We’re pleased to announce that we’ve just certified two Epson scanners, the TM-S2000 and the TM-S9000, for use with Intercept, our real-time ID document authentication service. We’ll be demonstrating the two products working together in Booth #313 at BAI Payments Connect next week in Las Vegas. (For more about Payments Connect, see the official Web site.)
Here’s why we think this is a big deal.
Powerful Scanners Plus Real-time ID Document Authentication
The Epson TM-S2000 and TM-S9000 are state-of-the-art multi-function teller devices that feature high-quality check scanning, the industry’s leading MICR (magnetic ink character recognition) accuracy, and cashier’s check printing. Both devices offer the fastest check scanning speed in their class with up to 200 dpm (documents per minute) and industry-leading image quality. Both feature up to 16 lines of endorsement printing and a double check detector to prevent double check feeding. In addition, the TM-S9000 features fast thermal receipt printing.
In short, both these devices provide branch personnel with everything they could possibly want in a scanner for checks and ID documents.
Now let’s combine these powerful multi-function devices with Dragnet Intercept.
Intercept analyzes identity documents such as driver licenses in real time and provides branch personnel with actionable intelligence about the document’s authenticity. Intercept instantly alert branch personnel to fraudulent ID documents.
In addition, Intercept tracks the use of identity documents across transactions and locations. Imagine a fraudster going to from branch to branch opening accounts with the same fake ID, or different fraudsters using the same fake ID in two locations. Intercept detects fraud like this and alerts branch personnel in time to avoid losses.
A study by the GAO found that fraudulent identity documents are used in about one third of identity theft cases. Institutions can use the combination of these products to reduce losses from identity theft.
We’ll have more to say about Dragnet Intercept in the coming weeks.
In the meantime, see us at BAI Payments Connect or watch this Web site for updates from the show floor.
Jeff began his career working as a bank teller, then a bank manager for various mid-tier banks, and later a back-office operations manager for Nations Bank. For most of the past two decades, he has worked in sales and sales management roles for leading financial industry technology vendors, including Checkfree/FiServ, Cyota/RSA, CoreLogic Teletrack, and FactorTrust.
In his new role, Jeff will be responsible for introducing Dragnet account-screening and identity verification solutions to financial institutions in the Eastern U.S. Drawing on his experience in the Alternative Financial Services (AFS) market, his work will include introducing Dragnet Accelerated InsightSM to institutions interested in serving the unbanked and underbanked.
“Dragnet’s account-screening solutions promise to help financial institutions deliver better customer experiences while also growing profits and reducing fraud,” said Jeff Sargent. “It’s a unique approach that combines cutting-edge data analytics and traditional bank workflows to create something truly new and important for institutions seeking new ways to grow in today’s economy. I look forward to working with the whole Dragnet team to bring these innovative solutions to all types of financial institutions and lenders.””
“We’re thrilled to have someone with Jeff’s passion and experience joining the Dragnet team,” said Greg Cote, president and CEO of Dragnet. “Jeff’s first-hand understanding of branch and back-office operations, and his experience providing solutions to all areas of retail banking and finance, makes him a natural choice for our organization and our growing family of customers.”
Jeff can be reached in his Atlanta office at firstname.lastname@example.org.
We’re back from this year’s NAFCU Technology and Security Conference in Las Vegas, where the sessions were informative and the conversations lively.
Presentations at this conference focused on a few key themes, which we came to imagine as layers making up a credit union’s IT environment, starting with a core system at the center, moving out to integrations with various other systems such as identity verification and account-screening services, and eventually reaching that all-important community, customers.
The conference featured many discussions about core systems. That was hardly surprising since this was a technology conference, and at any credit union the IT team is likely to be closely involved in the selection and deployment of a core system.
One lesson that came through loud and clear: credit unions should avoid signing long (e.g., 7-year) contracts with core vendors. Technology is changing quickly. New features and capabilities are being introduced all the time. Customer expectations and market trends are changing quickly, as well. Sign a 7-year contract, and you’re guaranteed to have old technology for at least half the length of your purchase.
Among the various core systems on the market today, credit unions clearly have their favorites. Several credit unions said they were evaluating new cores, which leads us to . . .
As important as core systems are, they don’t perform all the essential IT functions in credit unions. Cores need to be integrated with other solutions, such as front-end systems, onboarding systems, and other specialized services that support branch or back-office operations.
Because technology is changing so quickly, credit unions would do well to select cores, front-end services, and other solutions with open APIs (application programming interfaces). Open interfaces give credit unions the freedom to pick and choose various specialized solutions and combine them at will to create a best-of-breed IT infrastructure.
At the conference, several credit union managers expressed frustration at vendor lock-ins. Choosing solutions with open APIs, rather than monolithic architectures, is an important step for avoiding lock-in.
Many institutions recognize that, in order to provide the best possible customer service and to make operations as efficient and accurate as possible, it’s time to move beyond manual paperwork and Excel spreadsheets. Institutions should take advantage of the new in-branch and back-office solutions now on the market.
As the conference’s title suggests, security was another major theme of presentations and discussions.
IT security involves not only internal systems such as cores, but also the computing habits of credit union customers. Keynote speaker John Sileo gave a thorough talk about best practices for security in all aspects of computing: from designing networks to conducting ecommerce.
Here’s our own list of four security suggestions for credit union employees and customers:
Thanks, NAFCU, for putting on an engaging and informative conference.
