REMOTE

ONBOARDING
How Banks are Changing
the Game

A FINANCIAL SERVICES GUIDE SUMMER 2020

The New
Reality
We’re living in a new reality.

According to a recent J.D. Power study, nearly one-third (31%) of new account openings are executed
through a bank website or mobile app, up from 22% in 2019 — that’s a 50% increase in just one year.
Meanwhile, the number of new account openings at branches has declined year over year by 10
percentage points, and now comprises just 55% of all new account openings.

How Consumers Opened their Most Recent Banking Account

2019 2020

5% 5%
8% 9% In person at a branch

6% Online

22% 65%
12%
31% 55%
Mobile app

Phone
16% Total Digital Total Digital
Mail
19%

Source: J.D. Power, The Financial Brand 2

This is a sea change that few banks are addressing head-on.
Today’s banking customer is looking for Uber-like simplicity
and convenience in all their banking needs. They don’t want to
wait an hour to create a new account. They want it completed
in minutes — anytime, anywhere. Unfortunately, many banks
have simply cloned the new customer onboarding process
used in their branch offices and replicated it on their website
without considering how technology could optimize and
expedite the process.

No turning back

The shift to digital banking on the part of both consumers and

financial institutions was already taking place before COVID-19,
but the pandemic obviously moved digital transformation
to the front burner when in-branch activity was severely VS.
restricted. Banking and financial institutions have limited
branch access through outright closure, appointment-only
service or drive-through service.
A 2019 Thynk Digital survey
of nearly 500 bank and
Consequently, these organizations have had no choice but
credit union executives
to innovate — and quickly — or risk losing market share and
found that 53% said that
reputation to their more digitally nimble competitors.
consumers could open an
account with their institution
online, without coming
This is not a new trend into a branch. That number
may have been optimistic,
Well before the outbreak of COVID-19, bank branches were however, as only 26% of the
closing in large numbers. More than a third of the UK’s bank nearly 10,000 consumers
branches have shut for good in less than five years, while polled for that research said
hundreds of those that remain have reduced their business they had actually opened
hours (source: Which? Report, September 2019). accounts online — and
half of them had to go to a
In the U.S., the number of full-service bank branches fell from branch to finish the process.
almost 95,000 to just over 83,000 between 2010 and 2019, Even allowing for subjective
according to a Quartz analysis of Federal Deposit Insurance interpretations of terms,
Corp. data. That’s 12% of all bank branches across the country 55% there is clearly a large gap.
— and those findings were pre-pandemic. More than half of the
top 100 U.S. banks reduced their footprint by more than 50%
over the past five years, according to McKinsey & Company.

3
In Asia-Pacific, branches are declining in both emerging and mature markets, from Malaysia and
Thailand to Hong Kong and Korea. These actions have been in response to cost-cutting pressures and
customers’ shift to digital channels for routine transactions, such as bill payments or person to person
(P2P) transfers.

As a result, branch density — the average number of bank branches per 100,000 adults — has declined
in many countries. According to Deloitte Insights, branch density in Switzerland reduced from 54
branches to 42.5 between 2008 and 2016. In Norway, which ranks in the world’s top 10 countries with
the highest internet penetration, branch density dropped from 11.7 branches in 2008 to 6.2 in 2016.

Branch Density Continues to Decline Globally

Average number of bank branches per 1000,000 adults

2008 Global Average:

2016 Global Average: Australia
27.4 bank branches
60 22.9 bank branches
France
50 Germany

India
40
Japan
30
Netherlands

Norway
20
Singapore
10
Switzerland

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 United States

Source: World Development Indicators, World Bank and Deloitte Insights

While some consumers have long embraced digital

options, others are now adopting digital banking for the
first time out of necessity. Post-pandemic, the question
remains: how many of
55%these digital consumers will ever
return to the branch office?

Given these macro trends, let’s explore some of the

fundamentals around new account onboarding —
whether this is performed in-branch or online.

4
KEY QUESTIONS
to Address During the Onboarding Process

Most banks will leverage a variety of tools and third-party databases to

corroborate the identity and risk assessment of a new customer. In fact,
some larger banks use as many as 70 different solutions that are cobbled
together to help address these fundamental questions of identity and risk.

