How incumbent banks can outcompete on customer experience and efficiency with Fourthline

Today, incumbent banks still maintain an edge over neobanks in areas such as trust and brand recognition, thanks to their scale, physical presence, stability over long periods of time, and high standards for compliance.

Fourthline Forrester TEI thumbnailBy The Fourthline Team
Improving customer experience for banks

But it’s widely recognized that the situation is changing rapidly. Neobanks offer customer experiences that are drastically faster and smoother than traditional banks and these are being noticed by customers. Neobanks already hold 11% of all bank accounts in Europe. Unencumbered by legacy systems, high operational costs, and the bureaucracy of large organizations, they are poised to grab more market share in the coming years.

Against this backdrop, incumbent banks face a central challenge: As large, complex, multichannel businesses, how can you compete with small, nimble, digital-only scale-ups?

The good news? There are already solutions available that can help you build customer experiences equal to neobanks, while maintaining bank-grade standards of compliance and security. In this post, we are going to look at how the Fourthline API can help you achieve these goals. We’ll explore how we can help banks compete in onboarding and ongoing verification, and why partnering with Fourthline may be better than building such solutions in-house.

Use case 1: Onboarding

There are several instances during the onboarding process that are inefficient and wasteful.

1.Manual processes for onboarding new customers

This is the most obvious case for automation and digitalization; slow onboarding processes cost banks time and money and become a competitive disadvantage. For example, in the UK up to 25% of customer applications are abandoned due to KYC friction. On the other hand, neobanks tend to do onboarding particularly well, which contributes to their growing success.

Fourthline Onboarding

2.Duplicated onboarding processes within a single bank

If an existing customer wants to open a new account, but in a different market, they may have to go through the onboarding process all over again. This is a completely unnecessary and frustrating situation for the customer, as well as a waste of money for you.

3.Duplicated processes across different banks

If a customer wants to open a new bank account at a second bank, they will need to go through a standard onboarding process. But, as different financial institutions and/or government bodies run almost identical verification checks, this represents perhaps the biggest volume of duplicated processes of all.

In the first instance, automated solutions such as Fourthline identity verification can be powerful in helping incumbent banks provide the onboarding experience that customers expect. 90% of checks are performed automatically in real time, ensuring the smoothest user experience possible. Customers simply upload a photo of their ID and a selfie, and Fourthline does the rest.

But there are more intriguing possibilities for the use of the Fourthline API in the future. For example, to avoid duplicated onboarding processes for the same bank, you may be able to ping the Fourthline API to check whether your “new” customer can be identified as an existing customer from another market. The same is true when it comes to avoiding duplicated processes across different banks. Fourthline securely stores the identities of millions of EU and UK citizens. Therefore, confirming the identity of a new customer may be as simple as calling the Fourthline server via API to see whether your new customer has already been safely onboarded at another financial institution using Fourthline’s platform. If so, they have already passed an initial screen and so they can be onboarded quickly and with a minimum of steps, saving you considerable time and resources at scale.

Use case 2: Ongoing authentication

There are a number of reasons why you need to re-authenticate somebody over the course of the customer lifecycle. For example, if a customer suddenly wants to perform a transaction that is flagged ‘high-risk’. But with all the digital tools and technologies available today, it should be unnecessary to perform any inconvenient and time consuming manual tasks just to re-authenticate someone whose identity you have on file. These kinds of wasteful, duplicate processes cost time and money. They also carry a reputational risk as they can put your customers in embarrassing or inconvenient situations.

Fourthline Account Authentication

To protect your customers, your reputation, and your revenue, you need a non-intrusive, accurate, and speedy way to ensure that the person performing a high-risk transaction is the person who owns the account. That is where a solution such as Fourthline account authentication can help.

Once your rules for high-risk activities (large amount, different device, unusual location, and so on) are triggered, you alert Fourthline via API. At this point, the customer is asked to verify their identity via a biometric check. Meanwhile, Fourthline also checks a range of phone metadata, including language settings, which have a high correlation with fraudulent activity. If the person is the account holder, the log-in or transaction can continue, and if not, it is paused.

Why it makes sense to leverage the Fourthline platform, rather than build in-house

So far, we have looked at several situations in which you can deliver customer experiences that equal those of any neobank or fintech. However, you may feel that these business-critical functionalities, which touch on highly sensitive data, need to be built in-house in order to maintain control.

But the reality of building in-house can be complex and expensive. Here are a few reasons why it is better to partner with a third party, such as Fourthline, and what to look out for when selecting the right partner.

Fourthline CDD Report

1.Avoid the 20% of visible and 80% invisible complexity of building

Building a solution that solves complex and edge cases reliably is not just about compliance; it’s about how to approach fraud, how to recognize if documents have been tampered with, and so on. And that is just the first step. As regulations and fraud evolve, and document specs change, you need to constantly update your solutions to keep abreast of the newest developments. This results in an ongoing technical investment that could be better spent elsewhere. Further, if you want to enter a new market, you will immediately be faced with a new range of regulations and specifications. This is a large and ongoing investment that will always need maintenance and upgrading, an overhead which is frequently underestimated.

By contrast, Fourthline has already built a solution that is compliant across the EU and UK, and compatible with complex regulations and thousands of document types. As our core business is delivering compliant verification and AML solutions, we are incentivized to maintain a laser-like focus on staying ahead of changes in regulations and documentation specs, as well as innovations by fraudsters.

2.Improve operational efficiency

Fighting money laundering and terrorist financing is an expensive business (link in Dutch) for banks. In 2021, this cost was a total 8% of the expenses of the four largest banks in the Netherlands, or over €1 billion.

This may sound excessive, but it's important to remember that there is more to these costs than employees and software. You should also consider things like training, customer support, and business losses due to customer dissatisfaction. All together, there are a lot of gains to be made in operational efficiency around these critical but repetitive and expensive processes.

As well as automating onboarding, identity verification, and ongoing authentication, Fourthline takes care of investigating complex cases and false positives, removing the burden from your in-house teams. Fourthline then shares a Client Due Diligence (CDD) report complete with an audit trail including all the evidence that led to the conclusion, which helps keep regulators happy.

3.Benefit from network advantage

Last but not least, and sometimes less well understood, is the network effect of working with a partner such as Fourthline. When partnering with Fourthline today, the network advantage means that you will benefit from our learnings gained from verifying millions of identities, as well as functionalities and edge cases which have already been solved. And, as more customers join, you will benefit further from the expanding database and accelerating innovation and feature updates.

Banks can take immediate strides in improving customer experience and operational efficiency

Sub-standard customer experience and slow digital transformation are serious mid to long-term risks for the banking industry. With a much greater ability to innovate, lower overheads, and a digital-only experience, neobanks are steadily gaining market share.

However, incumbent banks do have advantages in terms of trust and brand recognition. And with digital tools such as Fourthline, which are built to bank-grade security standards, licensed by regulators, and already operating at scale, banks have new opportunities to take great strides in improving the customer experience and operational efficiency. In the long run, collaborations such as these will enable innovative banks to maintain their market share and thrive in a digital world.

To find out more about integrating with the Fourthline API, contact us.

Gabriele Rosati
Want to learn more? Talk to our experts

Get in touch with Gabriele Rosati, who brings years of financial industry expertise at Fourthline.