Hosted by top 5 banking and fintech influencer, Jim Marous, Banking Transformed highlights the challenges facing the banking industry. Featuring some of the top minds in business, this podcast explores how financial institutions can prepare for the future of banking.
Customer Identity: Balancing Security and Seamless Experiences
In a digital world where convenience, time savings and instant access reign supreme, a physical-first banking experience is no longer the preferred option for most consumers. But how can you verify the identity of someone wanting to do business with you?
Banks should not have to make compromises between security and a seamless customer experience along their digital journey — but this requires the right identity strategy that reflects today’s risks and the needs of the modern digital consumer.
I am excited to have Heidi Hunter, VP, Product Innovations at IDology on the show today. Heidi will discuss how knowing who your customer is, across channels and at all times, can be a differentiator for success.
This episode of Banking Transformed is sponsored by IDology
IDology is the trusted leader in digital identity verification and offers the industry's most innovative suite of multi-layered solutions to streamline customer acquisition, deter fraud, and drive revenue. Since 2003, IDology has provided easy to implement identity solutions that are flexible and customizable. Their ExpectID® platform gives you the confidence to locate, verify, and approve more legitimate customers faster with nominal to no friction.
Jim Marous: Hello, and welcome to Banking Transformed. I'm your host, Jim Marous, founder and CEO of the Digital Banking Report and co-publisher of The Financial Brand. In a digital world where convenience, time savings and instant access reign supreme, a physical first banking experience is no longer the preferred option for most consumers, but how can you verify the identity of someone wanting to do business with you? Banks should not have to compromise between security and a seamless customer experience along their customer journey, but this requires the right identity strategy that reflects today's risk, but also gives the opportunity to meet the needs of a modern digital consumer.
Jim Marous: I'm excited to have Heidi Hunter, VP, product innovations at IDology on the show today. Heidi will discuss how knowing who your customer is across all channels at all times can be a differentiator for success. So welcome to the show today, Heidi. Detecting and deterring fraud without negatively impacting the customer experience has brought digital identity verification to the forefront of strategic considerations for financial institutions really of all sizes. The stakes are getting higher everyday as fraud continues to rise at the same time that the demands for frictionless experience from consumers also becomes more pronounced. So Heidi, before we begin, can you share a little bit about IDology and what your firm focuses on?
Heidi Hunter: Yeah, absolutely. So IDology is a leading provider of identity verification solutions. Primarily we're focused here in the US. We are owned by a larger broader group called GBG, which has the same objective but they do it on a global scale. So for us, we've been in business for over 15... Hold on, let me take a breath there. It might actually be longer. I'm a dinosaur, Jim, I've been here for over 10 years so I have to do my math right. It's getting close to 20 years that we've been in business, but what we've really gleaned from that has been watching how things have really shifted. Originally, when I first started working at the company, our goals were to try to authenticate as many consumers as possible. Fraud wasn't as part of the on onboarding landscape as it is today. So as the industry's evolved, we've evolved, and our insights have really grown so we've been able to bring some really interesting solutions to the market to help address the problem of balancing, as you spoke about right, fraud prevention, but also giving that great onboarding experience that American consumers have grown to you expect.
Jim Marous: Financial institutions know the importance of ID verification with regards to compliance and fraud and risk.
Heidi Hunter: But nobody likes dealing with regulators, right?
Jim Marous: Oh, exactly. But how can they leverage an ID verification process to actually create a more positive brand experience?
Heidi Hunter: That's a great question. So data insights, I go back to this every time I'm asked by a customer what's the best thing that we can do here? If you want to gather as many data insights as you can about the person that you're going to be onboarding, and there is so much information that you can gather from information about their mobile device, their mobile account, their email address, you can do geolocation around the IP of the device that's doing the digital onboarding. When you have really deep data diversity there also in the identity and a strong provider or solution set that dives really deep into those details, you're doing the authentication beyond just the primary data points you need for compliance and you're pulling back all these great insights. And when you layer in fraud capabilities like consortiums or high velocity, propensity alerts, you're able to really get confidence that this is really a legitimate customer that wants your product.
