Using Automation To Accelerate Onboarding And Prevent Digital Fraud

Financial services firms are under attack. According to recently published research, financial players are some of digital fraudsters’ favorite targets: They fall victim to cybersecurity attacks 300 times more often than businesses in other industries.

For financial services firms, security breaches take a toll on not only their reputations, but also their relationships with customers. To top that off, cyberattacks can cost them up to $2.67 for every dollar stolen by fraudsters — more than in any other industry.

Unsurprisingly, companies are investing heavily in new tools and technologies to curb cybercrime. Nearly 90 percent of firms plan to increase their cybersecurity investment next year, according to one report — a decision that could mean the difference between success and bankruptcy, according to Paul Mennega, chief operating officer of Goldmoney, a Canadian financial services firm that facilitates the buying and selling of gold and other precious metals.

In a recent interview, Mennega told PYMNTS that “we want to be around in 100 years, and to do so, we need to do things the right way” – which means establishing trust with clients.

But earning that trust can be tricky, he said, and requires top-notch security that complies with financial rules and regulations, as well as digital fraud prevention efforts that benefit the user experience as well.

Onboarding Issues

Onboarding is one of the biggest challenges for financial services firms, Mennega said. When customers sign up with Goldmoney or other financial services providers – from mobile devices or computers – they expect to do so almost instantly and without interruption.

But offering immediate onboarding is easier said than done. Companies like Goldmoney face a wide range of financial regulations, especially know your customer (KYC) and anti-money laundering (AML) requirements. These rules require companies to learn more about customers’ identities and backgrounds by reviewing government-issued identity credentials — such as passports, for example — before allowing them to complete transactions.

Goldmoney had, in years past, usually relied on human experts to thoroughly review the documents manually. The company also looked to partner with credit reporting services to help them learn more about clients quickly. But in the modern era, manual reviews don’t move quickly enough to satisfy consumers’ need for speed, Mennega said.

“One of our biggest challenges is establishing an appropriate balance between client security, regulatory compliance and an improved onboarding and verification experience,” he said. “Everyone wants things to happen quickly; everyone wants instant gratification.”

Satisfying Consumers’ Need for Speed

To offer the instant service that customers demand, or at least something close to it, Mennega and his team look to new and emerging technologies that could improve upon the manual review process. Earlier this year, the company partnered with digital identity technology provider Jumio by integrating the company’s real-time ID verification technology into Goldmoney’s platform.

The solution allows Goldmoney to bypass the manual document review processes and offer customers a speedy and paperless onboarding experience. Consumers who want to do business with Goldmoney can send a photo of a government-issued ID and a selfie to the company when they register for their accounts. These documents are then reviewed automatically, and applicants are usually granted access to a full holding account within just three minutes, Mennega said.

In addition to being speedy, the solution is compliant with AML and KYC requirements, which allows the company to meet regulations while offering more accurate reviews than previous processes.

“We’re still required to capture the same data and meet the same KYC threshold, and this is really something that allows us to do that,” Mennega noted. “It’s [also] made things even easier for our clients.”

Educating Customers

Improving the user experience is only half the battle for Mennega and his team, however. While onboarding has become almost instantaneous for many customers, some new accounts are flagged for further review. And in some cases, customers concerned about their privacy may be wary of sending a photo of their government-issued ID, and even a picture of their face, to open an account.

To alleviate these concerns, Mennega said it’s critical to better inform customers about the data that’s being collected and why the company is collecting it.

“It has to be a marrying of education along with the technology,” he said. “We’ve really worked to make sure that our relationship managers and our customer-facing staff members are well-versed in not only our technology stack and our product, but can also speak to [why] we’re asking for [something], or why it’s taking us so long.”

The company also educates consumers about the regulatory requirements it faces, Mennega claimed. That way, he said, clients learn that he and his team are collecting this data because they’re legally obligated to do so — not simply because the company wants to boost its marketing efforts.

The Future of Financial Services Fraud Prevention

Going forward, Mennega said, distributed ledger technologies and identity protocols hold potential for improving the onboarding process.

“One of the more interesting things I’ve been exposed to recently is this concept of a KYC protocol or an ID protocol,” he said. “Imagine if — instead of us having to capture all of that data from a passport — we could simply plug right into the State Department in the U.S. to get that data? If there was some kind of protocol or way that data could be more easily shared, but remain secure and ensure the user remains in control of their data, I think that could be really interesting.”

He explained that these and other emerging tools will be crucial in the future, as he expects financial services firms to continue facing pressure to offer faster and more secure services.

Mennega said that consumers increasingly desire speedier and simpler financial tools, and that young consumers are even more eager than their older counterparts to do business online — leaving more opportunities for fraudsters. As a result, experts expect digital fraud rates to continue to rise in the coming years, particularly as cybercriminals develop more sophisticated methods of gaining unauthorized access to personally identifying information (PII) or payment data.

Financial services companies will likely be fighting digital fraud for the foreseeable future – but with improved onboarding and verification, it just might be a fight these firms can win.