Any new account onboarding process must answer these five fundamental
questions:

1. Do you know it’s them?

Instead of relying on the teller’s ability to discern a genuine ID document
from a fraudulent one, the process uses purpose-built identity verification
solutions that capture pictures of ID documents and assess their
legitimacy in seconds. These solutions rely on AI, machine learning,
biometrics and computer vision to determine whether the ID presented
matches known templates of ID documents from around the globe —
taking the decision away from the tellers who are ill-equipped to make
technical decisions. In the case of remote onboarding, it’s generally
considered a best practice to capture a picture of the customer’s ID
document and a corroborating selfie to ensure that the applicant is who
they claim to be online.

2. Does the customer pose a money-laundering risk?

Banks can now customize and automate Anti-Money Laundering (AML) screening and monitoring while
reducing the number of false positives within an integrated API and online dashboard. This enables
banks to quickly determine if the customer is listed on any government sanctions or watchlists (e.g,
OFAC, PEPs, adverse media).

5
 3. Is the customer creditworthy?

Lenders use FICO scores along with other credit report

details to assess credit risk and determine whether
to extend credit to borrowers. FICO scores take into
account various factors in five areas to determine
creditworthiness: payment history, current level of debt,
types of credit used, length of credit history and new
credit accounts.

4. Should you trust them?

Banks should continue to leverage third-party
databases to determine whether to open the account
and which services to offer based on first-party fraud
and customer default probabilities for the next nine to 12
months. Third-party services like Early Warning can also
determine the authorization for the funding account and
the associated funding risk.

5. Can you use the customer’s

biometrics to identify them online
in the future?

Modern identity verification solutions have embedded

liveness detection functionality to determine if
someone is physically present when conducting an
online transaction. As part of the identity proofing
process, more advanced solutions will create a 3D
face map of the user which can be used as a form of
authentication down the road. If the bank electronically
captures a picture of the customer’s ID and 3D face
map in-branch, that information can be used whenever
the customer initiates a high-risk transaction online,
such as a password reset or wire transfer.

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 In-Branch vs.
Online Onboarding
In-Branch Online

The combination of evolving consumer Timeframe: Timeframe:

expectations and technology trends Hours to days Second to minutes
is impacting the banking industry
more than ever. More than four in five Customer visits Customer visits
financial institutions ranked improving branch office bank’s website
the customer journey as the most
important strategic priority for 2019, Customer provides Customer captures
according to the Digital Banking Report. government-issued photo of government-
OP T IM IZ AT ION ZON E

OP T IM IZ AT ION ZON E
The customer journey starts with the ID and proof of issued ID, proof of
opening of the new account and as you address address and selfie
will see, there is considerable room for
improvement. Visual inspection of AI and machine
the person’s ID and learning verify ID
Banks around the globe typically proof of address document, face
perform a common set of steps when matching and liveness
they onboard a new customer though
the process differs depending on Ping credit bureau, Ping credit bureau,
whether it occurs at a physical branch sanctions lists and sanctions lists and
or online. While a bank is required to third parties third parties
perform the necessary due diligence as
part of their Know Your Customer (KYC) Bank generates Bank generates
and Customer Identification Program confidence scores confidence scores
obligations, there’s still considerable (e.g., likelihood of (e.g., likelihood of
opportunity for improvement in process default) default)
efficiency. The Optimization Zone of the
onboarding process includes the steps Bank determines Bank determines
that can be automated, streamlined whether to open new whether to open new
and simplified to deliver a better account and type of account and type of
customer experience. account account

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 While the overall customer journey between the in-branch
and online experience shares many similarities, there are
some fundamental differences between the two experiences.
There’s also an opportunity for banks to replicate some of the
more efficient processes often used in remote onboarding and
repurpose them within a branch setting. Since many branch
offices have iPads or tablets at the teller stations, banks can
leverage those devices to trigger online identity verification
solutions that can check the authenticity of ID documents,
perform address validation, ping government watchlists and
exclusion lists, and even query credit bureaus in real-time.

