The continuous growth of the digital space gave industries more opportunities to improve the supply chain and cater to customer demands efficiently. Banks and financial technology (FinTech) companies have leveraged websites and mobile applications to provide remote financial services.
From $8 trillion in 2020, the digital banking market is expected to grow to $10 trillion by 2027. More consumers now rely on mobile devices to perform various financial tasks, including checking bank balances and transferring funds. The COVID-19 pandemic also accelerated the need for remote banking services, with people wanting to stay home instead of engaging in financial activities in-person.
Unfortunately, the advancement of e-banking and FinTech has also attracted fraudsters, given the potential funds targeted for theft. The digital transition might have improved the financial services of banks for users, but cyber-criminals also found this as an opportunity to defraud companies.
Bad actors can access accounts illegally by circumnavigating the traditional knowledge-based credentials, such as passwords and personal identification numbers (PINs). Weak passphrases make it easier for culprits to steal funds, gain control of credit cards, or sell the account to the dark web.
With cybersecurity threats rising, mobile banking and FinTech providers are pushed to invest in cutting-edge security solutions, like biometric authentication. This measure can help improve the company's overall real-time fraud prevention measures for a more secure, reliable, and faster client onboarding.
Understanding Digital Onboarding
Banks and financial establishments bring customers onto their digital products, services, or facilities through digital onboarding. It is an alternative to traditional onboarding, where customers no longer need to visit the financial institution physically. They can complete the process quickly through an online channel using their mobile phones or computers.
In 2015, Forrester reported that manual customer onboarding usually takes 34 weeks and costs $25,000 per client. The report also cited the procedure as fragmented because many organizations still use disjoined tools and technologies to serve their potential clients. Online client onboarding can solve this costly and friction-prone process by eliminating tedious tasks, such as handling paperwork, exchanging emails and phone calls, and attending face-to-face meetings. Through digital onboarding, financial establishments can predetermine the documents their clients need to read, sign, and upload, then place them in a central database accessible to authorized users.
Using digital customer onboarding software can lessen the responsibilities shouldered by client success managers (CSMs). These professionals verify the user's background, set up customer accounts, and help the person understand the company's sales process. Financial institutions can set the CSM's tasks to run automatically once users onboard themselves. Finance service providers can create introductory product videos and instructional content to be sent to customers upon signup. However, as financial establishments automate their services, cybercriminals become technologically sophisticated. VMWare revealed that 63% of the 130 interviewed global financial security leaders and chief information security officers (CISOs) have experienced destructive attacks in the first half of 2022. These punitive attempts by cybercriminals leave no traces of their fraud by destroying, disrupting, or degrading the victim's system. To strengthen its protection and prevent different criminal schemes, banks must strictly comply with electronic Know Your Customer (eKYC) regulations.
eKYC for Digital Onboarding
Digital onboarding begins with KYC authentication. The process involves collecting data that might include personal information, spending habits, investment goals, and preferences from the applicant. Then, the organization verifies the legitimacy of the customer information. Once data collection and verification are finished, customers confirm agreement to the service provider's terms and conditions. These steps are performed to lower the risks of financial fraud, identity theft, money laundering, and terrorist financing.
Like traditional KYC, eKYC serves the same purpose for financial institutions operating in the digital space and their consumers. The emergence of the eKYC portal paved the way for banks and FinTech companies to execute cost-effective client verification. With it, financial businesses can provide secure, convenient, and user-friendly transaction verification that needs no paper and can be completed remotely.
Even though eKYC has revolutionized how financial organizations and users interact, the absence of a reliable digital identity verification technology makes service providers vulnerable to cyberattacks. IBM Security X Force Threat Intelligence Index 2022 revealed that the finance and insurance organizations are the second most attacked industries, with 70% of those targeting banks. The Anti-Phishing Working Group (APWG) also found that almost 24% of phishing attacks affected the financial sector during the first quarter of 2022. These data show how cybercrimes have grown exponentially in the past years and why financial companies need more stringent security solutions, like FIDO2 biometric authentication.
Biometric Authentication for Digital Onboarding Processes
Digital fraud rose by more than 52% from 2019 to 2021. This should concern banks because they have to establish trust with their customers during digital onboarding. Financial companies can address this by investing in a reliable authentication method like biometric verification for their online client onboarding.
From 2022 to 2028, the biometric technology market size is expected to hit more than $39 billion due to the need for highly secure user identification solutions. Biometric identity verification can enhance the overall e-onboarding procedure by eliminating the need for passwords. Creating and memorizing complex passphrases is not needed anymore. The user will undergo a fingerprint, facial, or iris scan to log in, which takes only a couple of seconds.
Biometric-based authentication can reduce the risk of fraud and other online crimes. Biometrics are unique to each person, meaning duplicating them is hard. Since the owner possesses the biometric code, stealing the device makes no sense because forced account entry is impossible.
LoginID Solutions for Better Banking and Financial Services
Digital onboarding allowed financial companies to streamline services, enabling users to transact even at home at their convenience. Unfortunately, without strong anti-fraud policies, fraudsters can effortlessly take over accounts of unknowledgeable clients. And with fraudulent web activities on the rise, this pushes banks and FinTech establishments to improve their digital security with passwordless authentication.
FIDO 2 passwordless authentication solutions like those provided by LoginID can help financial services verify user identities through biometrics. These non-password security products are the ideal replacement for passwords because the client's physical attributes serve as their authentication means, and not letters, numbers, or symbol combinations that can be stolen.
LoginID's partner, AuthID, provides mobile identity verification that also allows companies to provide user-friendly e-onboarding on various devices. The solution is easy to integrate across multiple channels, operating systems, and platforms. These features can help the organization increase customer conversion rate and decrease transaction abandonment.
To learn how LoginID can help, get in touch with our experts today at sales@loginid.io. Or you may also register for a free account to get immediate access to LoginID's biometric authentication solution. If you'd like to get your hands on LoginID's strong customer authentication solution, check out the tutorial or read through the open developer documentation.
Sources:https://www.outsystems.com/blog/posts/customer-onboarding/https://toqio.co/blogs/7-benefits-of-digital-onboarding/https://blog.hubspot.com/service/digital-customer-onboardinghttps://safeatlast.co/blog/online-banking-statistics/#grefhttps://signzy.com/blog/kyc-process-in-banks/#:~:text=eKYC%2C%20also%20known%20as%20Digital,OCR%20and%20live%2Dvideo%20access. https://auth0.com/blog/3-critical-trends-in-biometric-authentication-in-2019/https://www.altamirasoftworks.com/blog/digital-onboarding-how-to-get-and-keep-clients/
