out transactions.
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Source:: Business Insider