Due to the importance of its data, frequent audits, and the fines and financial implications of fraud, the banking and financial services sector is subject to some of the most stringent rules and monitoring in existence today. Technology platforms, procedures, and policies that guarantee your organization’s compliance and security are essential to keeping ahead in the banking industry in the digital era. Most importantly, identity and access control tools, , usually performed through identity verification, are the foundation of this essential technological infrastructure.
Let’s examine how identity management is now defined for banks and why a strong customer identification and access management (CIAM) strategy is essential to the success of digital transformation in the fintech industry.
What is Identity Management?
Identity and Access Management (IAM) is the umbrella term for any organization’s structures and procedures that administrate and control its workers’ access to resources and data.
IAM solutions and policies, at their most basic, handle the centralization, linkage, and governance of access to your systems, data, and resources. Consider them the brains in charge of an organization’s IT infrastructure. Centralizing identity information for each individual protects their related permissions and security, allowing automated procedures to drive and assist.
Standardizing and syncing your organization’s IAM results in the construction of an accurate, easily maintained database that allows all users secure, correct access.
IAM solutions assist in determining the ideal balance between too-open access and too-rigid security for each user’s particular position inside the distinct environment and activities of your firm.
The Rise of IAM in Banking
Although IAM is not a banking-specific solution, the techniques and technology have been used more widely in the financial industry than in others. Banks and financial services were among the first to implement official IAM policies and technology in their major businesses. This is largely because of the heightened rules that govern these businesses.
Because of the restrictions, the active enforcement of the separation of those who pass, verify, and enforce laws has been scrutinised.
Why is IAM required?
IAM is required by businesses to offer internet security: One common weakness in conventional security is the password. Your company becomes open to attack if a user’s password is compromised, or even worse if the email address used for password resets is compromised. IAM services reduce the potential points of failure and provide tools to help them catch errors as they happen.
How does IAM Improve Regulatory Compliance?
Security is also a legal, regulatory, and contractual issue. Your users and company may utilise an IAM solution to guarantee that the greatest levels of security, traceability and administrative transparency are routine in your daily operations.
How Does IAM Work?
IAM verifies the user, software, or hardware is who they claim to be by verifying their credentials against a database. Identity management systems typically carry out two duties. Compared to conventional username and password systems, IAM cloud identity products are more versatile and secure. Using passwordless authentication is key since identity checks are more precise and reliable than passwords and one-time password keys.
Read more about Passwordless Authentication using Biometrics
What is CIAM in Banking?
Client identity and access management, or CIAM, extends identity and access management (IAM) beyond organisations and their personnel to cover interactions between service providers and their clients. With financial services companies like banks, getting this incorrectly can result in fraud losses, the facilitation of money laundering, and a bad client experience.
IAM mainly focuses on preventing employees from accessing areas of the company’s IT infrastructure that they shouldn’t. Customer identity management must go one step further for consumer-facing financial institutions to balance customer experience and security.
- They must be able to verify the identity of new applicants without impeding valid ones.
- Verify that there is no needless friction experienced by customers while using their accounts.
- Ensure protection against identity theft and fraud access.
- Provide clients with easier access to the systems they require, while preventing them from using those they shouldn’t.
It’s essential to integrate customer identity management and access management correctly and get them to operate together if you want to effectively combat fraud and cybercrime while still providing top-notch service to legitimate clients.
What is the need for CIAM in Banking?
When exposing services in the banking and financial industry over the internet, security is a key consideration. Thus, it is the obligation of banks and financial sector institutions to ensure that appropriate security measures are introduced from the client registration journey through all other operations. In the meanwhile, they must ensure that their consumers can perform their tasks utilising the most recent CIAM trends, such as registering with the company using numerous devices. Because providing clients with the most up-to-date trends makes them pleased due to the hassle-free experiences they receive.
These are some of the major CIAM-related benefits that clients would value from banks and financial institutions:
As a bank customer, you want to have a seamless experience utilising your bank’s digital services. Yet, since you have placed your belongings there, you are also concerned about security.
Customers would thus prefer to utilise passwordless authentication and access but they want to ensure that it is sufficiently protected as well when we think about a frictionless experience in login. A password-free authentication mechanism substitutes an easier way to a password to establish authentication. It is not always easy for a user to remember a safe password.
Biometric Verification as 2FA
This may be accomplished via biometrics. The most popular biometric identification is Face Match, although additional identifiers include liveness checks, fingerprints, irises, speech patterns and palmprints. Biometric readers are now available for mobile devices thanks to technological advancements. The mobile gadgets have cameras and fingerprint readers. Biometric identifiers like fingerprints or faces can be used for authentication as a result. Passwordless access may be made possible using this to guarantee that clients have a seamless experience utilising their services.