Average number of bank branches per 1000,000 adults

Step In-Branch Onboarding Online Onboarding

Customer visit • Limited to bank hours • 24/7 access

• Inconvenient
• Waiting in queues

Presentation of • ID document (passport) • ID document (passport)

documents • Proof of address • Proof of address
• Selfie (face matching)
• Liveness detection

Document • Visual inspection of ID • Automation and AI

inspection • Biometrics
• Liveness detection
• Verification experts (optional)

Third-party • Credit bureaus • Credit bureaus

corroboration • PEPs, sanctions, adverse media • PEPs, sanctions, adverse media
• Bank data • Bank data
• Address validation • Address validation

Confidence • Likelihood to default due to first- • Likelihood to default due to first-

score(s) party fraud 55%party fraud
• Likelihood to default due to • Likelihood to default due to
account mismanagement account mismanagement

Final decision • Yes/no decision • Yes/no decision

• Account type based on risk profile • Account type based on risk profile

8
What’s Wrong with the

in-branch
onboarding
process?
Let’s explore some of the shortcomings of the current in-branch
new account process:

Convenience
“Account opening is the
first moment of truth.
Finding time in our hectic schedules to visit a branch office,
which is usually only open between 9 a.m. to 5 p.m., is a major Consumers
inconvenience that is only being exacerbated by the pandemic,
which has led to branch closures or limited hours of operation.
want validation
that they’ve
made a good
Time
decision.”
There are large swaths of the population that expect an Uber-
like experience when it comes to creating a new account. Paul McAdam, J.D. Power
Unfortunately, the process for opening an account in-person
often takes 30 minutes to an hour or more. Plus, you may have
to wait a while in the branch unless you book an appointment in
advance.
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Tellers are not fraud experts

Unfortunately, it’s far too easy to forge ID documents and proof-of-address

documents (e.g., bank statements, utility bills), especially when they are
out-of-state and outside the teller’s comfort zone. The modern ID document
contains a myriad of security features including microprint, ghost images and
holograms, all of which differ by state, province and country. This represents a
ripe vector for fraud even when banks furnish their tellers with printed guides
of different ID types and their embedded security features.

Unfortunately, sophisticated fraudsters can produce very realistic ID

documents that all too often get past the new accounts desk. This is obviously
not a scalable or reliable way to verify the authenticity of a document and
places an extra burden on tellers who are seldom trained on the intricacies
of spotting fake IDs. This can, in turn, open the door to sleeper fraud, which
occurs when a criminal uses a consumer’s PII to open a new account with the
intent of using the credit limit allowed on that account and then defaulting
on the payment or loan. Neither the consumer nor the bank knows that
information has been used to open a fraudulent account.

Tellers can be part of the problem

Bank tellers don’t typically make great money but they do have access to the funds in your
account and other valuable information, which can result in criminal behavior. Rich and elderly
bank customers are particularly at risk, prosecutors say, when tellers and other retail-branch
employees tap into accounts to wire funds without authorization, make fake debit cards to
withdraw money from ATMs and sell off personal information to other criminals. According
to The New York Times, accounts with high balances and those with direct deposits of
government funds, like Social Security payments, are especially coveted.

Forms, forms and more forms

Multi-part forms, various required signatures, several requests for

your Social Security number and paper-only forms are all part of
the problem. Plus, getting a signature on those forms is a major
bottleneck in the in-branch onboarding process — in fact, it can
take up to five days longer than acquiring an electronic signature.

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 Disjointed experience

A lot of banks think of onboarding as front-office

operations and back-office operations — two totally
separate processes. This results in siloed departments
using different product systems and technologies, which
prohibits them from sharing customer data and having
an integrated view of the client’s activities. It also causes
disjointed communication across departments, more
errors and a longer onboarding time.

Lack of customer centricity

Even when we ask our customers to open a new account

in person, the process is often too impersonal and too
focused on the needs of the bank instead of the needs of
the consumer. KYC and AML regulations have increased
requirements — both for information and documentation —
and this can lead to in-person interactions that focus more
on meeting regulatory and other process requirements
than on meeting customer’s financial needs.