It’s January, which means that it’s time for putting new plans and resolutions to work. What will banks, credit unions, and other financial institutions do differently this year? What should they do differently? What goals should they set? What should they invest in, and what should they leave alone?
Jim Marous, as usual, has a good list of do’s and don’ts for the year on his blog, Bank Marketing Strategy. One of his suggested resolutions for bankers for 2014 is not to get distracted by “big data.” For most institutions, that’s probably good advice.
Some larger financial institutions (FIs) probably have the resources to tackle adventurous projects involving some of the technologies commonly associated with Big Data, such as Hadoop clusters that create on-the-fly data stores for massive number-crunching and rapid business intelligence. There’s nothing wrong with these “shiny new” projects, but Marous is absolutely right that the glitziest of these projects are beyond the technical means and constrained budgets of most FIs.
Instead Marous advises FIs “to capitalize on the ever growing silo of data already available within your organization.” He notes that “competitive advantage is achievable through the better use of data in the development of lifestage trigger cross-sell programs, optimal branch configuration, pricing decisions and risk and fraud monitoring.”
We agree with Marous’s advice with one important qualification. We think that FIs should capitalize on data that’s readily available to them. Not all of it is available “already”—but fortunately data that’s useful but not available can be obtained pretty easily without major investments in in-house Big Data projects. We’ll say more about this below.
First, we’d like to take a short detour and propose a simple thought exercise. Even if FIs prudently choose to avoid cutting-edge Big Data projects, we think they could benefit from evaluating their use of and need for data in terms of some Big Data metrics. By breaking “Big Data” down to some of its constituent components, FIs might find a useful road map for upgrading some critical IT services without having to embark on bold, expensive, and risky IT initiatives.
To begin, we need to get beyond that catch phrase, Big Data. It’s time to dispense with the hype and ask what Big Data really is.
What is Big Data and how is it different from the databases and business intelligence tools of yore? Undoubtedly, some of the revolutionary claims about this technology are hype, but in many cases so-called Big Data really does outpace and outperform traditional data analysis. Big Data differs from previous data technologies in terms of three key attributes—the so-called three V’s:
Now that we’ve discussed the three V’s, we’re ready for the thought experiment.
Instead of asking whether your institution needs Big Data, ask whether your institution could benefit from any of the three V’s.
Let’s take each of them in turn.
You can break volume into two parts: there’s the volume going into your IT systems, and the volume of data coming out. Do you need more data coming into your systems, data coming out, both, or neither?
Most FIs are probably struggling with the idea of increasing data inputs. Mobile apps, social media, and the growing popularity of online banking have given them more than enough input to handle. It’s fine if they don’t want to add additional inputs for now.
But let’s consider data output—whether you choose to call it information, insights, or business intelligence. Does your institution have all the information it needs from its IT systems and the data they already collect? Would you like more information about customers and potential customers, for example?
Specifically, do you have all the information you could possibly want about customers and potential customers when you:
If your institution is like most, you probably would like to get more insights about your customers, especially if you could get those insights from the data you already have.
For example, CIP compliance requires that when you open accounts for customers, you record their names, current addresses, dates of birth, and identification numbers (usually a tax identification number, which for most people is a Social Security Number). Are you 100% sure you have access to all the business intelligence that can possibly be derived from these simple inputs?
When we analyze account-opening data for financial institutions (not just banks and credit unions), we find we can predict account profitably and likelihood of losses from charge-offs and fraud using analysis that begins with just these four data types.
We find that most institutions have data blind spots, and these blind spots are costly. Sometimes they lead to institutions turning down applicants who would have been profitable. Sometimes they lead to institutions offering the wrong product to a customer; for example, offering a DDA account that includes overdraft protection, when the FI would have reduced losses by offering this customer a more limited “Second Chance” account that omitted overdraft protection. Will a customer still be a customer a year later? We can predict the answer to that question, too, with a high degree of accuracy.
Without changing data inputs at all, these institutions are able to achieve better business results by applying insights gained from having more information about customers.
So, how about your institution: would you like more information about applicants and customers, or do you have enough?
Data variety, too, can be broken down into data input and data output.
Even if you’re content with—or overwhelmed by— the variety of data your institution is collecting, are you content with the variety of data you’re relying on to make business decisions? Would you like to know different sorts of things about applicants, customers, accounts, and potential markets?
New data types could include risk/confidence scores that are far more granular, instructive, and actionable than the simple approved/disapproved ratings that many ID verification services provide.
We’ve found cases where the profitability profile of a customer pool is surprisingly complex and in some cases not at all intuitive. By moving beyond binary (yes/no) data types to more nuanced metrics, many institutions will be able to gain insights that enable them to grow profits by 10-15% or more annually.
This is an area where almost every institution could improve. A great deal of finance still relies on overnight batch processes. Marous is absolutely right to recommend making more use of real-time data services.
Real-time data analysis is critical for operations like account opening. If your institution gets critical data about profitability and risk only when several days have already passed since an account has been opened and checks and debit cards issued, it’s too late to tactfully or cost effectively change or reverse the decisions that were made when the customer was meeting face to face with a banker.
Fortunately, real-time data services are readily available for bankers. Many of them can even be accessed securely in a Web browser, enabling institutions to choose the pace and scope of any eventual integration.
As you begin 2014, it might be best to forget about “Big Data” and instead ask questions about:
By ignoring the hype and focusing on the three V’s, you might be able to quickly identify some worthwhile projects that are manageable, affordable, and profitable.
