Technology has always been the enabler of market disruptors. Think Uber. Think AirBnB. Think Amazon. Technology innovation means that traditional industries face a constant battle to remain competitive when faced with nimble, well-funded start-ups that have worked out how to penetrate their more established rivals’ customer base with well-constructed, value driven propositions.
Nowhere is this more true than in the financial services sector. Here we see new market entrants emerging almost daily with an idea to penetrate a lucrative and seemingly recession-proof sector. And yet the very nature of the financial services industry – where customers choose services based on trust and confidence that their investment will be safeguarded – makes it a sector that can be hard to gain a beachhead in, in terms of rapid customer acquisition. Removing friction from the process of acquiring customers for new financial services players can therefore be the difference between a business plan that fails and one that flies.
But potential new entrants, in any sector, are faced with two main challenges: trust and conforming with local regulation requirements.
At the very heart of customer trust lies one central challenge; verifying the interaction between customer and brand is utterly secure. Since the 2008 crisis, global financial institutions have been fined $26B for violations relating to AML and KYC regulations, so with these kinds of numbers on the table, it’s no wonder that compliance is such a hot topic.
Fortunately, technologies are starting to emerge that address these concerns and enable providers to offer the same levels of trust and confidence to their customers as physical locations did for their grandparents. After all, new entrants to a particular market have to deliver absolute confidence that they are not going to be compromised. And if this isn’t a big enough challenge on its own, the situation is further complicated by differing regulatory regulations in different countries which means that, for new entrants, any solution they invest in needs to cover them in all markets they want to operate within.
One example of such technology is facial recognition to solve the Know Your Customer (KYC) challenge. Those who bought an Apple iPhone X will already be familiar with facial recognition technology which continues to be a preferred biometic benchmark for good reason. It’s easy to deploy, implement and requires no physical interaction by the end user. Most importantly, however, face detection and match processes for verification and identification are very fast which, combined with the accuracy of results, makes it a tempting tool for providers in any sector to ensure that their customers are who they say they are.
Technology also becomes the enabler for friction-free customer onboarding for market disruptors. In the ‘Now Economy’ of instant interaction and gratification, buying, selling, booking, renting, applying, publishing and account opening are all possible while on the move. So the early provider who can catch the customer with their online offering and maintain confidence through to the end of the sign-up process will be rewarded. Automated identification and verification methods make for a friction-free customer onboarding process all within a couple of minutes. And for providers operating in countries with more stringent regulation, Germany, for example, a platform that offers video as an alternative to automated identification and verification within the same workflow reduces the friction further.
Think of this story as a ‘T cubed’/ technology win:win:win effect: It’s technology that disrupts the traditional industry in the first place, it’s the technology that can create the customer confidence to share their details with the provider and it’s the technology that makes onboarding this customer friction-free for both provider and customer. And if you can find a platform that can do all of this AND satisfy local regulatory requirements, the world’s your oyster!
By Rupert Spiegelberg, CEO at IDNow
CEO of online identity verification firm, IDnow, Rupert Spiegelberg has more than 17 years’ experience building B2B technology businesses in Europe and the United States. Previously CEO of New York-based Investis Inc., a leading SaaS provider of investor relations and communications solutions for publicly-quoted companies, Spiegelberg established the US company as the fastest growing in its sector with offices in New York and San Francisco. Prior to this, he led Investis´ European expansion and overall product strategy.He holds British and Swiss dual nationality and has an MBA.
Online identity verification and e-signature is one of FinTech’s fastest growing areas and already a multi-billion euro market as financial services and other sectors seek to shift the customer experience to an online-only experience. This means they are accelerating the adoption of technologies that allow them to verify their customer’s identities without the need for paper documentation while remaining in compliance with European Anti-Money Laundering and electronic signature regulations. The European market for online identity verification and e-signature services could be worth as much as €10 billion per annum according to IDnow estimates.