Poor communication

Banks often struggle to give consumers clear and concise instructions during the account opening
process, and seldom follow up with them to inquire whether they have questions or ask whether
they are satisfied with their accounts. Better communication starts by clearly specifying the types of
documentation required to open an account and making sure your customers know that before they visit
the branch.

Manual workarounds

For most banks, the onboarding process is riddled with manual workarounds and a lack of basic workflow
automation. While many banks will claim that client-centric onboarding is a goal, they also acknowledge
that customer experience is their top challenge. Banks often lay the blame with onerous KYC initiatives
and related processes that inject extra manual reviews into the new account process.

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 Designing a Better Onboarding Process:

Offline
and Online
An overwhelming majority of banks and credit unions still do
not enable a consumer to open a new deposit account end-
to-end without visiting a branch. In fact, only 29% of banks
and credit unions surveyed have enabled a completely digital
onboarding experience for their remote customers with
another 44% planning to digitally transform the experience
in the next 12 months (source: December 2018 Digital
Banking Report). Presumably, the COVID-19 pandemic has
expedited these plans since, in many cases, the in-branch
option has been severely restricted.

Status of Data Transformation in Digital New Customer Onboarding

29% 18% 26% 20% 7%

Digitally transformed Digitally transformed in the next 6 months to 1 year

Digitally transformed in the next 6 months Digitally transformed in 1-3 years

Not currently planned for digitization

Source: Digital Banking Report Research

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We’ve outlined the principles and
technologies that result in a better, faster,
more customer-centric onboarding
experience. When moving online, there are
a number of best practices to consider:

Ask for key contact

information once.

Are you making potential customers

complete multiple forms with the same
information? Does each step require the
user to retype their name, address, date of
birth and Social Security number?

Reduce the number of steps.

The more steps, the more screens, the more clicks that you require a new customer to go through, the
higher the abandonment rate. The entire onboarding experience needs to be wireframed from start to
finish to ensure the experience is fast, secure and intuitive.

Provide clear instructions.

The best challenger (digital-only) banks understand they

cannot fall back to a branch experience. As a result, they
generally think through the customer experience from
beginning to end. This means they provide clear instructions
and rationale, without jargon, about why they need the user
to capture a picture of a government-issued ID or provide a
picture of a recent bank statement (i.e., for proof of address).
They also let the customer know where they’re at in the
process and how many more steps are left to complete so
they can see their progress. These are simple measures, but
they can have big impacts on conversion rates.

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 Tether the digital identity to a
government-issued ID.

Many historic methods of identity verification, such as

knowledge-based verification or credit bureau queries lack a
bonafide trust anchor. This means that the bank is not actually
verifying that the person providing that information is, in fact,
the person they’re claiming to be on the application. By relying
on a trust anchor, such as a government-issued credential
(e.g., a passport or driver’s license), modern banks can have
a much higher level of identity assurance because of all the
various steps an individual must take in order to qualify for
that credential. Plus, many government-issued ID documents
have embedded security features such as chips, holograms
and ghost images that can be validated with sophisticated AI
algorithms.

Integrate identity verification

and AML screening.

Banks are looking for ways to automate and streamline

identity proofing with AML screening. After the data has
been extracted from a government-issued ID using optical
character recognition, that information can be used to ping
dynamic real-time databases of people and companies that
pose financial crime risk. This type of product integration
automatically flags any new online customers if their names
are listed within thousands of government, regulatory,
law enforcement, fitness and probity watchlists, and
adverse media for financial and other crimes. Perhaps,
more fundamentally, this type of integration helps banks
dramatically reduce false positives and the excessive
manual reviews that they trigger.

14
 Repurpose the same biometric for identity proofing and
ongoing user authentication.

During the account onboarding process, banks will ask the new customer to take a picture of their
government-issued ID and a corroborating selfie. During the selfie-taking process, online solutions
are now embedding certified liveness detection to make sure that the online customer is physically
present and not using a picture of a picture or a deepfake video.

Better solutions will create a 3D face map of the user which contains over 100 times more liveness
data than a 2D photo. When a future user authentication is required (e.g., necessitated by a wire
transfer or password reset), the customer is simply asked to take a new selfie during which a fresh 3D
face map is created. This face map is then instantly compared to the original face map to unlock the
user’s digital identity in seconds.

