FICO Survey: Complexity and Cost, Top Pain Points for Lenders in Malaysia When Validating Digital Banking Customers

KUALA LUMPUR – December 9, 2020

Highlights:

• The FICO Identity in Digital Banking Survey examines how banks in Malaysia are approaching the validation of a customer’s identity during origination
• 50 percent of Malaysian banks said the high level of manual handling was the key challenge when validating a customer’s identity
• Forcing Malaysian consumers to leave their chosen channel will lose a bank business

FICO, a global analytics software firm, has released its Identity in Digital Banking Survey, which found that the complexity and cost of validating the identity of digital banking customers are the top pain points for banks in Malaysia.

Almost 50 percent of respondents surveyed nominated the ‘high level of manual processes to validate customer identities’ as their top challenge along with ‘consistent collection of supporting data/documents’ and the ‘need for physical validation of identity’.

More information: https://www.fico.com/en/latest-thinking/ebook/malaysia-and-philippines-banking-survey-2020

“Manual processing at Malaysian banks slows down the process, introducing friction into digital applications,” said Subhashish Bose, FICO’s lead for fraud, security and compliance in Asia Pacific. “Indeed, a third of banks still force customers to go to a branch to validate their identity after trying to open an account online.”

FICO’s previous consumer study found that a large percentage of Malaysian (40 to 78 percent, depending on the action required) said they wanted be able to complete all aspects of account opening online or on their phone. If all actions required to open an account could not be accomplished in-session, only 18 percent of Malaysians would carry out the necessary offline actions as soon as possible. A further 15 percent said they would try a competitor while 8 percent said they would give up completely.

“Malaysians are comparing their banking experience not just to other lenders but to other digital businesses,” said Bose. “Companies like Uber, Netflix, and Amazon have created an expectation that banks will need to meet this decade.”

Concerns about Authentication
Authentication strategies at Malaysian banks are driven more by security than by regulation; concern over the sophistication (53 percent) or volume (60 percent) of attempts to breach access controls is much higher than in the other seven countries surveyed, where, on average, concern levels related to sophistication of attack are 43 percent, and the volume of attacks 30 percent.

“Another issue is that many banks in Malaysia are making separate fraud and authentication decisions,” said Bose. “They are less concerned with user experience and will ask a customer to authenticate again for any interaction even if it is in the same session.”

When fraud and authentication decisions are combined, banks can progressively apply step up authentication controls based on fraud risk when needed. This approach significantly reduces friction without comprising on security.

Technology challenges are also impacting the ability of Malaysian banks to authenticate customers. The survey revealed that banks feel the time taken for systems change is a problem (27 percent), as well as inflexibility around identity approaches (40 percent). This may be due to rapid innovations in authentication and the number of technologies deployed.

“Malaysian banks are often torn between multiple point solutions that require integration and broader platforms that span authentication but don’t play well with third-party systems,” said Bose. “New-breed platforms that allow innovation with AI and integrate more widely are the next step. Consolidation is needed and banks need to determine which technologies are effective both internally and with customers to gain an edge over their competition.” 

FICO’s Identity in Digital Banking Survey was produced by Omdia via an online study with 172 global banks in May 2020. 15 Malaysian banks with a minimum of 500k customers were surveyed, and more than one-third of respondents had over 10 million customers.

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 195 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

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Contacts:
Neil Mirano
RICE for FICO
+65 3157 5680
neil.mirano@ricecomms.com

Saxon Shirley
FICO
+65 9171 0965
saxonshirley@fico.com