But trust is a two-way transaction, and banks are getting smarter about promoting the benefits of their safeguards to partners and customers.
Know Your Customer (KYC) practices are now essential in enabling banks to not only trust customers, but build trust across the digital ecosystem. From digital passporting to sophisticated identity checks such as voice and image recognition, digital technology is helping to make banking ever more secure.
No bank operates on its own. Collaboration with partners to share data via open APIs, and scrutinize it in virtual private networks, is allowing financial services providers to respect privacy regulation while keeping customers’ money and data safe.
As a result, users can quickly ping money to one another through their smartphones, while small and medium-sized enterprises (SMEs) can access financing free from the hassle of scheduling appointments with bank managers.
Yet financial technology is as transformative for criminals as consumers and demands fast responses. Digital banking can, for example, be abused by criminals to quickly open multiple fake accounts and launder money around the world from illegal activities. Planned intervention in the UK to match names to account details at the point of transfer are one of the many KYC measures banks are putting in place to manage this risk.
Despite increasing budget dedicated to preventing financial crime, global levels of fraud and corruption have not declined in the past two years (pdf). For banks, this has led to unprecedented levels of fines from governments in Brazil, the Netherlands, the UK, US, Switzerland and Sweden – indeed, Nordic banks with lax money laundering and financial crime policies have been targeted for criticism by the Swedish and UK authorities leading them to team up on developing a new KYC joint venture, Nordic KYC Utility.
But the real cost of financial crime and cybercrime in particular is damage to customer trust; strong KYC practices will be crucial to building faith in technology-based banking.