It’s important to highlight that the same biometric captured during the verification process (e.g., 3D
face map) can now be used downstream as another form of authentication in-branch rather than the
typical chip and PIN requirements.

15
Emerging Threat
Vectors
As banks have increasingly moved online in response to the coronavirus pandemic, there has been a
parallel proliferation of cyberattacks that attempt to damage, disrupt or gain unauthorized access to
the computer systems of banks and other financial institutions. So while banks are looking for ways to
streamline the onboarding process, they must ensure that they build in the necessary safeguards to
thwart these types of attacks.

Here’s just a smattering of cyberthreats that banks must now contend with and how having a smart
account onboarding process can help:

Average number of bank branches per 1000,000 adults

Threat Description How Smart Onboarding Can Help

New Account New account fraud isn’t new,
Fraud but it’s fast becoming one of the
biggest problems in the digital
banking era, costing the financial
services industry billions each
year. In fact, 48% of all fraud value
stems from accounts that are less
than a day old, according to RSA
Security.
Requiring a bank customer to capture a
picture of a government-issued ID and a
corroborating selfie has a chilling effect on
attempted fraud. The simple requirement
of a selfie can deter as much as 90% of
fraudulent attempts since it requires the
scammer to capture and share their own
likeness with the company they’re looking
to defraud.

Sleeper Fraud Sleeper fraud (aka bust-out By requiring a picture of a government-

fraud) is a type of credit card
fraud where an individual applies
for a credit card, establishes a
normal usage pattern and solid
repayment history, and then
maxes out the card with no
intention of paying the bill.
issued ID document and a corroborating
selfie, and not just relying on self-reported
information, banks can thwart sleeper
fraud and other forms of first-party fraud.
Banks should also leverage analytics to
help set a behavioral baseline and remove
suspicious accounts from the collection
workflow so that they can be properly
analyzed.

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Average number of bank branches per 1000,000 adults
Threat Description
Account Criminals gain access to
Takeover someone’s bank account to
make unauthorized withdrawals
and purchases. Sometimes,
the fraudsters will change login
details to the account. In many
cases, con artists engage in
phishing activities as part of the
scheme.
Synthetic Fraud Fraudsters can also carefully
hoard a cache of stolen bank
account data, credit and debit
card information, Social Security
numbers and other details
to impersonate legitimate
customers. Using these details,
fraudsters can cobble together
realistic-looking identities to
perpetrate identity theft, new
account fraud and gain entry to
other platforms.
How Smart Onboarding Can Help
If a remote user is required to provide
some type of biometric (e.g., face map,
fingerprint) when they initiate a high-risk
transaction such as a password-reset or
wire transfer, the account takeover threat
is largely eradicated. ATO preys upon
websites that rely exclusively on a simple
username and password (or some basic
form of knowledge-based authentication).
Synthetic identity theft is one of the most
difficult types of fraud to detect. Filters
employed by financial institutions may not
be sophisticated enough to catch it. Some
identity verification solution providers can
offer a 1-to-many face search. At Jumio,
we have witnessed a number of synthetic
fraud attempts where the fraudster
exchanged particular data points (e.g.,
name, date of birth) but always uses the
same selfie or photo printed on the ID,
which is an obvious red flag.
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Average number of bank branches per 1000,000 adults
Threat Description
Social Criminals are increasingly sharing
Engineering resources and information and
reinvesting their illicit profits into
the development of new, even
more destructive capabilities.
In fact, over 82% of surveyed
financial institutions said
cybercriminals have become
more sophisticated, leveraging
highly targeted social engineering
attacks and advanced TTPs for
hiding malicious activity (Source:
VMware Carbon Black, May 2020).
Wire Fraud With most wire fraud scams,
cybercriminals use spear phishing
emails designed to gather email
account details. Armed with
account access, fraudsters wait
patiently and obtain intimate
details about a transaction and
the participants involved. This
makes all other parties involved
in the deal targets. Nearly 64%
of survey respondents reported
increased attempts of wire fraud
transfer, a 17% increase over 2019
(Source: VMware Carbon Black,
May 2020).
How Smart Onboarding Can Help
Protecting online accounts and systems
with a simple username and password
is a recipe for disaster and represents
a significant vulnerability. Banks need
to move beyond password-based
and knowledge-based authentication
paradigms to better defend against
social engineering exploits. Here again,
creating a 3D face map of the customer
at enrollment helps defend against
downstream account takeovers.
The quickest way to defend against wire
fraud is by requiring more than just a
username and password to initiate a wire
transfer. By requiring the user to capture
a biometric such as a 3D face map, banks
can then check the face map against the
face map captured during enrollment to
ensure that the user requesting the wire
transfer is the actual account owner.
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Shutting
the
Front Door
Having a secure, rigorous onboarding process enables
banks to more definitively assess the digital identity
of new customers, with a high level of assurance,
and employing biometric-based authentication (for
logins and high-risk transactions) can help keep fraud
attempts at bay.
The best way to manage and address these emerging
threats is by having a global perspective of the
threat landscape which most banks lack — especially
smaller, regional banks. Too often, banks do not have
the internal expertise to stay abreast of emerging
threats or have the manpower to build in the necessary
safeguards. That’s why it makes increasing sense to
partner with global leaders in the fraud and digital
identity arenas to better defend against today’s and
tomorrow’s risks.
Bottom line:
If a bank can protect the front
door (the new account), it’s a lot
easier to guard the house. Smarter
onboarding makes it materially
more difficult to get through the
front door without a few, well-
placed hurdles. And it’s often
these hurdles that will deter most
cybercriminals and cause them
to shift their focus to softer, more
vulnerable targets.
19
Closing Words
Despite all the talk about delivering a great customer experience,
most financial institutions stumble out of the starting gates in
the early stages of building a new banking relationship.

