Author: Roland Papp, Lending Expert, Business Analyst at ApPello
Customer identification, what foundations we built on, what obstacles we experienced, and what opportunities we expect?
As a consequence of the coronavirus pandemic, it became evident that the practice of online administration, whether it be payment of monthly utility bills, applying for a personal identity card or, indeed, handling banking affairs, would expand rapidly.
The switchover in just a few short weeks posed major challenges to financial institutions (among others), compounded by a further four factors.
- Firstly, digitalization received such a boost over the recent past that a year, 18 months of development took place in just a few months, as a result of which not only several services and devices, but also specific networks and data have been migrated to the online space.
- Secondly, communication has gathered pace: consumers now expect that the online platform of a financial service provider should be available instantly, which of course is a requirement from the regulatory side: rapid transfers, rapid transactions, rapid data and document sharing, rapid authentication… and the list goes on.
- Thirdly, the concept of connection has also broadened and been reinterpreted: today, it is no longer only the customer and bank who are connected in online space, but the cloud/infrastructure service provider, the IT security service provider, the telecommunications company, the authorities etc., in short, total interconnectivity has been achieved.
- Fourthly, as the entirety of what has already been mentioned, we may find ourselves feeling that the entire system has somehow outgrown us, both in size and in complexity, yet even with all these factors we have to make a success of it.
The above factors have determined and still continue to define that environment in which the issue of digital customer identification ranks among the top priorities for banks and financial service providers.
In Hungary, digital identification is even today not a part of everyday banking administration. For this reason, we could say that we are still in the ‘learning phase’. First of all, it is important to clarify the expression and forms of digital personal identification, and in this regard create the conditions of trust and security. And, once secure, it doesn’t hurt to take stock of the main risks.
On the one hand, we can talk about the so-called confidentiality risks since the banks work with vast amounts of personal data. One only has to think back to the data we had to give to the bank in order to open a bank account, for example, 10 years ago. Today, there is far more data about us available in the digital space, data that similarly has to be secured and stored.
At the same time, it is important to mention the risk that the ecosystem made up of digital personal identities could be upset, thereby undermining the trust placed in it. Let’s consider the case where photos of Hollywood celebrities stored in the cloud were leaked after being hacked – the analogy is identical, that is, in similar instances mistrust of data handlers and storers may, logically enough, increase.
Finally, we need to talk about the risk that, since digital identification practices are not automatic and not conscious, rudimentary devices (and unsuspecting customers) are more easily circumvented by cybercriminals, thereby causing damage both to the bank and the customer.
Where does Hungary stand in digital identification?
Hungary is gradually bridging the gap between it and the more developed countries in Europe in the area of digital identification. On the one hand, in 2020 significant steps were taken not only in video identification but also through the introduction of e-personal identification, e-data wallet and e-passport utility. From 2022, banks will have access to customer identification through central data registration systems.
At the same time, the acceptance of these systems among customers is largely conditional on how user-friendly, convenient and ‘foolproof’ the use of these systems proves to be in everyday life.
Naturally, on the banks’ part it is necessary to introduce even stronger security solutions because the risks and threats are evident, yet at the same time it is vital to look at the issue from the perspective of the customer: slow, difficult and complicated, multi-stage security systems tend to put off rather than reassure the customer, which is why the middle way is perhaps the solution: standardized processes encompassing the entire sector must be introduced stage by stage, accompanied by a healthy amount of customer communication.