And that would be an excellent way to begin the New Year.
If some financial institutions find it difficult to grow profits from their DDA business, it’s probably because of the column of numbers listed here. The typical bank or credit union spends $150 to $200 to acquire a DDA account customer. About 12-15% of those customers will turn over every year, and only 40% of them will be profitable.
But as a recent study by StrategyCorps found, some customers will be extremely profitable, contributing $1,650 on average annually to the institution.
Institutions clearly need to be able to distinguish profitable customers from unprofitable ones as quickly as possible, preferably at account opening. Then they can segment accounts and cross-sell appropriate products and services to maximize profits while minimizing risks and losses.
Performing this type of analysis in real time is beyond the capabilities of many institutions’ account-screening and identity-verification services. But new services, which can be rapidly deployed and integrated into branch operations, are available to help institutions make these critical decisions in real time and with a high degree of confidence.
To learn more about the challenges of growing profitable DDA accounts while minimizing losses, read our new white paper, Profitable Insights from Real-time Data Analytics.
We had a great time at this year’s BAI Retail Delivery Conference, which was held at the Denver Convention Center from November 5 through 7.
The sessions were informative, and the conference well attended. The importance of innovation was a common theme in conference sessions and in our conversations with bankers.
Mobile banking gets a lot of attention, but the institutions we talked to also recognize that there’s a great need for innovation in traditional banking channels, as well. In most institutions, 70% or more of new accounts come through branches. A growing number of unbanked, underbanked, and millennial households are interested in opening accounts, and they’ll most likely apply for those accounts in branches.
Institutions can grow in-branch revenue by verifying the identities and likely profitability of every applicant in real time during account opening. By delivering better customer analytics in real time to branch staff, institutions can make time-consuming application processes quick and easy, while at the same time segmenting customers sensibly for profitability and risk. Ensuring that each applicant is offered the most appropriate type of account—a full-featured checking account, a “second chance” account with no overdraft protection, or some other type of account—is an excellent way to grow profits and to reduce risks of charge-offs and customer churn.
To help institutions improve the in-branch account-opening experience, Dragnet announced Accelerated Insight 2.0 on November 4. This new version of our real-time account-screening and identity verification service includes an extension, Accelerated Insight WorkbenchSM, which creates a live data feed of applicant data from branches and Web applications to an institution’s back office, where CIP-trained staff can resolve discrepancies that could not immediately be cleared in the branches on Day 1. AI Workbench includes workflow tools for examining, correcting, and tracking new customer records.
AI Workbench offers financial institutions these important benefits:
To learn more about Accelerated Insight Workbench, visit our new AI Workbench page.
To request a demo, contact us.
We’re pleased today to announce the availability of Accelerated Insight 2.0, the latest version of our real-time account-screening and identity verification service for financial institutions. A major new component of AI 2.0 is an optional extension we’re calling AI Workbench. This extension provides a live data feed of account-screening data from branches to the back office. Why is this important?
Many Customer Identification Program (CIP) solutions in banks and credit unions today were put in place after the passage of the USA Patriot Act over 10 years ago. In those days, branch IT operations largely depended on batch processing. During the day, branch personnel would meet with potential new customers and collect CIP data as part of the account-opening process. At night, that data would be collected and processed in batches on central computers. Back-office staff would review the data the next day (on the so-called Day 2) or later. If there were errors or discrepancies in the data, they would be discovered only on Day 2. If there were spelling mistakes, they might already be in the process of being printed on cards or checks. If the applicant was a fraudster, he or she already had a day or two to be get to work with a temporary debit card or temporary checks. When banking depends on batch processing, sometimes the barn door closes too late.
Our Accelerated Insight solution brings account-screening and back-office CIP processing into the second decade of the 21st century. Beyond our Big Data analytics which enable AI to deliver high match rates and real-time segmentation, AI now connects branches to back-offices with a live secure data feed.
AI Workbench gives banks and credit unions the option of moving Day 2 processing to Day 1.
Here’s an example:
Old Batch Process
Monday, 1:06 pm: Branch employee collects DDA application from a customer.
Tuesday or perhaps Wednesday: A CIP-trained back-office banker begins reviewing the data.
New Dragnet AI Process
Monday, 1:06 pm: Branch employee collects DDA application from a customer.
Monday, 1:07 pm: A CIP-trained back-office banker can begin reviewing the data.
A mid-tier bank with a multi-state branch network has been using Accelerated Insight since November 2012 to improve account-screening match rates, to streamline account-opening, and to prevent fraud in a market with many unbanked and underbanked customers. The bank recently began using AI Workbench to streamline and accelerate its back-office processing of CIP data.
From the example above, you can see how AI Workbench can help this bank streamline and accelerate its processing of CIP data.
More rapid review of CIP data can also help catch and reduce fraud. And centralized real-time collection of CIP data also helps banks and credit unions ensure that account-opening policies are being consistently enforced across branches.
With the addition of AI Workbench, our account-opening solution has broadened to encompass Day 0 (moment of application), Day 1 (day of application), and Day 2 processes. Here’s a diagram showing how the services meet financial institutions’ needs for account screening.
You can learn more about Accelerated Insight Workbench here,
If you’d like to learn how Accelerated Insight 2.0 can help your institution, please contact us.
Prepaid cards are poised for dramatic growth, according to a recent study from MasterCard.
