Europes identity opportunity

Our world is a digital one, we can do pretty much anything from our mobile devices. From shopping to booking a holiday or paying for a coffee, our connected lives are run from our mobiles. However, to be a part of this world, you need access to financial services, and this is where the connected world can begin to unravel. While almost every other sector allows you to sign up for a service 100% digitally, financial services in many European countries do not. This is due to (rightly) strict regulations around anti money laundering (AML) and know your customer (KYC). These require official proofs of identity which, as things stand, are paper-based and need to be physically presented.

This isn’t a universal problem. Sweden’s electronic ID (eID), BankID, allows consumers to sign up for financial services with ease. The Netherlands has two eIDs; DigiD used for public services, and iDIN for financial services and more. In some of these countries, the evolution in consumer expectations has been matched by what’s been created by governments and the financial sector and therefore satisfaction levels are high. Elsewhere, however, customer expectations are evolving faster than banks are able to. Used to the convenience and lack of friction that eID offers, these markets have seen increases in apps, higher expectations around ease of use and subsequently a higher abandonment rate. Other less advanced markets are still mired in paper-based ID verification processes, and the effect this has on the customer is tangible, with increasing abandonment and frustration.

Signicat’s new report, The Battle to Onboard II, shows exactly how bad this problem has become. Retail banks across Europe now lose 52% of potential customers at the onboarding stage—an increase of 35% in the last two years. This increase, and the subsequent lost revenue and upselling opportunities, are down to consumers’ expectations far outstripping the service that is available, leading to headaches for financial service providers as they try to maximise the potential brought by the customers they onboard.

Open Banking & PSD2

Addressing these issues will become increasingly important for financial service providers as Europe’s PSD2 and the UK’s Open Banking re-engineer how financial services will work.

The regulation is designed to increase competition as consumers use third-parties to bring together multiple accounts into a single dashboard. Access isn’t limited to financial services companies, therefore any brand that wants to use an API to access banking data and process payments can do so. The already competitive market has become now even more competitive with banks being challenged to innovate by fintech startups as well as innovators from other sectors.

This rewritten rulebook will make customers far more aware of how the user experience being offered to them compares with the rest of the market. Dissatisfaction with onboarding and eID is only likely to increase, as is abandonment of apps. Customers will increasingly turn to those providers that offer an all-digital experience.

Banks have the opportunity to build on consumer trust

Customers may be frustrated by banks when they are applying for a product, but they still show a great deal of trust in long-standing financial institutions. A recent YouGov survey found that in the UK, Germany, and Italy, around two thirds of people have confidence that the banks they use are competent and know what they are doing.

Banks are in a better position here than both governments and social media, thanks to banks’ longevity and recent social media privacy scandals. The relationship between governments and ID is uneasy in those countries where it is not a long-standing relationship. Essentially, those who do not have a government-issued identity card do not tend to want one, no matter if it would help them prove their identity.

Consumers trust banks, and the most successful eID schemes currently in use in Europe are driven by banks. Norway’s BankID is used not only for bank onboarding but for many other services, and the Netherlands’ own system, iDIN, is emulating this success.

Our own research backs this up. 52% of consumers trust banks to lead eID efforts, more than governments or social media giants. But even if consumers think that banks should take the lead in eID—why should banks take the initiative? What’s in it for them?

For banks, eID is an opportunity, not a burden

It’s tempting for banks to wonder just why they should take a lead in providing eID. After all, a scheme means collaborating with rivals, and offering something that is universal and not unique to their customers. Why take the time and effort to create something that does not guarantee to place you ahead of the competition?

The Battle to Onboard II is essential reading for any bank wondering what exactly European consumers think about the application process, and what their demands are for digital onboarding. It shows that eID is not only about convenience, but customer acquisition, retention and upselling, also.

Over half of the surveyed consumers say that they are more likely to complete an application if the entire process was online, more than the number from two years ago. The same number said that a completely online onboarding process would encourage them to take additional services from the provider. It’s not just domestic customers that stand to benefit from eID. The vast majority of consumers want to be able to use their eID to apply for services across Europe, potentially opening up a vast revenue stream for banks.

However, this increased ease of use means that other flaws in the onboarding process are cast in sharper relief. In countries with established eID schemes, consumers were far less tolerant of confusing language and more likely to simply change their minds. Clearly the simple onboarding process means that there’s a lower barrier to walking away. eID schemes are an obvious help to the onboarding process, but it’s just the first step in improving that process, especially as the audience becomes more technologically savvy and expectations around ease of use increase.

As PSD2 and Open Banking increase competition, banks are going to need every advantage they can muster to attract and keep customers. eID could be the best weapon they have.

About Gunnar Nordseth

Gunnar is a software veteran and founder of three software companies, including establishing Signicat as a global leader in electronic identities and electronic signatures. He has been working with information security for the past 15 years, and holds a master’s degree in numerical mathematics from the Norwegian University of Science and Technology.

About Signicat

Signicat is based in Trondheim, Norway, and was founded in 2007; the company operates the largest Digital Identity Hub in the world, offering a leading digital identity platform and trusted to reduce the burden of compliance in highly regulated markets. With Signicat, service providers can build and leverage existing customer credentials to connect users, devices and even ‘things’ across channels, services and markets transforming identity into an asset rather than a burden. By ditching manual, paper-based processes and replacing them with digital identity assurance, customer on-boarding is accelerated and access to services is made simple and secure. Signicat’s Digital Identity Platform is a comprehensive solution to that offers compliance and a route to better customer engagement.