Insight: Banks and the issue of non-standard ID

Harry Hughes,
06 Sep 2021

Banks and financial institutions need to be sure their customers are who they say they are. As a result, despite financial products being increasingly available at speed and through a variety of channels, identity checks need to be robust and recorded.

Ultimately, laws and regulations around identifying customers are there to deter the devastating impact that money laundering and other financial crime has both on individuals and the wider economy.

For these reasons, firms have rules in place to govern what they can and cannot accept as forms of identification (ID) before customers can access their products and services. For many customers, abiding by these rules is no great hardship. We are all used to the various steps involved in proving your ID.

However, for a significant minority, this initial stage of applying for a product or opening an account is challenging due to their lack of ‘standard’ identification documents. While passports are the most prominent example of a standard ID, did you know that 17% of British residents – 9.5 million people at the last census – do not hold one?

This poses a number of risks in relation to ensuring both good customer outcomes and access to banking.

Without taking appropriate steps to mitigate the risks relating to non-standard ID, it is possible customers will be given inaccurate information and be unable to access suitable products. This is not only a poor individual outcome but, if repeated by firms across the industry, could exclude customers from access to key services or the best products for their needs.

To improve customer outcomes, banks and financial services firms must adopt a shift in mindset from viewing non-standard ID as an obstacle into an opportunity. To achieve this, there are three key elements to consider when identifying customers.

Taking an omni-channel approach

Due to the legal and regulatory requirements to know your customer (KYC), it is likely that firms will already have established identification processes in place.

However, it’s vital that these are reviewed with both in-branch and digital onboarding journeys in mind, especially as new methods of customer authentication, such as fingerprints and facial recognition, become available. Both routes must cater to non-standard ID, but each requires a different approach.

While the former is more likely to centre around front-line staff training, for example, the latter might emphasise access to online help tools with clear instructions and contact methods made available.

Ensuring staff are well prepared

Firms should also think about the effectiveness of current frontline staff training methods. From making training materials more easily accessible – on firm intranet sites for example – and ensuring clear escalation channels are in place, firms can improve staff knowledge, engagement and most importantly, customer outcomes.

ID training should also explain to staff the impact of getting it wrong for the firm and the risks that it presents to customers, such as being underbanked, to help improve staff accountability.

Thinking outside the box

Testing the non-standard ID journey can be challenging. For instance, questions are often asked of staff before an account is opened, resulting in no record of the interaction. Additionally, non-standard ID queries may not be a regular event or categorised specifically, making it difficult for testing teams to find instances to review.

To understand whether the ID process is working as intended, banks and financial institutions need to think outside the box when it comes to how ID queries are documented and analysed.

It may be possible to find these accounts by looking at where the application process ended or was halted at the identification stage, before drilling down to see if the correct processes were followed or if more could have been done.

Complaints may be a source of insight on how customers with non-standard ID are being treated, and feedback available through social media or customer review websites can also be informative.

By ensuring that the approach to ID is clear, appropriate and understood across channels, firms can improve the onboarding experience for customers. Having well-trained staff with clear escalation routes can also improve the experience by getting the right answer to the customer at the first opportunity.

Finally, by having assurance methods that seek to understand how the process is working in a live environment, firms can continue to develop and improve their approach for those with non-standard ID.

Written by Harry Hughes, senior insight manager at the Lending Standards Board