Heidi Hunter: But you're able to find the problems with fraud, because those patterns are going to be there. There's always heuristics in how the fraudsters are going to transact and when they're doing these accounts. And so by leveraging those deep insights, that's data that you're already collecting. You need a phone number in order to communicate with them and an email so they can get into their account, so why not authenticate all these data points that you have? And by doing that, you're able to save the friction. And then you can leverage the friction where it's needed on things that looks suspicious. You can shut out the things that are fraudulent and that good consumer, the only thing that they've had to do is just data entry or scanning a document to get started and they're done. So it's a really great way to bring in as much as you can, but give the consumer what feels high touch but very minimal for what they have to do to transact and get in with you.
Jim Marous: So it's interesting, as Leah and my team know, there's probably not a podcast that goes by or a webinar that I do or an article I write that I don't some point say, "We have got to start thinking as a digital consumer thinks and try to meet their needs and making things easier, simpler, faster." And when we talk about digital account opening, a lot of times we're still at a 10 to 15 minute process. Organizations will say, "Oh, we can put them online right away," but that's after a 15 minute process. The whole digital identity process actually can speed up the mechanisms with which digital identity can be done in digital onboarding and new account onboarding can be done. What are some of the must have features needed for a truly effective identity verification solution?
Heidi Hunter: Absolutely. I'm going to go back to it again, those data insights, they can rapidly speed up that process, because if you are able to get a really good perspective on how much risk is associated with this transaction quickly, then you can make quick decisions about what's the next part of your process. So by having that information up front, that's a really quick way to know what you're going to need to do next. And if you've authenticated an individual beyond their identity that they've needed to provide, and you've gone deep into the details, you know you don't need to apply friction, and then what was a 15 minute process can be done in a few minutes of just entering in data. The other thing I would say is that there are digital technologies available that you can leverage that will help that process move faster than what you're doing traditionally.
Heidi Hunter: So as consumers are moving to this digital environment, they're becoming more accepting of technologies that in the past they might have been a bit resistant to. So what we saw back with Shelter in Place, in the pandemic, people that were holdouts and were adverse to doing digital, doing things like supplying a driver's license online, scanning a passport, doing biometrics, they're resistant to that technology. They might not trust it or they feel as though it's just not something they were accustomed to online, but the pandemic changed all of that because going into the branch and seeing your teller, that's not an option anymore. You have to adapt and do this. My father, he is very technology adverse. He is a serious holdout. I just got him off his flip phone two years ago and he works in the commercial...
Jim Marous: You beat the trend by two years because now they're completely unwinding. They're not even letting people have them anymore.
Heidi Hunter: Absolutely. [inaudible 00:07:39] you got to get out of it. That's what I was telling him. But for him, he had all these checks he needed to cash so he could fund his business and keep doing what he needed to do. So remote check deposit was something he was incredibly adverse to, didn't think it was safe. And he saw what he found was the ease of it. It's easy. He can sit at home and scan 20 checks and get him in his account and he's done. Get it over to the accountant. Everything is so much more simple. So that's really what the pandemic did for us, is it shifted the mindset of the consumer to be more accepting of these technologies. Whereas before, when you're evaluating your onboarding processes and you're trying to figure out how can we speed this up or offer more tools, you're going to find a consumer base that's more accepting of this.
Heidi Hunter: So doing a digital document verification, taking that paperwork in the flow that you need, whether it's additional pieces of their identity, like a lease or a mortgage or a utility statement, you can do these things online. It's a faster process. Nobody has to go find a fax machine, come to a branch, and you're going to find consumers and more accepting of it. And then if I can be super extra, Jim, the other side of this that I love is we have a new rise of millennials and the generations coming after them, they've always grown up with tech. My children, they've always had iPads and tablets in their hands. So they're used to digital technologies. And so one thing I really stress with my clients is outside of finding our core base is now accepting of digital technologies, there's a real big opportunity to attract a completely new market by accepting digital options. Because they've grown up with it, they're comfortable with it and they're used to the Amazon experience across the board. So you don't want to miss the goal by not bringing those things in.
Jim Marous: So you mentioned trust earlier and obviously it's becoming more important than ever in every industry. And you've also talked about the automation and digital identity verification process. And really when you're looking at it, from my perspective, if you make it easier for me and you protect me from people outside that are trying to steal my identity, this obviously builds trust. But what other ways does the digital ID verification program improve the trust concept of the experience?