The US had 73% of the prepaid card market in 2010. That share will likely slip to 51% in the coming years, as the rest of the world, including unbanked households in Africa and Asia, adopt prepaid cards for their convenience and security.
In the US today, prepaid cards are popular with unbanked and underbanked households, who use the cards instead of checking accounts for everyday payments.
As more banks and credit unions add products to meet the needs of the 25.6% of US households that are unbanked or underbanked, we can expect to see more branches promoting prepaid cards and screening applicants for prepaid accounts. Especially when serving customers with limited banking histories, institutions need to ensure that funds loaded onto cards are really available and that no fraud is being committed.
Unbanked and underbanked households aren’t the only users of prepaid cards in the US. The MasterCard study points out that prepaid cards are increasingly popular with traditional banked customers, who like the idea of having a secure payment solution that cannot be overdrawn, that is safe to take on trips and vacations, and that makes household budgeting easy.
By 2017, Mastercard expects the global market for prepaid card to consist of $191 billion in corporate payroll payments, $177 billion in government benefits, $152 billion in general-purpose reloadable cards, $56 billion in consumer travel funds, and $55 billion in healthcare payments.
Banks and credit unions should recognize the growth potential of this market, and ensure that their account-opening processes can support prepaid card applications from unbanked, underbanked, and banked clients.
To learn more about Dragnet Solutions services for identity verification and account screening, please contact us.
It’s no secret that, especially since the recession, many American households are managing their finances without traditional bank accounts. According to the FDIC’s most recent survey of American households, nearly a third of American households are “unbanked” or “underbanked.”
Here’s how the FDIC defines these terms.
About 8% of American households are unbanked. A little over 20% are underbanked.
Together, these types of households represent a large potential market for banks and credit unions. What’s stopping these institutions from serving these communities?
When the FDIC asked that question in a survey of U.S. banks, the leading answers were identity verification and fair-lending compliance.
At Dragnet Solutions, we’re working hard to deliver account-screening and document-authentication solutions for banks and credit unions to help eliminate these obstacles.
To learn more, please read our white paper on serving the underbanked.
A new study by BAI Research found that small businesses still do most of their banking at local branches. Consumers might be going mobile, but small businesses still prefer old-fashioned face-to-face banking.
From the story:
Small businesses continue to interact with- and transact at their branches. More than half of all business transactions are conducted at a branch. Small businesses also show a strong preference for in-person and live agent phone conversations with their financial institutions, which drives them to greater branch usage. And for financial marketers, branches continue to be the best venue to acquire new business relationships.
Unlike retail consumers, the research found that less than 25% of small businesses surveyed use mobile banking with only 8% using mobile bill pay.
As the story notes, before banks eliminate branches because of lighter traffic, they should consider the effect that eliminating branches might have on their small business clientele.
To read the full story at The Financial Brand, click here.
When banking changes, fraud changes with it. Case in point: as check-writing has declined and the use of debit cards has risen, debit card fraud has come to outpace check fraud.
What can banks and credit unions expect in the area of payments fraud in the years ahead?
In the new Resources section of our Web site, we’ve posted a short white paper that answers this question, drawing on recent banking surveys and security reports.
To access this white paper, Four Insights on the New Face of Payments Fraud, click here.
We’re very pleased with the partnerships we’ve announced in the past month or so.
First, in late November, we announced a partnership with ATTUS Technologies, provider of the industry-leading OFAC-checking service, WatchDOG Pro. This partnership enables us to offer OFAC SDN List-checking as part of Accelerated Insight.
For our press release about ATTUS Technologies and WatchDOG Pro, click here.
Second, we’ve just announced a partnership with First Data, a global leader in financial services technology. Working with First Data, we’re now able to offer the First Data Confidence Score as part of our Accelerated Insight identity verification service.
The First Data Confidence Score is an alternative tool that allows clients to use multiple forms of identification to screen applicants and provides access to hard-to-locate information on sub-prime, thin-file, and no credit score consumers. The solution leverages TeleCheck®, the nation’s most complete database of check writer information, which provides affordable, real-time information based on checking account history at TeleCheck merchants and financial institutions nationwide.
To learn more about the First Data Confidence Score and our partnership with First Data, see our First Data press release.
As these announcements show, Accelerated Insight provides comprehensive identity verification in a single secure Web service accessible in branches and through online applications, including mobile applications. In addition to Accelerated Insight’s proprietary discovery system, real-time data-cleansing algorithms, and ID verification services, Dragnet customers now have access to best-of-breed data services for OFAC-checking and account screening, providing branch personnel and online applications with critical insights at the time of account opening.
To learn more about Accelerated Insight, please contact us.
Epsilon just published a study showing that even in the age of smartphones and tablets, customers prefer receiving much of their information by direct mail. When it comes to receiving information about financial services in particular, 38% of the U.S. households surveyed preferred receiving information through postal mail. They preferred postal mail twice as much as Internet communications in general (17%). Email was preferred only a lowly 7% of the time. (For more about the study, click here.)
This Epsilon study is yet another reminder of how important it is to collect accurate address data from customers. There’s no better time to do this than during the account creation process when your customer is sitting face-to-face with a branch employee. Yet whether because of keyboard errors or outdated information on government-issued IDs, financial institutions end up with incorrect address data from these interviews too much of the time.
Bankers tell us that as much as 5% of their postal mail communications are returned because of address errors. That’s 5% of customers who never receive the institution’s direct mail pieces, no matter how well they’re designed or how compelling their offers.
