Td Bank on the Case for Real-Time Digital Id Verification

Home , Digital identity, Digital security

MARCH 2021

TD BANK ON THE CASE FOR REAL-TIME DIGITAL ID VERIFICATION

Page 7 (Feature Story)

Just 16 percent of U.S. and Canadian banks use tools needed for secure online account opening 10 Page 10 (News and Trends)

Why banks must optimize their identity verification strategies 14 Page 14 (Deep Dive)

© 2021 PYMNTS.com All Rights Reserved WHATʼS INSIDE A look at the most recent digital identity 03 developments, including why banks must overhaul their customer verification measures during the pandemic and how biometric technologies and other emerging tools could help them do so

FEATURE STORY An interview with Angel Kadelski, head of U.S. 07 mobile banking platforms for TD Bank, on why the banking space must adapt customer verification processes for the digital realm, such as by leveraging biometrics to ease the onboarding process without compromising security

NEWS AND TRENDS 10 The latest headlines from the space, including METHODOLOGY how many financial institutions are missing the The companies on top and how they got there mark on using biometric solutions to the fullest 18 extent and a new partnership between Jumio and Bahrain-based Al Baraka Islamic Bank

SCORECARD DEEP DIVE The results are in — see the highest-ranked An in-depth examination of digital banking’s 19 companies in a provider directory featuring 14 current state and how FIs are leveraging more than 200 major digital identity players innovative identity verification tools to modernize their onboarding processes and prevent users from abandoning account setup ABOUT 93 Information about PYMNTS.com and Jumio

ACKNOWLEDGMENT The Digital Identity Tracker® is done in collaboration with Jumio, and PYMNTS is grateful for the companyʼs support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis. WHATʼS INSIDE

Digital banking has been a boon to consumers This is not to say that adopting digital verifica- who are avoiding brick-and-mortar branch vis- tion solutions will be a light lift for banks. Know its during the pandemic, but financial institutions your customer (KYC), anti-money laundering (AML) (FIs) are still facing several challenges as more and nation-specific data privacy rules can make it customers take their financial habits online. One challenging for FIs to determine which measures significant friction plaguing many banks is their will work best for their organizations, but invest- lack of digital verification solutions — especially ing in robust digital ID solutions is likely to be well when it comes to account setup. A recent FICO worth it in the long run. report revealed that 51 percent of FIs in the United States and Canada still require customers to prove Around the digital ID space their identities by visiting bank branches or provid- Digital ID and biometric technologies hold great ing physical documents to open accounts online, promise for banks looking to streamline their dig- for example. ital verification measures, but a recent survey revealed just how important it is for FIs to en- There are several innovative solutions that can help sure that they are getting the most out of these banks change course on their digital ID strategies, tools. It found that 30 percent of FIs, even those however. The same shift that is prompting many that are using digital ID solutions, are still requiring consumers to seek cutting-edge digital and mo- customers opening additional accounts to com- bile banking experiences is also making them more plete applications wholesale rather than relying comfortable with new technologies like biometrics. on streamlined authentication measures to simpli- Seventy-one percent of consumers in a recent fy the process. This illustrates that many banks survey said they would be comfortable upload- can still do more to ease account opening for their ing selfies, scanning their fingerprints or providing customers. voice-based biometrics to their banks, for example, and just 13 percent felt FIs should not be able Some banks are turning to partnerships as they to access their biometrics. work to upgrade their digital banking experiences.

Executive Insight Bahrain-based Al Baraka Islamic Bank recently announced that it would team up with digital Many U.S. FIs continue to rely on paper-based ID verification solution provider Jumio to boost its ID verification procedures that complicate the mobile onboarding procedures, for example. The FI customer onboarding experience. What are said Jumio’s facial recognition technology would some of the key reasons that have stopped allow mobile banking app users to take selfies for FIs from digitizing their ID verification proce- comparison with official photo IDs during account dures and what kinds of ID verification tools sign-up. The solution uses liveness detection to hold the most promise to improve the on- ensure that legitimate customers are present when boarding experience? snapping their selfies.

