How banks are improving customer experience without compromising on risk

  (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

Market review by Omri Raiter, the Co-Founder and Chief Technology Officer of Hexatone Finance.

It’s no secret that 2020 was a year of unprecedented change for most industries, and that’s certainly the case for banking. Customers were forced to become part of the digital banking ecosystem as physical branches closed their doors. 

Although a shift to digital was already underway for some financial institutions, the Covid-19 pandemic accelerated the change. The result is a change in the relationship between banks and consumers and new challenges for managing financial risk. 

When digital banking first emerged, a top concern for customers was security. They didn’t understand how transactions completed on the internet are more secure than going into the branch, using a debit card, or a passbook. 

However, digital banking is improving customer experience without compromising on risk. 

What is customer experience in banking?

Customer experience is everything banks do to ensure their clients feel important when interacting with them. Reports show that banks investing in customer experience have higher recommendation rates, improved wallet share, and better potential to up-sell and cross-sell products. 

Poor service or financial advice is one of the main reasons people leave their bank or financial provider. There are some core features that banking customers expect from a digital experience.

  • Accessibility. Banking customers are becoming more mobile-dominant and want ways to connect from different devices. 
  • Assistance. Customers want help at the time they need it. According to an Accenture report, 49% of customers say instant support is key to their experience. 
  • Personalization. Customers want to see products and services that are relevant to their needs and expect banks to know what those products are.
  • Data security. Customers must feel safe using digital products and services from financial providers. They should be able to trust banks with their money and data.

The challenge for banks is how they provide a stellar customer experience without increasing risk.

Mobile banking

Statistics show that almost 80% of smartphone users have used their devices for online purchases in the last six months (as of March 2021). Although iOS and Android operating systems have relatively robust security, some features are still vulnerable to hackers. For example, customers could download non-authentic apps that install malicious code on their system or suffer a network attack in public Wi-Fi zones. 

Banks must treat mobile in the same way as their online journey to mitigate risk for customers. There are three best practises that all banks should follow to allow for the best possible customer experience without compromising on risk.

  1. Continually test and evaluate the end-to-end mobile experience. Banks can set transaction limits on mobile as a way to reduce the impact of attacks. Furthermore, test that security certificates and encryption are working as they should be
  2. Always repeat risk assessments. While mobile might be safe today, new apps come to market every day, and technology is changing rapidly. 
  3. Assume mobile devices are untrusted and insist on various levels of verification and authentication. For example, most banking apps require at least two passwords and the option for fingerprint and face recognition. You can even use GPS positioning to confirm locations. 

If banks are going to offer multi-channel experiences, it needs to be in a way that mitigates risk and builds trust. 

One of the most innovative solutions in this market, is designed and developed by a company in Israel named Hexatone Finance. Hexatone’s FinanceAI is a unique AI and Machine learning solution for the new KYC world, such that collects and converts scattered pieces of information from all over the world into an human-readable mosaic. The Finance AI platform minimises the effort and time required for Financial KYC and AML process through automated mechanism, with immediate access to hundreds of thousands of direct sources over the Internet, including  Online Media, News papers, Online resources and traditional sources as well, Supplying initial profile risk assessment to a full report in less than 60 seconds.

Digital and Know Your Customer (KYC)

The traditional KYC process was managed face-to-face at the local banking branch. A banker checks a physical ID such as a driving licence or passport, confirms the personal profile and submits the documents for review. Back office processes validate the information against databases to either approve or decline the application, and the account opening process begins.  

  (credit: INGIMAGE) (credit: INGIMAGE)

However, new financial technology based on artificial intelligence (AI) takes the entire process to a virtual world. More sophisticated tools enable customers to use mobile banking, cameras and facial recognition for KYC. Where these processes work in a digital ecosystem, AI and machine learning can augment and eliminate manual work at the branch that may have been prone to human error. An ID verification process now works like below. 

The digital KYC process is more convenient, safer, and more secure than offline methods. For example, someone could misuse an ID or documentation in the branch or incorrectly enter data into back-office systems. An automated online experience using AI ensures that is not possible. Layers of security such as two-step verification can protect customers and reduce risk more than they ever did previously.

Cybersecurity

The increase in digital channels means banks have to pour money into their cybersecurity investments. The Deloitte Center for Financial Services Global Outlook Survey shows that 71% of bank leaders expect the organization to increase cybersecurity spending. Cloud computing, storage and data privacy are the top three areas for consideration. 

Any form of a cybersecurity breach is naturally going to have a considerable impact on customers. Banks need to take advantage of new technology such as AI and machine learning to reduce the risk. These tools can analyze threats in real-time and often stop them before they occur. 

Summary

For banks to keep up with the example set by other industries such as retail, they need to digitise customer journeys and offer clients the best possible experience. In this article, we have discussed some of the challenges that pose when it comes to risk. However, as long as banks follow best practises with their security and technology implementation, there is no reason for an improved customer experience to be compromised by risk.

This article was written in cooperation with Omri Raiter