Part 2: Mobile account acquisition—the future is here.
As part of an engaging two-part series, we recently spoke with Eric Lindeen, marketing director for the credit decisioning and loan origination solution provider Zoot Enterprises, Inc., on the next big thing in banking—mobile account acquisition. In the first installment, he shared his perspective on the unique opportunities and benefits of expanding into this largely untapped space. Here, in part two, he sums up challenges banks are encountering in the mobile channel, and shares ideas for tackling these growing pains by using a fresh mix of data and technology that is readily accessible to all banks today.
What are the top challenges you’re seeing as more banks push into the mobile market?
There are a couple of things. One, you have a smaller screen. When you think about filling out an account application on a computer, you can scroll down and easily answer numerous questions. However, even stepping down to a tablet, it becomes much more restrained in terms of real estate—and the consumer’s patience. When you get down to a smart phone, the number of questions you can ask is minimal, unless the consumer is very committed and very prepared through the user interface. So, that’s a big factor.
Another important challenge is the “mobility” of mobile devices, and the fact that most consumers do not secure their devices, at least not effectively. That means the risk of a device being either stolen or used in a fraudulent way is much higher in the mobile space than you would have either online or in a branch environment. Also, there’s the volume potential. If you had to go to a branch each time to open a fraudulent account, there’s a limit to how many accounts you could open in a day. But, sitting on your living room couch using your cell phone, you can open 100 accounts per day. So, the scale with which fraudsters are able to act is also a potential issue.
How can banks address these challenges, starting with the small screen?
The good news is there are ways to address many of these challenges. To improve the user experience associated with smaller mobile screens, banks must embrace the idea of asking the fewest number of questions possible, while still managing the risk of account and identity fraud. Given the dynamic data sources that exist today, you can actually get down to three or five questions to open a new account and fill in most of the remaining information from other sources. For example, if you have a name, date of birth and maybe a Social Security number (SSN), you can actually pull credit data. That credit data then gives you the additional information you need to access third-party data sources, and bring in everything from email addresses to social networking sites. So you can actually have a very robust view of the consumer with very little data input.
Another option involves using the camera inside the mobile device. People can use it to take a picture of their identification, like a driver’s license, and then the bank can use the information on the driver’s license to pre-fill the application fields. That way, most of the basic fields are pre-populated, and all consumers might need to enter would be their SSN and income.
What about the potential for fraud, how is this being addressed?
Fraud mitigation and identity validation are slightly more complex processes. To start with, there are some device reputation aspects, such as using the GPS to identify the location of the device. This can work in synch with important questions such as, are they connected to a Wi-Fi network, what IP address are they using and what reputation is associated with the device. More specifically, has this particular device been used for fraud in the past, or is it a device that is already known to your institution as having a good clean reputation with a customer?
The second opportunity is around the camera that is built into mobile phones, and this can take several forms. One common use is to have the consumer take a picture of their ID which not only lets you prefill the form as mentioned earlier, but it also lets you validate if that ID is in fact a legitimate identification document and has the correct information on it. Another thing we’ve heard people start talking about, is having the consumer take a “selfie” with their phone through a mobile app, so you get a picture of their ID but then you also get a picture of the consumer. This way you can do a simple face matching to ensure that, generally speaking, it’s likely that you have the same consumer in both. So that helps in terms of identity theft and synthetic identity, because with synthetic identity, you are not always going to get a facial match.
The third step we’ve seen banks use quite successfully involves bringing additional data into the process. When you look at a traditional branch-based underwriting process, most of the information is self-reported by the consumer. So while they may provide a lot of information, unless you’re going out and verifying it—things like income, mailing address and phone number—you’re not really using it to verify the identity within the application.
The beauty of a mobile application is it’s actually very easy to access a number of data sources that allow you not just to look at the traditional fraud information which obviously is very important, but you can look at additional data sources that enable you to do several valuable things. One, it gives you an additional piece of information to help validate that the consumer is who they say they are. Second, it gives you another check against fraud, because every time you get an independent source that’s confirming that core identity, it’s less likely the identity is fraudulent. Third, it provides the ability to open accounts to a broader set of consumers. For instance, alternative data available through Equifax enables some consumers who would otherwise not be scoreable to actually be scored, which is a significant value. Beyond that, there are a number of different data sources that can provide all types of features, everything from further refining what’s in the credit report and improving your rank ordering, to doing more sophisticated predictive fraud analysis and helping to clear mismatches.
And finally, you have to consider the customer experience. In a mobile environment, the consumer has expectations that they’re going to get an answer quickly, so the last thing you want to do is say, “we’ll get back to you in a few days.” In a mobile and online environment, you really need to finish out the entire underwriting process within those few seconds of interaction, and that can absolutely be done and it can be done reliably. However, it requires bringing in the right additional data sources and setting up the right processes to really be able to clear the vast majority of the stipulations in real-time.
Just as opportunities in mobile banking are unique—an exciting, new path to account holders and a safe, nimble platform for operational testing—the challenges are also different than those encountered in a traditional branch office or online environment. Keeping prospects and customers engaged in a “small screen” account origination process and minimizing the fraud potential associated with the “mobility” of mobile devices are evolving issues that financial institutions are actively addressing as they consider, plan and implement their mobile acquisition strategies. They’re finding success by using a sophisticated mix of integrated data, GPS technology and analytics, process automation and real-time identity authentication protocols to mitigate fraud risk and deliver a premium customer experience that helps them win their share of” the next big thing”—the mobile audience—before their competition.
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