This week, fintech professionals, organizations, and service providers gathered in San Francisco for LendIt Fintech USA 2018. OWI attended this event and was honored to speak on identity and fraud prevention in fintech and lending. Today, we share our observations, key takeaways, and industry trends from the conference.
Competing on customer experience, trust, and speed
Lending and financial services have moved online. Financial institutions are increasing their investments in their online and mobile platforms. As consumers increasingly adopt online financial services, financial institutions are no longer competing on product offerings alone. Rather, consumers are increasingly expecting a seamless customer experience founded on trust as well as expediency.
Consumers are now more likely to purchase products and services from financial institutions that use advanced verification and authentication technologies. For example, many online lenders recognize that consumers will submit several loan applications to compare rates and loan offerings. Online lenders who leverage advanced verification technologies and processes can originate more loans more quickly.
As more personal identification information (PII) is compromised in cybersecurity breaches globally, consumer awareness and sensitivity around data security and data stewardship continue to increase. Many consumers will refuse to use a digital financial service that does not leverage biometric authentication as these technologies establish a strong sense of trust between the consumer and the financial institution. Furthermore, the adoption of advanced authentication technologies improves the customer experience across online and mobile platforms.
Identity and fraud prevention as revenue generators
As financial institutions increase their focus and investment in their online and mobile platforms to improve the customer experience, establish and promote trust, and increase speed in delivering products and services, identity verification and fraud prevention have become revenue generation capabilities for organizations.
Let’s take John Doe as an example. John utilizes a free financial wellness website that recommends he consolidate his credit card debt into a personal loan and to make it easy for John, the financial wellness website refers John to five online lenders. John has a 750 FICO credit score, and he was a victim of the 2017 California wildfires. Tragically for John, he lost all of his identity documentation in the fires. John applies for a personal loan across the five online lenders (A-E) to compare rates and offerings. Lenders A and B require a submission of identity documentation, and because John cannot supply this documentation, he drops out of the application process. Lenders C and D leverage other identity verification technologies, and because of this, John is able to complete the loan applications without submitting identity documentation; however, Lenders C and D are not able to fund the loan for 24 to 48 hours. Lender E leverages the most advanced identity verification technologies, and because of this, Lender E’s has the best customer experience and can fund the loan more quickly. John chooses Lender E.
Identity and fraud prevention capabilities have emerged as key differentiators in the online and mobile experiences for financial institutions and financial service providers. As Lender E experienced, they were able to convert the lead from the financial wellness website more quickly, thus turning John into customer and capturing the lifetime value of the customer. Do this at scale, Lender E wins.
It’s not just customers like our John Doe. The World Bank estimates that 1.1B people globally lack an official identity, and because of this, they lack access to financial systems. Moreover, The World Bank estimates that approximately 2B people do not use formal financial services and more than 50 percent of adults in the poorest households are unbanked.
A major topic of discussion at LendIt Fintech centered on financial inclusion. Identity is at the core of increasing financial inclusion globally. As the adoption rate of emerging technologies, such as biometrics, mobile data, behavior analytics, email intelligence, etc., increases, the opportunity for financial institutions is to bring 2B people into the global financial system.
Financial institutions are quickly realizing the benefits and opportunity to improve their identity capabilities, not only to compete on customer experience, trust, and expediency, but also to increase access to financial services globally.