Consumer ID for Better CX

By Tom Donlea

How consumer identity data can improve the customer experience for online financial services.

A 2016 Accenture report found that consumers are increasingly using (and shopping for) banking and financial services online. And they’re more inclined to switch when they feel like another institution provides more value or better service. At the same time, the report noted that the traditional methods that the financial industry has relied on to attract and retain customers—like rewards and loyalty programs—are becoming less and less effective. Those trends aren’t likely to change any time soon.

Accenture described this market as a “zero-sum game,” where banks “get trapped in an endless loop of one-upping and matching each other on discounts and product offers where no one wins.” What can financial institutions do to differentiate themselves in such a market? For starters, they can deliver a great customer experience.

When customers are choosing among banks and online lenders, one of the things they care most about is the experience.

They want to set up an account, get approved for a loan, or make a payment quickly and with minimal friction. When it comes to lending in particular, a PWC study found that borrowers consider speed a top factor when choosing a provider, ranking it just after product choices and a pre-existing relationship. And with institutions ranging from mortgage providers to alternative lenders now promising customers approval in just minutes, a seemingly small delay—or, worse, an unnecessary rejection—can turn a lead into a missed opportunity to land a long-term customer.

The onboarding and approval processes need to live up to the increasingly demanding expectations of consumers (especially younger consumers). To make that happen, banks and lenders must improve their overall identity verification processes—especially when gauging the risk of potential new customers.

Financial institutions have created sophisticated systems to facilitate account creation and speed up the loan underwriting process. For customers with limited credit histories, banks and lenders can turn to alternative credit bureaus that access payment histories with cell phone, utility, and other service providers. In addition, banks and lenders also:

  • Filter leads by geography (to ensure they can offer services to the customer)
  • Perform velocity checks to prevent loan stacking
  • Cross-reference industry black-lists

These checks, while important, still won’t fully ensure the application is not fraudulent or risk worthy.

Savvy fraudsters are persistent and sophisticated. 

They assemble identity data elements from various sources. Then they take the time to cultivate synthetic identities that combine real and fabricated identity details to fool banks, lenders, or payment providers. The fear of these fraud groups and associated losses can push institutions to be overly risk-averse, resulting in excessive false positives.

When good customers are rejected, that’s pretty much the epitome of a bad customer experience.  Alternatively, having good applications flagged as suspicious requires expensive and time consuming manual review.

This problem only gets harder for banks and alternative lenders who are competing for the business of the 64 million “thin file” customers in the U.S. who, despite their limited credit histories, are an important and growing segment of the online lending market.

One way to reduce the “customer insult rate.”

While it might seem like a contradiction, the push for speed doesn’t have to come at the expense of an increased exposure to fraud. Institutions that make better use of consumer identity data can detect bad actors, fast track legitimate applicants, and reduce the customer insult rate while still providing rapid approvals.

By using non-personally identifiable information (non-PII) data as part of their automated review processes, financial institutions can look for signals that correlate with their best performing leads. Non-PII data to pay attention to includes things like:

  • Matches like phone to address, email to name, and phone to name
  • The age of an email address (older is generally better)
  • The validity of a phone number, physical, or email address
  • The relative locations of the customer’s IP address and physical address (closer is better)
  • The use of a proxy IP address
  • Whether a phone type is non-fixed VoIP

Identity data can improve the qualification and approval process without a noticeable (to the consumer) impact on approval times. Banks and lenders benefit not only from a reduced requirement for manual review, but lower fraud and default rates, not to mention increased customer satisfaction. Consumers benefit from faster approval times and less chance that their applications will be mistakenly turned down.

And happy customers are more likely to stick with a bank or lender and recommend it to friends and family.

Tom Donlea is vice president of Global Marketing at Whitepages Pro, an international identity data company.