For a lot of reasons—including getting the most out of future marketing campaigns—it pays to use a real-time identity verification service that corrects address information in real time.
We’re pleased to announce that we’ve partnered with ATTUS Technologies, Inc. and integrated ATTUS WatchDOG Pro into Accelerated Insight, our real-time identity verification service for financial institutions.
WatchDOG Pro is an industry-leading automated OFAC (U.S. Office of Foreign Assets Control) verification solution. WatchDOG Pro screens entity and individual names against OFAC lists that are updated in near real time, providing institutions with an easy and efficient method for monitoring OFAC compliance. It compares customer and vendor lists against multiple watch lists, including OFAC’s Specially Designated Nationals (SDN) List and Sanctioned Countries List. By law, financial institutions in the U.S. must check OFAC lists before opening accounts for individuals or businesses.
You’ll find our partnership announcement here.
Interested in seeing Accelerated Insight in action? Contact us.
We’re back from this year’s BAI Retail Delivery Conference in Washington, D.C. It was a great conference: good speakers, lively conversations, and lots of innovation to see on the exhibition floor.
There was a lot of excitement about mobile. But in our conversations with bankers, we found that many institutions, large and small, are still wrestling with classic challenges such as identity verification, compliance, and fraud detection even in that most unmobile environment—the branch.
These institutions are looking for new, foolproof, and efficient ways to address challenges related to account creation and identity verification—challenges such as:
In our booth, we demonstrated our identity verification services.
For identity verification and OFAC-checking at account opening, banks and credit unions can use our Accelerated Insight service to verify names, date of birth, and Social Security Numbers, while getting the latest address on record. In addition, institutions get a risk/confidence score that predicts account profitability, even for unbanked and underbanked customers.
We also demonstrated our document authentication service, Intercept, which detects fraudulent driver’s licenses, tracks the use of a specific document across transactions and locations, and alerts institutions to the re-use of an ID photo across multiple documents.
If you attended the show, what were the highlights for you?
Imagine two banks that have decided to grow accounts aggressively.
Bank #1: Open Now, Fix Later
The first bank opens accounts for nearly anyone who enters the branch. Applicants walk in, meet with a banker, and walk out thinking that they have an account.
Back-office processing for new accounts takes place in batch mode at night. So the day after applicants visit, bank employees start looking for fraud, past charge-offs with the institution, and invalid ID data; they also try to correct any mis-keyed customer information. They shut down any new accounts that look too suspicious, and try to contact the would-be account holders by phone or direct mail to clarify information that didn’t quite check out. Unfortunately, new account holders can be hard to reach. Perhaps the account irregularities include incorrect or old addresses or phone numbers. Or perhaps a banker made keystroke errors when entering contact information or other data. (This happens more often that we like to think.) In the meantime, debit cards and check orders have already been ordered and are on their way – perhaps to a wrong address—or to a crook. In either case, more time and money will be wasted straightening this out.
After that initial visit to the branch, the customer might be disappointed or even angry that the account opening process—standing in line, filling out forms, etc.—resulted in the need for further follow up with the bank – or a closed account the next day.
Bank #2: Getting It Right the First Time
The second bank will open accounts for lots of people, but it verifies IDs, address information, and relevant customer history in real time. If there’s a problem, the banker and the applicant can discuss it right there in the branch, face to face. Perhaps it was a misunderstanding or a clerical error. Perhaps the applicant really does not qualify for a conventional DDA account, but might be interested in a special type of account or a prepaid card. Perhaps the applicant is a fraud operator and shouldn’t be given any type of account at all.
Whatever the outcome, a degree of trust has been established between banker and applicant (except the fraud operators). The banker has had an opportunity to sell or cross-sell appropriately. And the bank won’t be spending money in the form of staff time, IT operations, and special direct mail pieces or after-the-fact re-work to close accounts and repair the damage done by a fraud operator, simply because it had to wait a day or two to vet an account.
The Value of Real-time Analytics
For banks interested in growing accounts aggressively, it makes sense to follow the example of Bank #2. Using real-time ID verification and risk/confidence scoring, banks can make the most of in-branch visits and eliminate the costs of back-office Day 2 processing. That’s a good strategy for growing both revenues and profits.
To learn more about Accelerated Insight, our real-time identity verification service for financial institutions, please contact us.
Earlier this year The Financial Brand published the results of its survey of 228 banks, credit unions, and community banks about the state of bank and credit union marketing. The survey asked these institutions what their top three marketing priorities were for 2012.
Obviously, answers 1 and 3 are closely related. In addition, 51% of institutions said that their customer onboarding program would be more important in 2012.
None of these results surprise us. Engaging with customers more successfully—understanding their needs, and selling products and services to meet those needs—is the best solution for acquiring profitable clientele and growing sales in a tough economic environment.
So the goals are clear. What about the obstacles?
The majority of respondents said their biggest challenges came from internal factors such as:
If limited marketing and IT resources are the problem, then new sales and marketing initiatives will have to be highly cost-effective. Multi-year engagements with big consultant firms are probably out. Sales and marketing need to be fast and efficient in order to contain costs while addressing the needs of rapidly changing markets. And any new, widely deployed IT solution is going to have to be easy to use (minimizing training costs) and easy to deploy (minimizing IT costs).
We believe that financial institutions can achieve their sales and marketing goals by optimizing account creation with fast, efficient customer analysis and ID verification services. These services give branch personnel the best possible information for making real-time decisions that affect account growth, account profitability, and fraud risk.
