How should Banks Approach Digital ID Adoption?

Banking CIO Outlook | Wednesday, June 24, 2020

Digital IDs can create a favorable ecosystem for fraud-free banking operations and solve a major headache for service providers.

FREMONT, CA: The tussle that banks face between ensuring security and offering highly satisfying customer experiences will soon be over if digital IDs are adopted at scale. Digital identification enables banks to satisfy the complicated regulatory norms while minimizing the hassles customers face with identity verification. The layers of encryption that come with digital IDs help consolidate security mechanisms and make banking services less prone to threats and vulnerabilities. The infrastructural requirements necessary for banks to embrace digital IDs are not very taxing. With a simple, step-wise approach, banks can start leveraging digital IDs.

• Identifying Specific Pain Points where Digital IDs will be Useful

Initially, banking firms will have to determine the areas that will benefit the most by adopting digital IDs. The subsequent acquiring of resources and development of infrastructure depends on how and where the digital IDs are deployed. Customer onboarding, account enrollment, transaction authentication, and KYC processes are some common areas where banks can get the best out of investing in digital IDs.

• Acquiring Essential Data and Modifying Infrastructure

To develop digital IDs, banks will need to extract a new set of customer information. Thus, an exercise of creating a unique database has to be carried out. The process of shifting to digital identification will be easier for those banks which are already in possession of key customer credentials that are crucial in creating digital identities. The back-end and front-end IT infrastructure will require multiple altercations.

• Keeping Customer in the Loop

Every time there are major changes to banking security, banks must ensure that the customers are made aware. Banks also need to frame ways to encourage their customers to make use of digital IDs. One way for banks to achieve this is by highlighting the benefits and enhanced security prospects of using digital IDs. When a significant proportion of users start using digital identification, banks will be able to reduce the number of financial frauds and identity thefts.

The exercise of shifting to digital identification can be rewarding when undertaken promptly and executed with precision.

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