(As originally published on LinkedIn, 4 April 2018)
A few months ago, I found my 14-month-old son in the living room doing something quite interesting. He got hold of his favourite toy (my phone) and was repeatedly tapping on the screen and looking at the television in the living room. I quickly realized while he was tapping away, he was expecting his nursery rhymes to be casted on the TV from my phone.
And then it occurred to me. My 14-month-old is a customer of the future and his expectations of digital products are significantly higher than what I had growing up. We hear about digitization all the time but do we really understand the changes coming in 5, 10 or 20 years? The purpose of this blog is to emphasize how customers’ needs have evolved over time due to digitization and how financial organizations can address customers’ needs by optimizing one of the biggest assets they’ve always had: customer identity information.
Companies in the financial services sector and beyond serve a diverse pool of customers – from baby boomers to Gen X, Gen Y (millennials) and Gen Z (born after 1995 to-date). And yet the industry as we know it today is built on century-old business principles catered primarily to baby boomers. The differences between baby boomers and following generations are immense. Businesses have made substantial investment in understanding generational differences but that’s not being reflected in the services they provide. And when we look at customer influence, that’s a problem. Goldman Sachs1 reports that Gen Z is just as, if not more, influential than millennials.
Remember, this generation will only know a digital world. From the moment they are born, they are subject to everything digital and their identities are digitized almost immediately after birth. For example, as soon as my son was born I was taking and sharing pictures online. These photos were immediately tagged with geolocation and facial recognition algorithms by the photo hosting cloud provider. It’s that simple. A few photos and my son’s identity is stored in the cloud, available in hundreds of servers across the globe. It’s the birth of a digital identity.
So how does customer information (identity) help the banks reinvent themselves?
Now let’s focus on how all this newly digitized customer information can be optimized to help address the needs of the next generation of customers. We’ll first redefine digital customer identity. The traditional definition of identity included your biographic information (e.g. first name, last name, DOB etc.). This is the information that has been used by organizations over the years to define a customer’s identity within a bank. An identity would be created only after a customer wanted to buy a product. A big opportunity is being lost with this traditional way of offering services/products to customers in today's digital world. Organizations know (or at least has the data to know) much more about a customer than before. The fact is, a customer identity is not a human-only identity anymore. A customer identity can have some or all of these attributes (human or non-human): device, location, biographic (e.g. age, name), picture, voice, health info etc.
Now think about the following scenario…
A customer connects with a mobile device to browse the bank's website from Richmond Hill, just north of Toronto. She browses insurance and retail credit card products. A few days later she signs up for a promotional offer for a completely different product (e.g. investment account). By now, that bank should be able to build out the following customer profile with an advanced digital identity management platform:
- Customer A is from Richmond Hill
- Her age is X (and may have business needs specific to this age or her generation)
- She uses a mobile app primarily so all products and services must be available to the customer via mobile
- She subscribed to investment products but is also interested in insurance and retail products
All of this information can help provide a tailored, seamless experience to the customer – and create new opportunities to stay relevant for traditional banks competing against FinTechs. These competitors are focused on very specific problems and their user base is targeted. Yes, they are disrupting businesses but at the same time, each FinTech is disrupting in small fractions. Banks still have the opportunity for being more relevant because of the amount of data and specifically customer identity information they possess.
So how do we move forward with digital identity?
The objective of Digital Customer Identity Management (DCIM) should be to transition from "transactions" to facilitating "interactions" that can offer greater convenience. We’re already seeing this play out in the form of real time advice based on data collected through wearables and facial recognition at the branches among other things. But the opportunity remains untapped by many. DCIM hasn’t received the required attention by businesses as technical implementation of DCIM solution components have been thought of as a requirement and cost of providing secured transactions. Cyber security is definitely an objective of DCIM but the key benefit is an enhanced digital experience for the customers.
To start benefitting from DCIM, banks should focus on the following six key areas:
You might be wondering if this is just a theory or if it’s achievable. Our team at EY has successfully redesigned and implemented complete digital customer identity eco-systems for some of the largest companies in the world. So yes, I would say it is possible, you just need to reimagine the possible and redefine your customer’s digital identity journey.
- Identity definition and unification: gather identity information from all sources and create a unified identity profile across all channels and business entities.
- Personalization: enable intelligent, personalized customer interactions that blend physical and virtual experiences (e.g. provide real-time automated advice based on personalized knowledge about the customer).
- Frictionless experience: implement a frictionless experience such as using social sign up/sign in, government identification sign up, facial recognition or voice authentication.
- Smart risk management: create a digital trust perimeter that will be able to reduce risk by providing services such as device and application access security, continuous identity proofing and verification, risk based access management and user entity behaviour analytics.
- Privacy and compliance: develop a comprehensive privacy and compliance program around customer identity and related data that provides customers with assurance that their privacy is protected (e.g. GDPR, consent management, privacy analyst chat).
- Align to industry innovation: embrace technology innovations to keep pace with competition – like using blockchain to address middle- and back-office use cases such as Bring Your Own ID or facial recognition for the customer.
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