“Most traditional financial institutions and Biometric solutions are also catching on for ap- banks will leverage a variety of tools and plications outside the banking sector. The U.S. third-party databases to corroborate the iden- Customs and Border Protection (CBP) agency re- tity and risk assessment of a new customer. In cently reported that it conducted facial recognition fact, some larger banks use as many as 70 dif- scans on 23 million travelers in 2020 — a 21 per- ferent solutions that are cobbled together to cent increase from the 19 million scanned in 2019. help address those fundamental questions of The agency said that the scans achieved a match identity and risk. This can prove daunting when rate of more than 97 percent last year and noted trying to digitize the process. According to that its officers have used the technology to spot Gartner, by 2023, 75 percent of organizations seven impostors at airports and 285 in other set- will be using a single vendor with strong iden- tings since 2018. tity orchestration capabilities and connections For more on these stories and other digital ID to many other third parties for identity proof- headlines, read the Trackerʼs News and Trends ing and affirmation, an increase from fewer section (p. 10). than 15 percent today. Rather than having individual solutions pieced together, financial How real-time digital ID verification helps TD institutions should be looking for an identi- Bank strike the seamless and secure balance ty proofing platform — like the Jumio KYX Many banks in the U.S. and Canada still believe Platform — that combines services and tech- customer onboarding and new account opening nology like identity verification, biometrics, are best-suited for in-branch interactions, but the fraud signals, AML monitoring and authenti- pandemic has forced FIs to reassess as more con- cation to accurately establish, maintain and sumers turn to digital channels for their banking reassert trust from account opening to ongo- activities. Biometric tools, such as facial recogni- ing transaction monitoring.” tion, fingerprint scans and voiceprints, are just a PHILIPP POINTNER Chief product officer at Jumio

few methods banks can deploy not only to ease and mobile banking solutions, but more than half customer onboarding but also to offer real-time of banks in the U.S. and Canada still request that ID scoring and frictionless security, according to consumers prove their identities when opening Angel Kadelski, head of U.S. mobile banking plat- new accounts online by visiting branches in per- forms for TD Bank. In this month’s Feature Story son or submitting paper documents. This month’s (p. 7), Kadelski discusses why the future of digital Deep Dive (p. 14) examines how banks can opti- ID verification in the banking space will involve a mize digital ID verification during the onboarding combination of solutions to meet customer identi- process to both modernize the banking experi- fication program (CIP) and KYC requirements. ence for users and deter them from abandoning account setup. Deep Dive: How banks can leverage innovative ID verification tools to modernize onboarding The pandemic has caused more consumers than ever to seek the convenience and safety of online

Portion of consumers who use 50% mobile banking apps

Share of consumers who are dissatisfied with their 31% account opening experiences

Portion of mobile banking app users who use their apps Five Fast Facts 88% to check their account balances

Segment of mobile banking app users who want more 90% control over their identity authentication measures

Share of mobile banking app users who say they 28% would use them more if they had transaction-specific authentication controls

When The New Yorker published its most reprinted The timing is right to accelerate the adoption of cartoon in the magazine’s history by cartoonist these tools to confirm consumers’ identities with Peter Steiner in 1999, the internet — and digital one or more biological traits. Digital ID solutions identity — was still in its infancy. The cartoon fea- have become essential to onboarding for new ac- tured a dog sitting at a desk, paw on a computer, count openings, though a survey by FICO found saying, “On the Internet, nobody knows you’re a that only 49 percent of U.S. and Canadian banks dog.” More than two decades later, the pandemic use digital ID verification methods for these pro- has created the perfect storm for shady cyber- cesses. The study further showed that just 16 criminals to hide behind online anonymity to exact percent of these banks use integrated, real-time their schemes, with more consumers moving to digital validation tools for consumers to securely digital channels for their daily activities than ever open financial accounts online. before. FIs and businesses fortunately have the Angel Kadelski, head of U.S. mobile banking plat- opportunity to digitally confirm that users are who forms for TD Bank, acknowledged that customer they say they are when communicating and trans- onboarding is still considered risky and best-suited acting online. for in-person interactions — especially when it

