Survey results released by Duff & Phelps, A Kroll Business, a provider of governance, risk and transparency solutions, reveal that 81% of respondents agreed or strongly agreed the concept of Digital ID would improve the effectiveness of financial crime prevention across the FS industry.
The survey, which polled professionals working within financial services, goes on to reveal that financial crime is currently the primary driver behind the adoption of digital ID services, with 34% of respondents citing more effective Know Your Customer (KYC) processes as the greatest potential benefit to their company. Other advantages cited were lower operational costs (20%), efficient ID verification (20%) and more robust verification processes (14%).
These results follow an uptick in financial crime over recent years. At the end of last year, a benchmarking survey conducted by the Association of Certified Fraud Examiners revealed 73% of respondents had seen an increase in identity fraud across 2020, and 80% expected a further increase in the next 12 months. A similar report released by Cifas, the national fraud database, in summer 2020, showed identity fraud was up by nearly a third over five years.
Commenting on the findings, Mark Turner, Managing Director, Compliance and Regulatory Consulting at Duff & Phelps, A Kroll Business said: “The need for a comprehensive digital ID service is only growing more urgent, as fraudsters increasingly target identity to deceive businesses. Companies are aware of the threat and our survey respondents cited the effectiveness of KYC processes as the primary reason for adopting digital ID. Digitising this check helps businesses protect themselves, by building a clear picture of their customers and the level of risk they pose.
“As well as tackling financial crime, digitising ID verification will also save companies significant resources in terms of efficiency, resilience and costs. Digital ID is growing in acceptance and will underpin many initiatives as more firms implement digital verification schemes. Both businesses and customers will feel the benefits in almost all financial transactions, from buying their first home to accessing their pension.”
The survey was conducted at a conference hosted by Duff & Phelps where The Investing and Saving Alliance (TISA) unveiled their new digital ID scheme. TISA’s scheme will provision pre-verified identities, enabling the customer to set up, manage and reuse their digital identity which is verified to an Anti-money Laundering (AML) standard. TISA has built a sophisticated benefits model to illustrate the conversion rate and cost savings that financial services providers can expect from leveraging a Digital ID. Using this model, it predicts the scheme will reduce costs of identity verification checks by up to 50% of the current cost.
Of the financial services firms polled, 57% are spending more than £150 when onboarding a new customer. Putting these figures into perspective, official figures from Nucoro show approximately 6,000,000 people downloaded a banking app for the first time in 2020. If we assume these six million people cost the mean amount of minimum of £150 each, TISA’s digital ID scheme could have saved financial services over £450 million in onboarding costs over the year.
Furthermore, the survey found that for over a third (35%) of respondents it takes an average of 3-5 days for an account to progress from application to opening at their institution. A further 29% stated that this process takes over five working days to be completed. TISA’s service, which is expected to be rolled out in February 2022, will enable customers to deliver their verified identity within minutes reducing onboarding times to a fraction of the previous period.
Turner added: “Current onboarding processes, using physical ID checks, take significant time and pose a greater risk of human error and fraud. A universally accepted digital ID scheme will close the gap, creating a tool which provides greater accuracy, efficiency, and convenience for users on both sides.”
Harry Weber-Brown, Digital Innovation Director at TISA, concluded: “TISA is excited to be spearheading this Digital ID scheme for financial services. Once verified, the scheme allows users to re-use their identity across different financial services. By reducing friction for a range of different transactions, such as opening a new account, digital ID will increase conversion rates while delivering a better customer experience.”