Earlier this month The Economist magazine hosted a lively debate on its site about the future of branch banking.
Brett King, author of Bank 2.0, argued that bank branches are obsolete. He wrote:
“Just like the publishing and media industries, a place is simply no longer a vital, necessary component of day-to-day banking. Bankers would have no more luck getting customers back into the branch than Borders might have getting customers back into a bookstore.”
Opposing this motion, Mark Weil, head of EMEA financial services at Oliver Wyman, argued:
“Far from killing the branch, new technology is revolutionising it. It means banks can do simple transactions via the ATM, phone and internet and turn their branches into places where customers have space to talk about their big financial decisions.”
Jonathan Rosenthal, banking editor at The Economist, moderated the debate. The discussion raised important points about banking trends, customer demographics, and technology. Readers were not shy about chiming in: twice the debaters’ statements garnered about 70 comments.
But readers rendered their verdict early. About two-thirds of voters opposed the motion on the first day, and that majority barely budged in the two weeks the debate was live on the site.
That said, the back and forth was instructive, and between Mr. King and Mr. Weil’s statements and the comments of readers, one can find a wealth of information and opinions about retail banking in 2012.
What’s our take on this question? Are bank branches really obsolete?
Branches are changing, but they’re hardly obsolete. The rise of online/mobile banking concurrent with the closing of over-abundant branches should not be construed as indicative of the demise of the branch; they are each largely driven by different business objectives. Based on our conversations with banks large and small, and based, too, on our review of market, including financial results from major financial institutions, we believe that most banks will continue to operate branches indefinitely. The technology inside branches will undoubtedly change. ATMs will evolve, and video tellers might outnumber people at certain locations. New products and services that are appropriate to provide through physical locations will emerge. But branches, in one form or another, are here to stay.
Why? Two reasons: sales and security.
Let’s start with sales. Studies show that consumers like having branches near where they live and work, and that they choose banks based in part of the proximity to branches. Mobile banking might be convenient, but lots of people still want the choice of being able to walk into a branch for a face-to-face discussion with a banker. Online-only banks won’t win these accounts. And they’ll lose an opportunity for long-term profits.
Look at the impressive results a major U.S. bank is achieving through its growing network of branches. According to its recent investor reports, this bank has 5,500 branches in the U.S. and is opening about another 150 this year. New branches break even at around 30 months. Once “seasoned,” the branch delivers $1 million on average in annual pre-tax profits. The 1,250 or so branches the bank has added since 2001 are projected to contribute roughly $1 billion in pre-tax profits over the next 8 years. Affluent customers visit them 4 times a quarter. Far from considering this channel obsolete, this bank is planning on adding more branches in the coming years.
As for security, most bankers are expecting fraud to get worse, not better, in the foreseeable future. Most banks will not want to dispense with at least an initial face-to-face initial meeting with a customer to ensure compliance and to stop fraud. If trouble strikes in the form of ID theft or other types of security breach, both bankers and customers are likely to appreciate the opportunity to talk in person to assess the situation and to rebuild trust.
Bottom line: If you build branches in the right locations and deliver the right kind of services, customers will visit branches. They’ll trust branches and use them, and branches will deliver profits to the shareholders.
First, there’s the very real risk that your latest customer is a fraudster. Financial institutions expect to be hit with more fraud this year, including credit card fraud, check fraud, and account take-overs. Every time your institution opens an account, there’s a chance—too big a chance—that the account holder isn’t who he or she says she is and will attempt to defraud your institution.
Second, there’s a chance that in your organization’s drive to grow accounts and hits sales numbers, branch staff will take shortcuts, violating company policies and jeopardizing your institution’s compliance with OFAC, CIP, and other Know Your Customer laws. For example, a banker might accept a government ID that’s expired or take some other shortcut, reasoning that the customer doesn’t seem like a fraudster and that new sales targets must be met. Unfortunately, shortcuts like this are taken all too often.
Third, there’s a risk that the institution will fumble the account opening and customer onboarding process. Names might be misspelled or other CRM data entry errors might occur. Wrong offers might be suggested, and real opportunities overlooked. That’s a pretty substantial risk. Since the majority of a customer’s lifetime sales occur in the first three months, mishandling the onboarding process can be costly.
One of the best ways to reduce these risks is to streamline and automate data collection and identity verification during customer onboarding. By deploying real-time identity verification services in branches and integrating those services with CRM systems and other account services, risk management teams enable branch staff to:
Banks have invested millions of dollars in branch IT and training, but all too often the customer onboarding process remains frustrating and error-prone.
Take the example of a friend of ours who recently opened an account with a major U.S. bank. She visited a local branch to open a checking account. The branch staff were friendly enough, but the process was grueling: it took about an hour to fill out forms, wait for computer responses, and so on.
A week later, she learned that even though the branch staff had spent a lot of time opening her account, they had made several glaring errors:
One account, three errors. And the misspelled name doesn’t bode well for the bank’s fraud detection services.
We’re hoping that branches like this apply their best thinking and IT to improve their customer onboarding process. How about cutting that hour down to half an hour, spelling the customer’s name right, and not surprising her with the number of accounts she’s opened?
To win over customers, financial institutions must get that crucial first interview absolutely right.
Accelerated Insight is our real-time identity verification service for financial institutions. To request a demo, please contact us.
