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Identity Fraud Practices Used by North American Banks Risk Falling Behind in Digital Era

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Fraud Protection & Compliance

SAN JOSE, CA — October 14, 2020


  • FICO today released a Customer Identity Management Survey that found banks across the U.S. and Canada are struggling to meet consumer’s digital banking expectations, particularly around identity management.
  • The impact of a bad digital banking experience can be costly to banks, as a previous FICO consumer survey found that 23 percent of customers would abandon opening an account if forced to prove their identity via another channel.
  • Only 49 percent of North American banks presently use digital methods to capture or verify identity when opening personal bank accounts (i.e., checking accounts).
  • 75 percent of banks in the U.S. and Canada are planning to invest in an identity management platform within the next three years.

FICO, a global analytics leader, today released a Customer Identity Management Survey which found that many banks across the U.S. and Canada are failing to meet their customers’ online identity fraud and digital banking needs.

Despite COVID-19 quickly turning online banking into an essential service, the survey found that financial institutions across North America are struggling to establish practices that combat online identity fraud and money laundering, without negatively impacting customer experience. For example, 51 percent of North American banks are still asking customers to prove their identities by visiting branches or posting documents when opening digital accounts. This also applies to 25 percent of mortgages or home loans and 15 percent of credit cards opened digitally.

“The pandemic has forced industries to fully embrace digital. We now are seeing North American banks that relied on face-to-face interactions to prove customers’ identities rethinking how to adapt to the digital first economy,” said Liz Lasher, vice president of portfolio marketing for Fraud at FICO. “Today’s consumers expect a seamless and secure online experience, and banks need to be equipped to meet those expectations. Engaging valuable new customers, then having them abandon applications when identity proofing becomes expensive and difficult.”

The study found that only up to 16 percent of U.S. and Canadian banks employ the type of fully integrated, real-time digital capture and validation tools required for consumers to securely open a financial account online. Even when digital methods are used to verify identity, the experience still raises barriers with customers expected to use email or visit an “identity portal” to verify their identities.

Creating a frictionless process is key to meeting consumers current expectation. For example, according to FICO’s recent Consumer Digital Banking study, while an overwhelming majority of consumers (75 percent) said they would open a financial account online, nearly a quarter of prospective customers (23 percent) would abandon the process due to an inconsistent identity verification process.   

The lack of automation when verifying customers’ identity isn’t just a pain point for customers – 53 percent of banks reported it problematic for them too. Regulation intended to prevent criminal activity such as money laundering typically requires banks to review customer identities in a consistent, robust manner and this is harder to achieve for institutions relying on inconsistent manual resources.

Fortunately, 75 percent of banks in the U.S. and Canada reported plans to invest in an identity management platform within the next three years.  By moving to a more integrated and strategic approach to identity proofing and identity authentication, banks will be able to meet customer expectations and deliver consistently positive digital banking experiences across online channels.

The Identity and Authentication Banking Survey was conducted on FICO’s behalf by independent research company Omdia, which surveyed 172 banks in May 2020. Approximately 34 percent of respondents were based in North America. The study was conducted online with Tier 1 and 2 retail banks (based on the number of retail banking 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, 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.

Learn more at https://www.fico.com

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