By Mark Crichton, Senior Director of Security Product Management at OneSpan

The financial services industry had already been experiencing an unprecedented wave of digital transformation, which has only been accelerated by COVID-19. When the pandemic hit, banks began to rapidly digitise their internal management and customer processes, as people across the globe stayed home. This allowed services for important financial transactions to continue. Now, as we emerge out of the pandemic and lockdown, these will be the key technologies that banks will look towards to usher in the next digital banking era.

Eliminating fraud with digital ID verification

Today, one in five banking customers still require in-branch visits for their financial needs. The shift to digital forms of banking has been continually rising throughout the past couple of decades, and the pandemic has only accelerated this trend even more. As we know, cybercriminals will always follow where the money goes, so it’s no surprise that the NCSC have taken down 15 times more online scams last year, compared to 2019. As we move out of the pandemic, we’re not out of the water yet.

Next-generation authentication technologies such as biometrics and facial matching can actively verify a person’s identity both digitally and for in-person interactions. Consumers can use their mobile devices to scan their ID and take videos or “selfies” to prove that they are indeed the person on the ID.

Mobile-first delivery models

With the onset of the pandemic, millions of banking customers needed new ways to manage their finance, banks were forced to quickly switch to mobile-first payment model. Today, approximately 68% of UK banking customers use mobile banking, 86% of those said it was their primary banking method. By making use of the full potential of mobile channels, financial institutions will have access to more data than ever before, so that they can instantly, more accurately identify and thwart cyber-attacks and fraud attempts.

Banks can use mobile channels to collect real-time data about customers and transactions, as well as data about their behaviour, environment, location, and biometric data. A mobile phone’s Bluetooth can even enable them to discover other connected devices near the client. All this data allows the bank to have a deeper understanding of its customers and the meaningful context of any given situation.

For example, the bank may know exactly where the transaction occurred: either in the customer’s hometown, or in a suspicious location (such as overseas). By leveraging the vast amount of new data available on mobile devices, banks can better understand each session and transaction in real-time and block fraud before it happens, which was almost impossible to do before.

AI is garnering the full potential of data

The information stored in many different databases makes collecting meaningful data a tedious and time-consuming process. As the amount of data increased over recent years, banks began to use artificial intelligence (AI) and machine learning (ML) technology to analyse the wealth of data available to them in real time. Today, more than one-third of large banks are using artificial intelligence technologies.

In the past, banks relied on manual verification of transaction data to detect fraud. Now, the amount of data has become so large that it cannot be processed manually. In contrast, sophisticated AI and ML technologies are now used to fully automate risk assessed workflows. This greatly reduces the number of manual rejections by the anti-fraud team.

With these technologies, anti-fraud teams can become more flexible and quickly detect fraud. The real potential of AI and ML in the banking industry is finally being recognised by people. Today, most banks already use these technologies to easily identify potential fraud and assess risks. However, with AI and ML technologies in place to automate responses to mitigate fraud and solve customer problems faster, it means that financial security teams will spend less time dealing with false positives and more time ensuring key digital channels are completely secure. What’s more is that as banks get a better idea of a customer’s regular banking behaviour, such as where usually they bank from and regular patterns of transactions, these algorithms can recognise this so that security decisions have little to no impact on the digital user’s experience.

Self-sovereign digital identity through blockchain

Blockchain technology, also known as a distributed ledger, can fundamentally change how we control our personal information (PII) and make financial institutions and online transactions more secure. A digital identity that you can use with any online organisation via public key cryptography and referencing someone’s verified credentials in a shared and trusted ledger (distributed leader), blockchain will be able help people control their digital identity.

Consumers can ensure the safety of their credentials and use them as encrypted evidence when banks or other online businesses need to verify their identity. It will also enable individuals to revoke access at any time. These channels across the blockchain network will enable individuals to have full control of their PII disclosure, helping to prevent fraudulent transactions.

If the transaction is rejected as fraud, the company currently has multiple options to prove its legitimacy, which can contribute to greater annual refund losses. If consumers each have a verified digital ID, secured via blockchain technology, they will all be protected online. Banks and other companies would have the ability to show who made the transaction and significantly reduce the refunds they issue.

Widespread blockchain infrastructure has been slow to be accepted, but with the growing popularity of cryptocurrency, blockchain will soon become the norm of the financial services industry. 70% of banks around the world are already beginning to experiment with blockchain technology to enhance the services they provide.

Beyond the pandemic these technologies will provide a faster, more convenient, and fully digital way to open new accounts while preventing fraud in financial services. In the past year, with the help of mobile devices, AI, blockchain and digital identity verification, the financial services industry has made great progress to digitally transform these critical processes. However, banks still have many unexploited opportunities to use these technologies to optimise their services and increase competitiveness. For financial services and even in other industries, these technologies can enable companies to improve the digital user experience, eliminate online fraud, give customers back control over their sensitive information, and help us protect our online identities.