Top Benefits of Customer Identity and Access Management (CIAM) for Financial Services

Competition and compliance in the financial services industry are driving change. Traditional banks are losing customers to digital challenger banks offering more convenience and better customer experiences. For example, UK's Financial Conduct Authority found that digital challengers have around 8% market share for personal current accounts while also growing their share of small and medium enterprise (SME) accounts and lending during the pandemic.

Because customers moved online, the pandemic prompted traditional  financial services firms to speed up their digital transformation. Lack of vendor support for legacy systems caused banks to migrate to more secure, hybrid solutions that allowed customers access to their accounts at any time from any device. Regulations are another factor in the digital transformation, including those related to Know Your Client (KYC), customer consent and preferences, data security, and anti-money laundering (AML). A 2018 report found that $26 billion in fines has been imposed for non-compliance with AML, KYC and sanctions regulations in the prior decade.

Read on to learn how modern customer identity and access management (CIAM) solutions combined with identity verification work together to provide a seamless customer experience, prevent fraud and achieve regulatory compliance.

Customers expect similar online experiences for shopping, streaming, social media and banks, knowing they can always switch to a competitor if they are unhappy. A 2021 Ping Consumer Survey: Brand Loyalty is Earned at Login found that 56% of online consumers abandoned an online service when logging in was too frustrating. Providing customers with a frictionless experience while preventing bad actors from accessing your network is the framework for modern customer identity and access management (CIAM) solutions.

CIAM solutions enable organizations to build, test and optimize digital experiences that seamlessly weave together the necessary identity capabilities using identity orchestration to delight and protect customers. Capabilities include registration, self-service account management, consent and preference management, single sign-on (SSO), multi-factor authentication (MFA), application programming interface (API) security, access control, directory services and dynamic authorization.

Watch this short video to see how CIAM provides online banking customers with frictionless, secure experiences for a variety of use cases.

Seamless User Experience

Customers want to be able to access their accounts through any device at their convenience. Single sign-on (SSO) allows customers to access the apps or websites associated with their account through a single login. This eliminates the need for multiple passwords, and frustrating password resets, which improves the customer experience and reduces IT support costs. Customers can also update their account profiles through self-service features, process transactions, retrieve information, and manage data privacy settings at any time.

Unified profiles

Customers often expect a personalized experience from service providers. CIAM enables unified customer profiles stored in a secure directory to provide consistent multi-channel experiences and personalized interactions. For example, a banking customer who has a car loan and credit card through affiliated companies can update their address once rather than having to update it in each app or website. As more information is gathered on customers through progressive profiling, firms can identify opportunities for new products or cross-selling with partners.

Reduce Fraud

Bad actors view banking and other financial accounts as high-value targets. Fraudsters with stolen credentials, including username-password combinations, can take over legitimate user accounts if identity security measures are not in place. Multi-factor authentication (MFA) and two-factor authentication (2FA) require users to provide proof of their identities from two or more of these categories:

• Something you know (knowledge): Passwords, PINs and answers to security questions

   

• Something you have (possession): Smartphones or other devices, hard tokens, key fobs and smartcards.

   

• Something you are (biometrics): Physical traits verified through fingerprint scans, voice or facial recognition, retinal scans and other methods,

Fraudsters rarely have multiple proofs of identity. To reduce friction for legitimate customers, risk-based authentication can evaluate customer behavior, device data and other contextual factors in real-time to determine the risk level and add MFA only when needed. Limiting the need for additional authentication to high risk situations, such as logins from a new device or location, can streamline access for customers.

Limit the Scope of Data Breaches

Data breaches can be caused by rogue insiders, employees falling for phishing attacks, or  inadvertent mistakes made by IT or development teams. CIAM foils data breaches by:

• Encrypting data so that it can be difficult or impossible for hackers to use

• Alerts administrators of suspicious activity

• Logs tampering evidence so insiders cannot cover their tracks

Privacy and Regulatory Compliance

Financial services is a highly regulated industry. Standards-based identity and access management platforms are needed for compliance, such as Payment Services Directive 2 (PSD2) and Open Banking’s requirements for banks themselves, providing secure access to accounts through open APIs, strong customer authentication (SCA) and consent management. Data privacy regulations vary by region, such as California Consumer Privacy Act (CCPA) and General Data Protection Regulation (GDPR).

Merging CIAM solutions with identity verification solutions allows financial service firms to meet Know Your Customer (KYC) regulations to verify customers, their risk profiles, and financial profiles. If a person fails to meet minimum KYC requirements, banks may refuse to open an account or halt a business relationship. These client-onboarding processes help prevent and identify money laundering, terrorism financing, and other illegal activity. For firms that fail to adhere to regulations, penalties are steep. Almost $1 billion in KYC, anti-money laundering (AML) and data privacy fines were issued during the first half of 2021.

Identity verification, also known as identity proofing, ties digital identities to real-life identities. Just as you might ask a bank customer at a branch location for a driver’s license or other form of identification to open an account, online verification does the same thing. Proof of identity may include a driver’s license, government issued ID card, or biometric data, such as fingerprints or verified photos used for facial recognition. Identity verification can be integrated directly into your mobile app to help ensure customers are who they claim to be.

Watch this brief video to see identity verification in action.

CIAM Provides a Competitive Advantage for Financial Services Firms

Firms who embrace the digital transformation and incorporate customer identity into their operations can better serve their customers and effectively compete with digital challengers.

Learn more about CIAM solutions for financial services firms here.