In July 2011, the Federal Financial Institutions Examination Council (FFIEC) published a supplement to its 2005 guidelines, “Authentication in an Internet Banking Environment.” The supplement, which is available here, notes that Internet fraud has become more sophisticated in recent years:
“Since 2005, there have been significant changes in the threat landscape. Fraudsters have continued to develop and deploy more sophisticated, effective, and malicious methods to compromise authentication mechanisms and gain unauthorized access to customers’ online accounts. Rapidly growing organized criminal groups have become more specialized in financial fraud and have been successful in compromising an increasing array of controls. . . . Cyber crime complaints have risen substantially each year since 2005, particularly with respect to commercial accounts. Fraudsters are responsible for losses of hundreds of millions of dollars resulting from online account takeovers and unauthorized funds transfers.”
To stop this rising tide of fraud, financial institutions need to strengthen their anti-fraud defenses, educate their customers, and become more effective overall at combatting fraud. The FFIEC supplement offers general guidelines for doing so.
What new guidelines does the FFIEC propose?
First, “financial institutions should perform periodic risk assessments and adjust their customer authentication controls as appropriate in response to new threats to customers’ online accounts.”
Second, “financial institutions should implement more robust controls as the risk level of the transaction increases.” Because they typically hold fewer funds, retail banking accounts are generally at less risk than commercial banking accounts. But both types of accounts need more effective security.
To implement new “robust controls,” institutions should take a layered approach to security.
“Layered security is characterized by the use of different controls at different points in a transaction process so that a weakness in one control is generally compensated for by the strength of a different control. Layered security can substantially strengthen the overall security of Internet-based services and be effective in protecting sensitive customer information, preventing identity theft, and reducing account takeovers and the resulting financial losses.”
Layered security can include such measures as more rigorous authentication, anomaly detection, out-of-band verification of transactions, IP-address blacklists to block connections from sites known to be involved in fraud, and more frequent use of challenge questions as part of the authentication process.
The trick, of course, is not only to strengthen security, but to do so in a way that improves the customer’s experience.
At the same time that financial institutions are going back to the drawing board on Internet security, they’re trying to appeal to the changing marketplace of online services. Users are more Internet-savvy. They’re connecting from multiple devices, including smartphones and tablets. And they’re accustomed to fast, easy-to-use services for getting directions, selecting restaurants, booking hotels, and—why not?–banking. Life is moving now at Internet speed. Users are impatient. And they’re not terribly loyal to any particular brand or institution.
How should financial institutions proceed? Here are some thoughts:
While layering on new defenses, look for ways to streamline or simplify customer interactions and business workflows.
A good first step is to benchmark your existing workflows, so that throughout the design process you have a well-understood performance standard to meet or exceed. How many steps are involved in your current authentication process? How long does it take for a typical user to perform them? Does the performance vary on a mobile device? Can you make it even easier—and more secure—for a customer to apply for an account and start banking?
By establishing efficiency as a design goal, financial institutions can deliver better customer experiences even while reducing fraud and complying with the FFIEC’s more rigorous authentication guidelines.
To learn more about Accelerated Insight, our real-time identity verification service for financial institutions, please contact us.
We offer financial institutions trials of Accelerated Insight, our real-time identity verification service. The form of a trial varies. We tailor each trial to suit the needs of the institution we’re working with.
In this blog post, I’ll describe some of the forms that a trial can take. First, though, let’s review just what it is we’re offering in a trial.
Accelerated Insight is a secure, real-time Web service that accepts customer data, such as a name and a previous address, and instantly returns the complete and accurate data that financial institutions need for identity verification—data that includes the customer’s name, the current address, Social Security Number, and a risk/confidence assessment.
Accelerated Insight applies data-cleansing and risk-analysis algorithms to data drawn from billions of consumer records managed by a leading data aggregator. Accelerated Insight is a standards-based, SOAP-compliant Web service that supports both .Net and PHP and that can be extended to support other programming interfaces upon request. Dragnet Solutions grants access to Accelerated Insight only to banks, credit unions, and other financial institutions. Each institution’s data is accessible only to its authorized users.
Now that we know what we’re delivering in a trial, let’s consider the various ways we can deliver it.
If you’d simply like to compare the results of Accelerated Insight to the results of your institution’s current identity verification service, you can sign up for a trial and then send us customer records. Within 30 days, we’ll send you the results from Accelerated Insight’s data-cleansing and risk analysis algorithms.
A batch data trial lets you experience Accelerated Insight’s data-cleansing and risk analysis, but it doesn’t let you experience the speed at which Accelerated Insight performs analysis and delivers results. After all, it’s one thing to understand that a service delivers real-time results. It’s another thing to see accurate customer data and a risk assessment appear instantly on a computer screen in a branch with a potential customer sitting just a few feet away.
To experience the benefits of real-time analysis, ask for a trial that gives you access to our standard user interface and the right to analyze a certain number of accounts per day. This type of trial lets you key in customer data at the point-of-service and see real-time results from Accelerated Insight: corrected addresses, corrected Social Security Numbers, and risk/confidence assessments that can prove helpful when deciding whether or not to open accounts.
Accelerated Insight has a fully documented application programmatic interface (API). An institution’s technical team can use this API to integrate Accelerated Insight with the software applications used for customer onboarding at a branch. Integration isn’t difficult since the API is standards-based.
Full-scale integration enables branch personnel to experience Accelerated Insight as part of their normal workflow. It also enables institutions to feed customer data from Accelerated Insight directly into Customer Relationship Management (CRM) software, eliminating an extra step in the onboarding process.
