There’s a shift taking place in the financial services industry. It’s so fundamental that the World Economic Forum calls it the “findustrial revolution.” New and agile start-ups are adopting new technologies and disrupting traditional approaches to banking. As the financial services industry evolves, one of the biggest challenges to overcome is the issue of trust in online transactions. Digital identity promises to be a game changer because it addresses this problem directly.
“As a society, we’re becoming more and more concerned with our online security and privacy,” says Vinny Iyer, Senior Product Manager with TELUS. “As financial institutions move forward and expand their online service offerings, digital identity services can help them innovate while maintaining their customers’ trust.”
The Shifting Landscape
A 2016 study by PwC on Canadian banks states that the disruption taking place in the financial services world is profound, with technology players like Apple, Google and several other upstart financial technology (a.k.a. FinTech) companies aiming to shake the value chain and seize market share from established banks. The FinTech players in particular have started offering easy-to-use and cost-effective mobile and cloud-based solutions.
With more than 40 banks in Canada, it’s an era of unprecedented competition. A recent survey by the Canadian Bankers Association shows that Canadians are shopping around for banking services. It found that 17 per cent of Canadians say they’ve switched financial institutions in the past three years and, of those, 79 per cent said it was easy to do so.
The skyrocketing use of mobile devices is also changing the way people do their banking. The survey showed that 65 per cent of Canadians use non-branch options for day to day banking. When asked what is most important to them, 77 per cent of respondents said the ability to do their banking from virtually anywhere, while 90 per cent want to bank at any time of the day.
As more high value transactions move online, so does the potential for hacking and cybercrime. A report by Raytheon Websense notes that there are three times as many security incidents among banks, credit unions and insurance companies than any other sector. What’s more, 15 Canadian financial institutions were targeted in 2015 by new malware aimed at stealing passwords.
How Digital Identity Can Change the Game
The financial institutions that will thrive during this period of disruption will be those that provide convenient, secure and trusted online services. The key, saysIyer, is digital identity services. “Financial institutions can build trust in transactions by working with providers who offer digital identity as a service to authenticate and verify the identity of users.”
Globally, financial institutions and governments are moving towards a model of using trusted third-party digital identity solutions, allowing them to focus on their core business and reduce costs. As the mobile device becomes ubiquitous, mobile network operators are being relied upon to provide trusted digital identity services. As an example, mobile network operators in Switzerland have partnered to offer “Secure login for the whole of Switzerland“, allowing Swiss citizens a single, convenient way to access a multitude of online services – from online banking to government services. This service, called Mobile ID, has eliminated the need for consumers to remember unique user names and passwords for their various online accounts and has reduced the susceptibility of their accounts to cyberattack. At the same time, online service providers are benefiting from reduced call center costs related to password resets, and greater adoption of their online service channels versus other more expensive channels.
The use of digital identity services changes the game by allowing users to control how their information is shared to make their lives more convenient. Most importantly, it addresses the critical issue of trust in online transactions. It’s no wonder the World Economic Forum calls digital identity “a new frontier” of privacy and security.
This article is one in a series sponsored by TELUS to provide advice and expertise on digital identity management for organizations. For more information, please email [email protected].