Heidi Hunter: Absolutely. I think as a brand, if you're promoting yourself as being aware of these things and you're going through these authentication steps, that's a way to assure a consumer that you take identity seriously, you take their identity seriously and you're not going to be letting fraudsters make fraudulent attempts with data that's been stolen or is synthetic because you are taking the time and consideration to implement those policies in your workflow, which shows that beyond wanting to onboard legitimate consumers and people that really want your product and you want that to be a great experience for them, you also have that consciousness of the impact that identity theft has on the American consumer. So by having that secure process like that, you're helping build that trust with consumer that you know this is a challenge and you're doing everything you can to prevent it as a company. So I think it's a trust that flows both ways. You can trust this is your consumer, and your consumer can trust that you're taking their data seriously and you're not going to do anything that puts them at risk.
Jim Marous: Now, you do a study at IDology around identity and fraud and risk and all this. How big of a problem is identity theft right now? And how big of a problem are we trying to address with your solution?
Heidi Hunter: It's enormous. And unfortunately it's an evolving problem that it's gone multifactor. There's a lot that you're up against. So we know that phishing attempts are one of the biggest challenges that any company experiences, any consumer experiences. I think yesterday alone, I got around three or four fake texts on my phone in various ways. Some are total garbage. Some were like, "Oh, you need to do this for your account to turn on." And one was really ugly. It was actually a falsified AT&T telling me I had security options I could download on my phone. These attacks are coming to the consumer every day at a really high propensity. My poor grandmother, I think her Facebook account gets breached once a week. Bless her heart. I don't know how it keeps happening, but she does it.
Heidi Hunter: So phishing is a serious problem for a person at the consumer level, but also at the business level too. And it's a really easy way to get data. They try to get you on the line, they try to take over your device, they're going to start stealing things. And then it's a problem for the consumer that it happens to, but it's also a massive problem for the banking world, because how do you know that this is really this person and not somebody who's breached their account, stolen their data, and it's only accelerating because they can go direct to consumers to get this information. When I started in the industry, the problem was companies having data breaches. You got the Anthem breaches, the credit bureau breaches, that was the linchpin, that's where you wanted to get, but they don't have to do that anymore.
Heidi Hunter: They can come into our own home and take this information from us if we're not secure and we're not protecting ourselves. And it's so widely available on the internet and it's really ugly the depth that it goes to. I've actually seen on some dark web searches that we did internally where they had bucketed people based on their credit scoring. So if you wanted to really have a solid data that... You could steal people's data that had a score of 750. You could just imagine what they could do with that. Take out loans. Really get anything that they wanted. It's a massive problem and it's not going away. I think at this point we can all expect that our identities, in some capacity, either by our own doing or by another organization, our data's been breached. Our children's data has been breached. So all you can do is layer up and secure your processes as best as you can so you can get those people, get those bad attempts out of your system and reject them from being able to open accounts.
Jim Marous: Another aspect of digital identity verification is the fact that there's more and more interest in being able to serve the segments that have been underserved in the past. This includes customers that have maybe thinner credit files. How does IDology help institutions grow market share with these file thin or thin file customers?
Heidi Hunter: I actually love this question because this is one of the things that make me a true believer of IDology. When you have data diversity with the types of data sources that you're searching, and what I mean by that is going beyond credit, looking at what we would call the public record system, that data is built on 50 different types of data. And then on top of that, there's billions and billions of records in there. By having diversity like that, you're able to authenticate with the methods that are approved by regulators and get access to people who are credit adverse, underserved when it comes to credit, and when you can offer a product to that consumer group that other people have rejected or passed on, I think what I really love about...
Heidi Hunter: I love the access of it first, doing that broader good of serving everyone and making sure everybody has access to great products, but I tell my customers, "I think about what's the adverse of that? You were the company that was able to find data on them, authenticate them and get them boarded when they got passed up by others, they're going to be a great customer for you. They're going to be loyal. They're going to love your products because you were the one that made it happen for them." And that can be their springboard to getting things like ACH and then maybe they open a credit card with you in a few years once they've really started building things up, and they'll be a customer for life.