comes to CIP and KYC procedures and the general another method TD Bank uses to reduce custom- need to fight fraud. She said there are nonetheless er frictions. opportunities for digital ID verification solutions “I expect the use of both existing and new biomet- to ease the customer onboarding experience, ful- rics to expand to other use cases across digital, fill stronger CIP practices and protect FIs from including within physical branches,” she said. “The cyberattacks. reason is not necessarily to be a sole or primary “Digital ID solutions for customer onboarding can authentication solution, but as an additional au- actually improve CIP and KYC practices because thentication method for customers who may have you can triangulate and verify the authenticity of failed traditional means or may have been flagged various data points that you cannot achieve in a for a high-risk transaction that needs an extra lay- face-to-face interaction with a potential customer of verification.” er,” Kadelski said. The customer convenience balance The importance of real-time verification Kadelski noted that customers have come to ex- Among the data points that can be combined pect convenience, especially as innovative digital to score an individual’s ID digitally, she said, are experiences are being introduced at much faster real-time validation of IDs matching government rates across industries. databases; cross-references with sanction lists; “Banks are left with having to meet those custom- geolocation verification; biometric capabilities that er expectations to stay relevant and competitive use facial recognition to match consumers with with nontraditional FinTechs while also having to photo IDs; credit bureau and social media data ensure they are providing safe and secure experi- to confirm relationships between consumers and ences,” she said. their businesses; and device identification to confirm that applicants are not bots. Innovative ID solutions can address both sides of this balance if done right, she added. Smart identi- Biometrics not only can simplify verification to fication processes that can score identities in real keep customers from abandoning the process but time across multiple categories can help banks also can help banks meet CIP requirements when eliminate barriers to onboarding new customers in-person interactions are challenging — such as — or to satisfying existing ones as they come to ex- during a pandemic. TD Bank uses fingerprint and pect frictionless, end-to-end experiences. facial recognition biometrics to verify customers on its branded mobile app. The bank also enables The future of digital ID verification will require a customers to use voice recognition to confirm their combination of solutions, including both biometrics identities. Customers who enroll in TD VoicePrint and entit y data . FIs that once relied on face-to-face no longer need PINs, security questions or pass- interactions in-branch to prove customers’ identi- words. Selfie ID capture — or the comparison of a ties will therefore need to rethink how to adapt to selfie against a government-issued photo ID — is the pandemic-driven, digital-first economy.

Digital ID and the rise of online forcing U.S. and Canadian FIs that have relied on face-to-face interactions for identity verification banking to rethink their approaches. Seventy-five percent Most banks in US and Canada still require branch of the region’s banks are planning to invest in iden- visits to open accounts tity management services by 2024, for example. Consumers are coming to expect smooth digital US bank customers face frictions regarding services in their financial lives, but recent re- biometric usage and account opening, search suggests that they are still facing hurdles survey finds when it comes to verifying their identities in the Even the FIs that are adopting emerging digi- online banking space. A new survey from data tal verification measures must ensure that they analytics firm FICO revealed that 51 percent of are utilizing these solutions to the fullest extent U.S. and Canadian banks still require customers to to keep customers satisfied. A new survey found prove their identities by visiting brick-and-mortar that 30 percent of FIs are still asking customers to branches or posting copies of physical docu- complete applications to open new accounts in- ments when opening accounts online. The study stead of offering secure authentication measures also noted that while the remaining 49 percent to ease the process. It also revealed that just 50 of respondents were using digital methods to percent of U.S. banks allow their customers to al- verify customers’ identities when they opened ter personal details, such as their PINs, or to seek new accounts, just 16 percent were tapping ful- new debit products online, and most have failed to ly integrated digital validation tools that allowed seamlessly enable remote account opening proce- consumers to securely open accounts online in dures using biometrics. real time. The report found that two-thirds of banks make it There is evidence to suggest that financial insti- simple for customers to access new services, but tutions are heeding the call to adopt more robust consumers said that only 35 percent of these pro- digital verification methods, however. Liz Lasher, cesses are easy to use. Seventy-five percent of a vice president at FICO, said the pandemic is

