Digital and mobile banking have become the norm, rather than the exception. One survey of more than 5,000 consumers found that 69% wish to perform all their banking and financial actions through online and mobile channels. Consumers expect to be able to open an account, take out personal loans, transfer funds, and check their balance from any device, on-the-go.

In many areas – peer-to-peer transfer, instant check deposit, and virtual trading – banks have adapted well to the mobile consumer. But, there’s one area where traditional financial institutions still struggle to digitize: the new account opening and onboarding process.

Digital Account Opening (DAO) is the process of opening an account without ever stepping foot inside a bank. At its core, DAO must be able to perform the following steps:

Collect a user’s basic personal identity information

Evaluate and approve (or reject) applicants from a risk/fraud perspective

Verify an account applicant’s identity

Collect funds digitally in real-time, either through a debit/credit card or with mobile deposit

Sync with an institution’s core banking system (CBS)

Today, banks are able to handle online account opening; but, mobile-optimized account opening capabilities lag behind. Here’s what some banks can do to close the gap and offer consumers the ability to open an account on any device.

What’s the incentive for banks to adopt DAO?

There are some very good reasons why banks are finding it difficult to introduce DAO on a widespread basis. Primarily, application fraud and strict “know your customer” (KYC) and anti-money laundering regulations present significant compliance concerns for banks.

A financial institution must positively verify a customer’s identity – many institutions aren’t equipped with the technology to perform this process yet, but there are incentives to make progress or risk missing out on the trend and becoming irrelevant. Organizations in the digital account opening market experienced 16% growth; the non-digital group experienced a 9% decline in revenue growth year-over-year. The cost of acquiring a non-digital customer is $138 per account, compared to $77 per account for a digital customer. KYC solutions, including Civic’s own solution, intend to reduce this cost even further with better technology. Finally, there’s also an incentive to save money by reducing the overall costs of bank fraud loss, which totaled more than $31 billion globally in 2018.

The opportunity: DAO and identity

Progressive financial institutions are viewing DAO initiatives and better identity management as core competitive advantages going forward, and identity is one of the top three initiatives for financial institutions. There are many challenges in the way of progress for banks, but banks that can effectively approach customer needs through emerging technology can win the hearts of customers.

Researchers from BAI found that around 75% of millennials and more than 65% of Gen Xers prefer to use a digital channel to open a deposit account. However, only three of five consumers who say they would open an account online actually complete the process because many institutions aren’t able to perform digital identity verification in real-time to meet regulations and other security concerns. Despite the demand for DAO, many banks currently struggle to offer this critical service to customers. Identity verification is at the core of the issue, but there is a solution at hand banks can take advantage of.

Identity verification and DAO

At Civic, we focus on a distributed solution to identity verification. Upon enrollment, our users are verified using valid government IDs, biometrics, liveness checks, facial recognition, and other methods. Customers with verified identity on the blockchain get the benefits of reduced fraud; banks benefit by meeting regulatory standards, knowing their customers, and complying with anti-money laundering rules.

Decentralized identity solutions like our KYC solution will enable good actors to be verified, reduce friction during the new customer onboarding process, and provide the information and records as required to ensure banks are compliant.