Heidi Hunter: So I love that piece of it and what it does to serve everyone and to even add to that, if you think about why a digital environment has made this even better is those consumers, maybe they don't have a car to drive to your branch. Maybe they don't have the means to go and do a traditional opening. Everybody has a cell phone. Cell phones outnumber us. They better never go SkyNet and rise against us, because I think cell phones outnumber us in the States two to one, everybody has a phone. So if you can offer a great experience on a device, it's accessible to all, anybody can have it. And so I really love that about it.
Jim Marous: Well, it's interesting. As my listeners know, I went to China two years ago in January, right before the COVID crisis, and visited Tencent. And Tencent with their WeBank, it's very interesting because their data files got so deep and they were able to hit almost every single consumer in some way. And they were using data like cell phone usage data that helped them validate whether or not a person was real. But as opposed to saying, "Oh, they're good in credit," they were able to avoid those people that created the biggest risk. And that took out a segment, but it left a whole wide segment between those that really present a risk and those that would meet traditional guidelines.
Jim Marous: What they're able to do with that is hit a much broader marketplace, which actually is what's happening in the FinTech marketplace in the United States where FinTech players are usually going for those consumers that are in that mid-market that are not bad consumers, but they were never good enough for the traditional banking world. And I think we have to remember that yours is not just a digital identification verification, it's really a data and analytics solution that lets an organization more seamlessly impact the consumer's journey across the entire life of the relationship. And it's not just at account opening. Yes, that's a major point of impact, but it's on an ongoing basis. So I think your point is that for those lower market consumers, many of them are going to grow into very loyal, very profitable consumers. Let's take the buy now pay later base, these people, you now can use data that's being used by the FinTech's in such a way to grow market share, correct?
Heidi Hunter: That's exactly right. Well put, are you looking for a job, Jim, because I'm hiring right now for product?
Jim Marous: I don't know if I could interview myself, but I understand the process. Well, it's interesting because I think when we talk about data and analytics, a lot of times we're talking about experience and next most likely product, but some of this is bare bone stuff that's so important to make it so that consumers trust their financial institutions, so that consumers can transact seamlessly and, oh, by the way, be protected in the meantime. So what's interesting is your solutions are very sophisticated and they meet a growing need in the marketplace. Now, can any size organization partner with you for your solutions or is this really for the bigger guys?
Heidi Hunter: No, absolutely not. We have thousands of direct and indirect customers and they are across the board in size. And honestly we love working with people who are starting to enter certain spaces or plays, because we love to work with them as partners and figure out what are their challenges, what's unique to their business, how we can help them with the insights we have. Our years of consulting other banks and help them really grow their business base, we like to feel ourselves very invested, and it's mutual because learning from their experiences and what they're seeing in data, it will translate to a broader insight. So we love working with banks of all sizes, large and on the smaller side, because at the end of the day, the fraud is the fraud, it's going to be there no matter what size you are. And so it's wonderful to work with folks that are getting into this and try to help them be very invested in their success so that we can see them grow. And it's just very rewarding.
Jim Marous: I would imagine also that in the same sense that you can work with any size organizations that the ability that you have to work with so many different financial institutions, even those outside of the financial service industry, every institution that you work with actually benefits from your learning that you have with other institutions. So if something comes up, something brand new, let's take the current crisis between Russia and Ukraine where obviously there's all kinds of fraudulent activity that may be on the horizon, you're able to apply this across all your customers, aren't you?
Heidi Hunter: We are. And actually we did a specialized outreach to our clients about this and we explained these possible cyber threats, this is how you were going to see this in your life cycle, through the following ways and the data, these are the insights that are going to come across, and in your onboarding for new clients, these are the things to look out for. And we told all of them, "Through your existing settings, these are the things that we think that you should do." And we also did things like supplying Russian email domains for their negative lists. So we try to go above and beyond and address those situations as best as we can. And it's there. The insights are there. If you're able to make those changes, to prevent that type of activity, it was pretty seamless for our clients.
Jim Marous: So as we wrap up, what challenges do you see on the horizon around digital identity?