banks also require additional security verification Biometrics usage worldwide measures when customers attempt to transfer money to external accounts. The survey concluded US Customs and Border Protection reports 23 that biometric verification methods could go a long million travelers received facial recognition way toward helping FIs streamline their account scans in 2020 opening processes and online banking transactions Biometric solutions are also witnessing increased and ultimately prevent consumers from switching usage outside the banking sector. The U.S. Customs to other FIs. and Border Protection agency recently reported that it used facial recognition scans on 23 million Jumio partners with Al Baraka Islamic Bank on travelers last year — up 21 percent from the 19 digital banking app leveraging biometrics million it scanned in 2019. The CBP said that these Many FIs are recognizing the need to update their scans boasted a match rate of more than 97 per- digital banking approaches, and some are turning cent in 2020 and that the technology has helped to third-party partners to provide smooth verifi- its officers discover seven impostors at airports cation methods for these new offerings. Bahrain’s and 285 in other settings. Al Baraka Islamic Bank recently announced that it Some have voiced concerns regarding the agency’s is working with digital identity verification solution use of facial recognition technology at airports, provider Jumio to bolster its mobile onboarding however, claiming that such solutions risk com- processes, for example. The FI will leverage Jumio’s promising individuals' privacy in the name of faster facial recognition platform to match mobile bank- and more seamless security screening. Critics also ing app customers’ selfies with their official photo point to research showing that the technology’s IDs, and liveness detection is employed to ensure error rates can differ for people of certain genders that legitimate users are present when their self- or ethnicities. ies are taken. The CBP maintains that judiciously used facial rec- The partnership will allow Al Baraka Islamic ognition tools can have a positive impact on the Bank’s customers to open accounts via their mo- travel space, especially during the pandemic, as bile devices, freeing them from having to visit they can reduce wait times, the need for physical brick-and-mortar branches to provide identity interactions and the handling of paper documents documents. Dean Hickman-Smith, Jumio’s chief all at once. resource officer, noted that the move will help the bank streamline its electronic know your customer World Bank report notes biometrics’ potential for (eKYC) verification procedures and give its custom- pandemic-related aid delivery ers a way to remotely and securely open accounts Myriad nations have rolled out initiatives to de- without relying on face-to-face interactions. liver financial aid to residents hit hard by the pandemic, and emerging evidence suggests that

biometric-based identification measures could be verification methods for Pakistan’s Benazir Income well-suited to verifying recipients. A recent World Support Programme. Bank report examined how such solutions could be used to help governments more accurately identi- SCA implementation has implications for fy pandemic-related aid recipients and factor into biometric verification solutions in the EU nations’ vaccine delivery plans. The World Bank The European Union’s deadline for businesses to pledged more than $700 million toward its glob- implement strong customer authentication (SCA), al efforts to bolster the implementation of digital which requires card issuers to leverage multifac- identification and civil registration initiatives last tor authentication for all card-not-present (CNP) year, it said. transactions, passed Jan. 1, heralding a shift in how the region’s merchants will handle CNP pay- The report comes after the FI conducted a work- ments. Customers will now be required to use at shop in December that focused on how nations’ least two distinct verification methods when mak- identification systems are affecting their respons- ing CNP transactions, such as typing in passwords es to the pandemic and other events that require and verifying single-use codes delivered to their them to offer financial support to their residents. mobile devices to initiate payments. The workshop focused specifically on the adoption of biometric solutions to deliver benefits, eCommerce merchants have been skeptical including the Indian state of Jharkhand’s usage of about SCA’s implementation because they wor- Aadhaar-based authentication to offer welfare aid ry that the stricter security measures will prompt to recipients and the utilization of biometric-based more potential customers to abandon their carts.

