In a world where you can access mobile banking in the blink of an eye, the technology used to identify customers still falls far behind.
While every other element of banking has been digitised, most banks still require physical identification - passport/birth certificate and a utility bill - for an individual to open an account or product. While paper may have been the safest way to check identity in the past - the ease with which people can falsify these documents means this isn’t the case anymore.
There are better ways. Both for anti-fraud and to improve the customer experience, old ID techniques are out, newer, safer digital methods are in. So what does this mean for collections teams right now, and what needs to be done to future-proof their processes going forward?
The problems with physical ID
The world we live in is becoming increasingly paperless. From a cost-saving, convenience and environmental viewpoint this is a win-win for both businesses and consumers. But many companies still insist on versions of identification that have been sent by post (utility bills, for example.) There’s a clear disconnect between how user experience is evolving and the barriers still being faced in proving identity.
This issue isn’t being helped by the spread of products consumers now have. Where once a consumer may have had a primary bank that would have delivered all of their financial products, nowadays products are spread amongst many providers. This means more calls for identification, more passwords to remember and a greater risk of a bad user experience.
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And, it’s not just user experience that’s suffering. Skip Tracing, which is the process of finding someone who may have left their original address, is now more onerous as it’s becoming increasingly inefficient to sort through the large amount of user data that now exists. It means teams need to work twice as hard and for twice as long to filter out correct information in order to establish an individual's location.
Change is coming
Given that there are currently around 1.1 billion people globally with no official proof of identity – and this number is set to rise exponentially with the younger generation – it’s no surprise that this issue is being taken very seriously.
The World Bank has published a report, ‘Technology Landscape for Digital Identification’, which analyses what’s happening globally to enhance the identification process for users and highlights key benefits and challenges of the technology being tabled.
There’s no shortage of companies who have the capability to create change. What’s more difficult however is understanding what technologies can scale up on a global level whilst being robust enough to minimise the risk of fraud. Any global solution also needs to be able to be governed on a local level – with nations understanding and agreeing to universal terms.
Switzerland are leading the way in making digital onboarding processes more efficient, with the The Swiss Financial Market Supervisory Authority (FINMA) making changes that improve the authentication process online. For example, the requirement for online identification to be conducted by "trained employees of the Financial Intermediary" has been dropped. So far, the feedback on these changes has been overwhelmingly positive. However, all eyes are on whether these changes will lead to an increase in fraudulent activity in the future.
The key tech at its heart
In the race to innovate - biometric technology (using aspects of the body as authentication) is emerging as the clear winner. Fingerprint, face and iris capture are the most mature branches of biometric authentication, powered predominantly by the ubiquity of smartphones and other mobile devices.
It's estimated 600 million devices globally will use one or all of these authentication techniques by 2021.
But that doesn’t necessarily mean biometrics are the solution to better identification processes. Iris and fingerprint scanning technology is expensive, which could hamper scalability, and facial recognition software is currently not optimised to identify minority groups.
Universal ID cards also continue to be explored, with countries having varying levels of success with implementation. Estonia currently lead the way, with mandatory digital IDs for all 1.3 million of its citizens. Finland also have a digital ID scheme, however, it is not yet mandatory, so take up has not seen the numbers it has in Estonia. As yet, there hasn't been a solution to roll out a harmonised scheme worldwide but if we can get to this point it could create a level playing field for individuals across the globe – and make identification much easier to govern across nations. Given the continuing rise of ‘no border’ organisations (companies that channel resources to where they are needed as opposed to where they originate from), this would create better experiences for consumers and colleagues alike.
The issue with ID cards, however, is that changes in tech continue to outpace the conversations around how best to implement these globally - meaning any potential solution has become outdated before being agreed upon and put into practice.
Big players such as Billon and IBM are looking towards blockchain to rectify current issues with identification. IBM have created IBM Blockchain Trusted Identity which is a ‘decentralized, point-to-point exchange of information about people, organizations or things – enabled by blockchain – created specifically for a world of many networks, implemented on global standards.’
The aim is to look into using the increased security blockchain can bring in a bid to reduce the risk of malicious attack as well as bringing the control of identity back to the user, with them being able to decide how much or little information to share with third parties.
For all its benefits though, at present, blockchain technology still doesn’t solve the underlying challenge of registering identity. And, as it stands, it is also too complex for users to adopt on a mass-scale.
What do ID changes mean for debt collectors?
With 16.7 million consumers losing $16.8bn to identity fraud in the US alone in 2017, creating a robust and regulated global identification solution will provide a safer landscape for consumers. It will also make collections processes more efficient and save teams hundreds of man hours chasing the wrong people.
Field agents will also benefit as there will be more data available to them to understand behaviours and analyse patterns. Having a clearer picture of someone’s full financial footprint will allow them to track inconsistencies and predict outcomes.
Given that Skip Tracing hinges on finding an individual’s location, having technology evolve away from the physical into the digital creates opportunities for new methods of tracing. Having a universal ID will allow collections teams to quickly identify and pinpoint individuals without the need for sifting through reams of information like they have to at present.
It’s clear that current identification processes aren’t fit for the predominantly digital world we live in – being costly, inefficient and ineffective.
The changes on the horizon can provide great opportunities for collections teams to create better, more accurate processes – as long as they are on the front foot when it comes to understanding the new technology and how to harness it to their benefit.