Heidi Hunter: Well, there's a couple things I think folks should be on the lookout for. New technology is very exciting when we think about things like we are... I think in the United States, we are moving towards the concept of a tokenized identity. There's a lot of rush to this. We see it. We know there's a semblance of this with Apple. I imagine at some point Google's probably going to have something similar. We know that there's things like the Microsoft verified credentials, they've got a program there they announced a couple years ago. And we know the States are starting to do digital documents. So you can have a digitized version of your driver's license or ID card that you carry around in your wallet. Our phone and our life as a consumer are merging and they're growing and eventually it's going to be there.
Heidi Hunter: And while I think this is incredibly exciting, I'm really cautioning clients, yes, let's keep transitioning towards this, but know that there is not a challenge a fraudster will not of breach. It will be possible to crack these and steal these. And so as they're being built, as we're adapting that tech, we need to be thinking about where are the holes here. Because there will be. It's easy enough to port someone's account to a different provider and steal it. It's easy to break into a phone and steal it, so how do we prevent that, how do we find that activity when it gets there? Another one, blockchain. I love the concept of blockchain, our solutions support blockchain and I know a lot of institutions are wanting to start leveraging it in more capacities.
Heidi Hunter: I've got clients that are using it under the covers today to build up information around their consumer base, but if you think about if you didn't have the insights that someone was bad from the beginning, you're building information on a bad identity from the start and you're saying that it's good, because a lot of the fraud, they'll sleep for months and let something build up and look normal and then all of a sudden they just take you down and take as much as they can. So I think blockchain's another one to be cautionary on and make sure that as you're starting to leverage that technology in the back end, you really understand how you're building it, you're making sure that the data that's getting in there is good data. I think those are all things to watch out for, but also be excited about because they are, at the end of the day, going to automate our processes, make it easier for us to work with our consumers, but just know fraudsters are always going to be there. It's never going to go away.
Jim Marous: It's interesting. I asked you about challenges, and as an optimist you brought in opportunities at the same time. And I think that's what's interesting, is I think IDology, as I've gotten more and more familiar with your company, it is not just a fraud prevention company, it is really an opportunity door opener where the use of data and analytics at the deepest level, which is what you need for fraud. And when we look at the use of machine learning, when we look at AI, all those started in the risk and fraud areas and now they're being used for better customer experiences. And I think one thing that your company really has brought to the table is the ability to use the same data that you use to protect people to open doors for opportunities for finance institutions to serve consumers better, which is a nice mix.
Jim Marous: But it also, again, it's using the same data. There's no reason to have one company do this while another company does this. You could actually handle both sides of it at the same time. Before we leave, I want to make sure that you give a chance to tell people how they can find out more about your solutions, but more importantly, and one thing that I want to bring up is you continue to do blog posts and you continue to do insight releases on your site where anybody who may not be up to speed as to what the marketplace as a whole is providing as an opportunity and a challenge, you provide an insight there as well. So how do people get ahold of you or how do they find it on your website?
Heidi Hunter: Absolutely. So our website is www.idology.com. On that site you can download the consumer study that you mentioned today, Jim. Also, our annual fraud report is on there. It's all very easily outlined. There is a connect with us there where you can go in and do things like request a demo or ask for more information, download some of our white papers, read our blog. We're on LinkedIn. We're on Facebook. I'm personally on LinkedIn. I love talking about fraud. So if you just want to hit me up on there anytime, happy to do it. So we're pretty easy to get access to. And we're always at trade shows too, so you might just stumble across one of our booths at one of the ones coming up this year. And please, if you do, come over and say hi, we'd love to meet you.
Jim Marous: Hey, Heidi, thank you so much for being on the show today. I really appreciate the time.
Heidi Hunter: Thanks Jim. Thanks for having me.
Jim Marous: Thanks for listening to Banking Transformed, just rated as the top five banking podcast and winner of three international awards for podcast excellence. If you enjoyed today's interview, please give our show a five star rating on your preferred podcast platform. Also, be sure to catch my recent articles on The Financial Brand and the research we're doing for the Digital Banking Report. If you're an organization that's trying to reach other finance institutions, be sure to check us out for our solutions interviews such as the one we're doing today. This has been a production of Evergreen Podcasts. A special thank you to our producer, Leah Longbrake, audio engineer, Sean Rule-Hoffman and video producer, Will Pritts. I'm your host, Jim Marous. Until next time, have a great day.