Many consumers don’t want their branch office to go away.

Consumers still want a choice, whether it’s online, within an
app, on the phone or at a branch office. Often it comes down to
whether consumers want to use a branch or if they have to use a
branch.

When the digital onboarding experience is a carbon copy of

the in-branch experience, the customer experience invariably
suffers. That’s why it’s not surprising that customer satisfaction
levels are higher with digital (or challenger) banks. In fact, 63%
By following the guidance
of direct bank customers report being extremely satisfied,
outlined in this e-book,
compared to 52% of credit union customers and just 19%
of customers of the top 50 global banks (Source: 2019 FIS banks can
Performance Against Customer Expectations survey, April 2019).
close this gap
Customer satisfaction matters. According to McKinsey, by delivering a fast,
customers who are highly satisfied with their digital experience convenient and amazing
are two-and-a-half times more likely to open new accounts with onboarding experience
their existing bank than those who are merely satisfied. They are that optimizes new
also less sensitive to price and generate more positive word of account conversions,
mouth. while at the same time
defends against emerging
Whether you’re trying to create an Amazon-like onboarding fraud tactics and meeting
experience or just looking to streamline the in-branch ever-evolving compliance
experience, banks need to make the right investments to mandates.
fuel digital transformation, fraud detection and customer
satisfaction.

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ABOUT
JUMIO
When identity matters, trust Jumio. Jumio’s mission
is to make the internet a safer place by protecting
the ecosystems of businesses through cutting-edge
online identity verification and authentication services
that quickly and accurately connect a person’s online
and real-world identities. Jumio’s automated identity
verification solutions fight fraud, maintain compliance
and onboard good customers faster.

Leveraging advanced technology including AI,

biometrics, machine learning and certified 3D
liveness detection, Jumio helps organizations meet
regulatory compliance including KYC, AML and GDPR
and definitively establish the digital identity of their
customers. Jumio has verified more than 250 million
identities issued by over 200 countries and territories
from real-time web and mobile transactions. Jumio’s
solutions are used by leading companies in the
financial services, sharing economy, digital currency,
retail, travel and online gaming sectors. Based in Palo
Alto, Jumio operates globally with offices in North
America, Latin America, Europe and Asia Pacific
and has been the recipient of numerous awards for
innovation.

For more information, please visit

jumio.com.