Recent research shows that customers are more the need for national ID cards. Emma Lindley, security-inclined than these retailers may realize, co-founder of the London-based nonprofit Women however, with a 2020 survey of 8,000 consumers in Identity, said the government’s collaborative ap- revealing that 76 percent wanted stricter security proach to crafting a new digital ID framework is a measures when making payments online. One ver- step in the right direction toward accountability for ification technology that holds particularly strong all parties. appeal for consumers who are prioritizing speed and security is biometrics, which is allowed under More organizations are turning to passwordless SCA. These tools can enable EU merchants to offer technologies during pandemic, report shows smooth checkout experiences while also comply- A global increase in cybersecurity threats during ing with SCA mandates, meaning that biometric the pandemic is prompting more organizations verification is likely to see increased implementa- to seek authentication measures that do not rely tion as time goes on. on passwords, according to a new report. The report surveyed more than 425 IT professionals Digital ID developments to examine key trends regarding the adoption of passwordless MFA technologies. Ninety percent of UK unveils framework for standards and rules respondents said that their organizations had ex- governing digital ID applications perienced phishing attacks in 2020, illustrating the Nations are looking to boost public confidence in vulnerability of firms that continue to maintain the security of digital ID applications as a grow- password-based verification solutions. The report ing number of organizations implement them. The noted that the uptick in fraud was prompting more United Kingdom recently issued a draft detail- of these firms to seek authentication measures ing new guidelines, standards and rules governing that did not rely on passwords or shared secrets. the usage of digital ID solutions as well as how Almost 75 percent of respondents stated that re- the information they leverage is shared with other placing such legacy verification methods with firms and authorities. The UK Digital Identity and smartphone-based passwordless solutions would Attributes Trust Framework, which is eventually ex- provide the most seamless and convenient ex- pected to become law, specifies that organizations periences. The report found that just 36 percent must present data management policies detail- are using their mobile devices as Fast ID Online ing how data will be obtained, disclosed, protected (FIDO) tokens, meaning they rely on unique securi- and deleted. It will also outline industry standards ty keys or some form of biometric identification to for security and encryption and help consumers verify their identities. This reveals that more edu- choose authenticators offering services that best cation and communication could be necessary to fit their needs. help organizations recognize the security benefits The move marks another step in the U.K.’s efforts of adopting passwordless authentication solutions. to digitize consumers’ identities and eliminate

Modernizing The Banking would abandon the onboarding process if ID verification proved to be too inconvenient or complex. Experience With Innovative The other challenge financial entities face is that Identity Verification Strategies customers have to be willing to help protect themselves for banks’ identity protection strategies The pandemic has driven more consumers to seek to be most effective. Only 18 percent of FICO re- the safety and convenience of online banking, spondents said they used password management yet new data has revealed that banks in Canada software, and another 18 percent said they simply and the U.S. may not be doing enough to pro- write their passwords down, leaving much room tect against identity theft or money laundering for improved security. for the increased volumes of digital banking users. FICO recently reported that a majority of U.S. This month’s Deep Dive examines the current state and Canadian banks still require customers to of the customer banking experience and how banks prove their identities by visiting branches or sub- are leveraging innovative identity verification tools mitting documents when opening accounts online. to modernize their onboarding processes and pre- The requirements were similar for 25 percent of vent users from abandoning account setup. mortgages and 15 percent of credit cards opened online as well. How biometrics helps narrow the ID verification divide Digitizing legacy onboarding processes calls for Making sure that customers’ identities are gen- banks to enable online account opening while uine when they sign up for new accounts is the simultaneously adopting identity verification solu- main factor driving most banks to revamp their tions to protect new customers’ information. digital ID verification strategies, with 51 percent FICO’s Consumer Digital Banking study revealed of bank executives in one recent study stating as that just 16 percent of U.S. and Canadian banks much. There are several challenges that FIs must offer the ID validation tools required to secure- first address before putting robust tools into place, ly open accounts online. The study also showed however. Banks have strict compliance standards that while 75 percent of consumers would be will- they must meet for onboarding and managing cus- ing to open a bank account online, 23 percent tomer information, for example. Meeting those