Yet, it is better if we can restrict access to particular activities for passwordless authentication when we take into account the security aspect in the banking and financial industry. In light of this, only a limited number of procedures are typically password-free in the banking and financial industry.
For instance, a bank customer can sign up for online banking, but they can only view their balance and the status and history of their transactions. Payments, fund transfers, and other operations are not permitted with passwordless authentication.
How do FinTechs benefit from IAM?
Fintech companies need to alter their Identity Verification tactics if banking is to survive in the future. For a digital transformation to be successful, it must have a robust customer identity and access management (CIAM) strategy. In recent months, a lot of financial services companies have been forced to acknowledge that they are not yet prepared to run entirely online. To meet the consumers’ rapidly shifting expectations, features and capabilities that seemed like nice-to-haves in 2019 are being rushed to market in 2020. The current challenge in fintech is to deliver a positive user experience while upholding a strong security posture.
One of the best methods for boosting digital resilience and enhancing online banking security is identity verification for digital customer onboarding.
Customer Centric Digital Onboarding Practices
Most people’s lives have altered dramatically in the last several years, and we’ve reached a tipping point where we’re questioning and challenging existing systems and practices. Simply put, banks and fintech firms must modify the way they interact with their clients.
It’s never been more important to use CIAM to plug gaps and guarantee your identification strategy is sound.
Enable Contactless Remote Customer Onboarding
People used to go to a physical bank and present an employee with their identification in order to establish a financial connection. Prior to 2020, the business was already moving towards improving remote capabilities because of Millennials’ preference for online banking over in-person transactions, but the pandemic has sped up this transition. Financial organisations must be able to remotely verify consumers both when they are establishing a new financial connection and when they are accessing an existing account via an ATM or mobile app. Whether the cost of face-to-face communication is calculated in terms of public health or time savings, it has increased.
Boost Customer Trust with User-Centric Identity Verification
According to a 2019 consumer study by Ping Identity, 81% of participants would stop interacting with a company online and 25% would stop interacting with it across all channels if there were a data breach.
Fintech firms need to adopt open, user-focused security policies and ensure the protection of user data across the internet and mobile apps. These functions can be easily carried out using IDAAS (Identity As A Service) solution that specialises in fraud detection and prevention, like an Identity Verification API.
Balancing Security and Customer Onboarding through Digital Identity Verification
Establishing a strong security posture while avoiding friction that drives users away is an ongoing problem. This is especially true for fintech businesses and banks, which are heavily regulated and prioritise user account security. Moreover, their user populations can vary greatly in terms of technological ability, thus the authentication procedure must be simple to prevent confusion, annoyance, and eventually losing clients.
Lose focus on Digital Onboarding and lose 32% of your users
It’s simple to overlook the effects of a difficult user experience, especially given how crucial it is to secure consumer data and the fact that doing so is required by law in 65% of the world. Nevertheless, negative user experiences immediately translate to decreased income for you. According to a study by PWC, roughly a third of consumers will stop supporting a business they enjoy after just one bad encounter. Hence, it’s essential to strike a balance between strict security measures and a positive consumer experience.
Attaining this balance entails hiding the security paradigm from consumers. In other words, making identity management and verification systems and procedures so smooth that users hardly notice them.
Flexible Biometric Identity Verification
According to pace, a deep grasp of the context in which interactions occur is a critical aspect in balancing security and user experience. Circumstances with varying levels of danger necessitate varying levels of authentication. Thankfully, contemporary CIAM technology is smart enough to create systems that assess all of these contextual elements while making judgements for today’s use cases. By requesting different levels of verification based on context, finance organisations can maintain high-security requirements without bothering the customer with authentication every time they turn around.
CIAM Predictions for the future of Banking
Nobody knows for sure what the banking industry will look like in the future, but it is certain that many elements will continue to be digital. Many clients will continue to favour online banking even once it is more feasible to do banking in person. Future-proofing of financial organisations will require a hybrid organisational structure.
Real-world interactions will have a new type of value in a post-pandemic society, and financial services firms are no exception. One possibility is that banks will become community offshoots. Banks, similar to Capital One Cafés, may utilise their real-estate assets by providing common areas where individuals can transact business face-to-face, so adding another layer of value to the banking experience. Another potential is that banking branches may become distant call centres for consumers with questions that used to be handled in person.
Eventually, regardless of what new income streams financial firms uncover when hybridising their structures, both clients and vendors will put pressure on banks to digitise more thoroughly. A solid CIAM approach paves the way for next-generation digital onboarding without putting client accounts in danger.
Try IDcentral’s Identity Verification and Customer Onboarding Solution
Sumanth Kumar is a Digital Marketing Consultant at IDcentral (A Subex Company). With hands-on experience with all of IDcentral’s solutions, he loves to compare and create indispensable digital content.