In addition to accepting keyboard input, Accelerated Insight can also accept customer data from the magnetic stripe or 2-D barcode of a driver license. Using magstripe readers—whether they’re already deployed in branches or provisioned by Dragnet for your trial—dramatically streamlines the process the customer onboarding process. Just swipe their driver license and Accelerated Insight instantly delivers accurate customer data on the screen, allowing your new-account team member to spend more time cross selling additional products and services.
When someone walks into the branch of a financial institution to open an account, the branch personnel need to answer two questions. First, is this person who they say they are? Second, do we want to do business with them?
After a cursory examination of the person’s driver license and a few background questions, most branches consider the first question settled. They focus most of their attention on the second question. For example, they’ll use a risk-analysis service like TeleCheck to determine if the applicant has a history of writing bad checks. They’ll often perform other queries, as well.
If the check analysis and other analyses don’t raise any red flags, the branch staff will typically open an account for the applicant.
Do you see the danger here?
All the data analysis performed to answer the second question is predicated on a correct answer to the first question. Figuring out if Jane Smith at 123 Meadow Street has ever bounced a check is relevant only if the person standing in front of you really is Jane Smith. If it’s really Mary Jones posing as Jane Smith, all your analysis about Jane Smith is only leading you astray. In fact, Mary Jones may have chosen to impersonate Jane Smith precisely because she knows Jane Smith has a high income and a good credit history.
Back-office exception handling is not a substitute for determining immediately whether or not customers are who they say they are. Discovering two days after an account has been opened that the woman claiming to be Jane Smith was really somebody else is practical knowledge gained impractically late—by then, the institution has invested its time and money in onboarding a customer who’s going to turn out to be trouble.
To defeat fraud, financial institutions need identity verification that takes place in real time. Branch personnel need to be able to determine instantly whether an applicant is who they say they are. Only real-time identity verification can ensure that other risk-analysis services—such as querying a person’s check-writing history—provide genuinely useful knowledge, instead of simply furthering a fraudster’s deception.
To learn more about Accelerated Insight, our real-time identity verification service for financial institutions, please contact us.
Customer Relationship Management (CRM) records are obviously essential for any Financial Institution. CRM records are required for Know Your Customer (KYC) mandates, effective outbound sales and marketing initiatives, and daily business operations.
You rely on your CRM records. But how are you entering these records in your CRM system?
It turns out that CRM data entry can have a significant influence on the lifetime sales you make to your customers.
Most sales to DDA customers take place in the first few months of an account being opened, according to BAI. Sixty percent of sales will take place in the first month; 75% take place in the first three months.
Your initial meeting with a customer is critical. The customer is clearly prepared to buy something from you. It’s a great opportunity for needs-based selling, and for establishing trust. Not surprisingly, studies show that trust turns out to influence how much customers will buy in the future.
In the course of your initial meeting with a customer, then, you and your institution should achieve these four goals:
The first two goals include data collection; in fact, they both use the same data—the customer’s name, address, and Social Security Number. The second two goals involve face-to-face time with the customer. These goals are best achieved when the branch staff are looking at customers and conversing with them, rather than pecking at a keyboard and filling out labyrinthine forms.
The trick to pulling this all off? Achieve goals 1 and 2 quickly and efficiently so that identity verification and data entry do not interfere with goals 3 and 4.
Here’s where CRM data entry becomes important. The process can go wrong so easily. For example:
CRM data entry the wrong way:
CRM data entry the right way:
Here’s an example of how CRM data entry can frustrate bankers.
I recently spoke to bankers at an institution that’s been using an identity verification service that is not integrated with their CRM system. Because the two systems are not integrated, the customer onboarding process required sales staff to key in a DDA applicant’s personal information twice—first into the identity-verification service and then again into their Customer Relationship Management (CRM) system. Of course, all that typing interrupts the selling process. It also introduces lots of opportunity for keyboard errors. The bankers are frustrated. Lack of CRM integration is making customer onboarding more time-consuming and complex that it needs to be. No one is winning in this scenario.
This bank is now searching for an identity verification service that is faster and more accurate and that can be easily integrated with their CRM system. The bank hopes to enter CRM data once and take care of identity verification and CRM input in a single operation.
In contrast to the disjoint systems being used at the bank I just described, Accelerated Insight not only verifies identities in real time, it also integrates with CRM and other branch systems, eliminating redundancies and reducing errors. Accelerated Insight accepts data from mag-stripe readers, so branch personnel may not have to do any typing at all to enter a customer’s identity information. Simply swipe a driver license—even a driver license with an old address—through a reader, and Accelerated Insight instantly returns the person’s name, current address, date of birth and Social Security Number, along with a risk and confidence score.
If your institution has been relying on disjointed CRM and identity verification services, and you would like to get a free trial of Accelerated Insight, please contact us.
In October, we attended the BAI Retail Delivery Conference in Chicago. We thought the conference sessions were very educational, including many presentations by industry practitioners with great data and insights. In future blog posts, we’ll be writing about some of the big ideas discussed at the conference—ideas such as applying new technology to streamline customer onboarding and developing strategies to increase the profitability of DDA accounts.
On the exhibit floor, we had the chance to demonstrate Accelerated Insight, our real-time identity verification solution. It was enjoyable to see “the light bulb turn on” with so many people once they saw how easily they could eliminate keystrokes, reduce exception handling, prevent fraud, and create more time for their front line employees to sell additional products to new customers.