Turkish banks are engaged in a debate about how far they will go in using biometrics to identify new customers when they open accounts, an important enabler of digital account opening. Indications from the Turkish regulator in March 2020 seem to be supportive, and legal interpretation is ongoing.
While some banks are pressing ahead and realizing the benefits of digital account opening, others are taking a more measured approach. The ability to deploy digital means of identity proofing means that rather than visiting branches with identity documents, customers can verify themselves by scanning their identity and submitting a ‘selfie’. But are customers ready for this leap into truly digital banking?
What Do Turkish People Think?
A recent FICO survey shows that 97% of Turkish people are prepared for digital account opening of a financial account, and they are prepared to open different types of account in this way.
Turkish people are actually ahead of those in some countries that apparently have more developed digital onboarding. For example, only 75% of Americans will open any type of financial account digitally and of those that will, only 47% will open a bank account.
Despite being new to the reality of digital account opening, Turkish people already have strong expectations that account applications they start in digital channels can be completed there. They expect that by scanning documents and taking selfies they can open accounts without visiting branches.
Are Turkish Banks Ready?
It looks like Turkish people are ready to take advantage of digital account opening – but what about the banks? Globally many countries permit digital account opening and ‘digital only’ banks such as Monese and Monzo have been setting up accounts successfully for a number of years in UK. Of course, these organizations must still comply with eKYC and AML regulations and take care to protect their organizations and their customers from fraud.
In many ways, Turkish banks have an advantage. spurred on by early adopters, technology has advanced, and lessons have been learned. Having had processes that relied on paper for years, banks have been losing many new customers at the onboarding stage due to branch waiting times or complexity of paperwork. Turkish banks now have the opportunity, to learn from their peers in other countries and take a strategic approach to customer identity management.
A recent FICO survey of leaders at 172 banks in countries that already extensively use digital identity verification, found that many of them struggle with multiple point solution. While 19% have already consolidated solutions for identity management using a common platform or orchestration layer, a massive 75% plan to do so within three years. While they are struggling with legacy solutions and multiple un-integrated systems Turkish banks can take the opportunity to forge ahead by taking a more strategic approach from the start. This will be particularly helpful as they consider how to integrate identity proofing at application to ongoing authentication of existing customers.
How Does Digital Identity Proofing Work?
When customers start their application, they are asked to scan the front and rear of their identity document. The validity of the document is then tested:
- Data is extracted from text, machine readable zone, barcodes and chips is cross-referenced to look for discrepancies that suggest it is fake.
- The data is checked to determine that the format is correct for that document type.
- Hologram detection ensures that the correct hologram for that document is in place. Non-detectable holograms indicate tampering.
As a bonus, data from the document is used to pre-populate application forms so that the applicant doesn’t have to fill them out and error is reduced.
The next step is to ensure that the identity presented belongs to the person opening the account. To do this, ‘selfie’ technology allows the customer to scan their face for comparison to the image in the document. This will:
- Use machine learning algorithms to match the face in the document to the selfie image presented
- Determine that the applicant is present rather than a criminal using a photo or video. There are two ways to do this:
- Passive liveness detection, where machine learning algorithms determine that the person is behind the camera in person
- Active liveness detection, where applicants are asked to carry out certain tasks such as look up, left, down or follow a dot on their mobile phone screen
At this point, successful applicants can open an account – and it can all happen in less than 60 seconds.
See how easy this is for the customer in this short video:
The Customer Lifecycle
Identity proofing is just the start of customer identity management, as the Turkish regulator announced permission for the use of biometrics in customer identity proofing, they also announced that similar to PSD2 in Europe, they would be requiring Strong Customer Authentication. This means that cohesive management of customer identity across the customer lifecycle is necessary. The adoption of point solutions that simply help with onboarding is likely to create long-term issues as banks struggle to implement Strong Customer Authentication as discussed in this blog ‘The Six Steps to Using Biometrics to Open & Manage Accounts Digitally.’