requirements was the top concern of 53 percent of biometric data to their chosen FIs. The most pop- banking executives in one recent study when inno- ular biometric method appears to be fingerprint vating their ID verification strategies. scans, with 48 percent of U.K. consumers saying they would be comfortable providing their finger- FIs thus need identity solutions that allow them to prints to banks to access their accounts or verify comply with digital privacy guidelines and updated their identities. financial regulations without adding friction to the onboarding experience. This means moving away This comes as more smartphone manufacturers from branch visits and paper documents to tools graft fingerprint scan capabilities into their devic- that can identify consumers based on data they es, making biometric tools more accessible to the have readily available — such as their fingerprints growing number of consumers who are banking via or voices. Biometrics could add the necessary mobile. American consumers are less enthusias- security and speed to ID verification to keep up tic about biometrics than their U.K. counterparts, with both regulatory requirements and consum- but the technology's popularity is slowly increas- ers’ demands. ing among mobile users. Nearly 16 percent of U.S. mobile banking users in a recent PYMNTS study The good news is that consumers globally are be- stated they preferred to authenticate themselves coming more comfortable with biometrics as their using fingerprint scans, though only about 9 per- method of choice when verifying their identi- cent said they actually used this method to access ties online: One recent study of banking users in their accounts. the U.K. indicated that 71 percent would provide

FIGURE 1: Authentication methods for U.S. online and mobile banking users, by method used and method preferred

ONLINE BANKING MOBILE BANKING

Password Password 29.8% 0000000000 26.8% 0000000000 34.3% 0000000000 25.4% 0000000000

PIN PIN 13.9% 0000000000 15.5% 0000000000 9.4% 0000000000 10.2% 0000000000

Private security questions Private security questions 12.0% 0000000000 9.2% 0000000000 0.0% 3.6% 0000000000

Email or text verification Email or text verification 7.2% 0000000000 6.0% 0000000000 14.2% 0000000000 13.1% 0000000000

Challenge questions Challenge questions 7.3% 0000000000 6.0% 0000000000 0.0% 11.7% 0000000000

Biometric fingerprint scan Biometric fingerprint scan 4.2% 0000000000 8.7% 0000000000 6.0% 0000000000 15.8% 0000000000

Biometric facial recognition Biometric facial recognition 3.2% 0000000000 6.0% 0000000000 4.2% 0000000000 8.4% 0000000000

Receive phone call Receive phone call 2.0% 0000000000 1.9% 0000000000 2.2% 0000000000 2.4% 0000000000

Physical ID documents Physical ID documents 1.7% 0000000000 1.9% 0000000000 3.0% 0000000000 2.5% 0000000000

Digital ID documents Digital ID documents 1.5% 0000000000 1.8% 0000000000 4.6% 0000000000 6.3% 0000000000

Biometric voice recognition Biometric voice recognition 0.5% 0000000000 1.0% 0000000000 0.2% 0000000000 0.6% 0000000000

Source: PYMNTS.com Used Used Preferred Preferred

This gap between preference and actual usage may channel they are using to onboard. Consumers are exist for several reasons, including the possibili- searching, in other words, for solutions that are ty that available biometric options do not offer the not only digital but also mobile-first. speed or security that users would like. Closing Tailoring ID verification solutions to run seamless- this gap could be critical for FIs looking to engage ly on mobile could give FIs a key advantage over and onboard consumers digitally in the coming their competitors. Consumers are even willing to years. Many FIs may still face barriers in doing so, provide the typical documents FIs need when on- however, because consumers are asking not just boarding as long as they can do so via their phones’ for biometrics but instead for a whole fleet of dig- cameras. One recent study found that two out ital options from their banks when signing up for of three U.S. consumers would be willing to take new accounts. photos of their ID documents as long as doing so Optimizing ID verification for a mobile-first world would make the onboarding and verification processes safer, faster and more secure. Focusing solely on biometrics could be the wrong move for FIs, as consumers appear to be re- Staying on top of this rising preference for questing a wide variety of emerging ID verification mobile-first banking requires that FIs approach solutions from potential financial partners. One their ID verification and onboarding strategies so of the most important factors driving consumers’ that they work together in a cohesive way. Failing choice of verification type — and choice of bank — to do so will see banks fall behind on the digital is whether the method is optimized to the banking banking curve.

Consumer data Online, physical identity, social identity and knowledge-based question data

Device intelligence Device fingerprint, IP geolocation, true app and device emulator features Scoring overview Transaction behavior Click flow, payment history and payment transaction features

Multifactor authentication PIN, biometric and security to- ken features

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01 Systems is a software application and solution provider. Its products include signature management, biometric solutions, enterprise content management and digital vouchers.

Products: Biometric authentication, enterprise content management, signature management Customer Focus: Financial services