SAN DIEGO—Credit unions should prepare for blockchain to become a much bigger part of banking in 2018, especially for identification and security purposes, according to one forecast for five trends to watch in 2018.
Mitek, which made that prediction, also believes that credit unions and banks this year will follow the lead of money transfer companies when it comes to retail delivery.
The company shared with CUToday.info its annual predictions on trends that will shape the financial services industry in the coming year. Sarah Clark, SVP, global product management, outlined five key changes to look for in 2018.
The five things to watch:
Fifty Percent of International Banks Will Partner with Blockchain Companies
“Many view blockchain as a potential solution for secure identity verification in the digital channel, with its ability to serve as the backbone for a new system of federated digital identities. We predict that 2018 will see banks announcing blockchain partnerships in order to position themselves as the stewards of digital identities,” said Clark.
Clark described what’s ahead for financial services as “interesting times.”
“With all the data breaches there are now enormous market needs regarding digital identities,” said Clark. “People are now becoming more fearful of providing their personally identifiable information (PII) when it’s not absolutely necessary. We believe this year there will be a global trend to empower people to own their own digital identities.”
Sarah Clark, Mitek
She said financial services providers are well positioned to play a valuable role in this new PII ecosystem, because they are likely the most valuable repository of personal data in the world.
“So someone joins a credit union and they go through the Know Your Customer process, and then they transact with the credit union,” said Clark, who noted that creates a valuable data bank that establishes the person is “a real and reliable individual.”
Clark said that FIs can leverage that data and the blockchain to become the “stewards” of digital identities.
“For example, a customer goes to a retail store to make a large purchase and the retailer can then simply ping the person’s financial institution to verify the individual’s identity,” she said.
Money Transfer Companies will Emerge as the Leaders of the Hybrid Branch Service Model
“Money transfer companies are proving to be on the leading edge of customer service and we predict these companies will emerge as the leaders of the hybrid branch service model that other businesses, such as credit unions, will emulate in the future,” said Clark.
Clark said that since money transfer companies deal with such a high volume of transactions, they are pushing more of the in-person transaction to a mobile app.
“A customer can set up much of the transaction before they stop by to transfer their money, and when they reach the office, the visit is quick,” said Clark.
She told CUToday.info money transfer companies often employ mobile solutions that allow individuals to quickly and securely identify who they are by scanning a driver’s license or some other reliable ID.
“The person’s identity is verified and much of the transaction is already staged before they stop by,” said Clark. “This makes the branch transaction more convenient and more secure.”
Clark is forecasting that banks and credit unions will begin to follow this branch service model in 2018. She also said it is the right fit for CUs as they seek to mesh mobile with the branch.
“We know credit union members value their personal interaction with the credit union, but they also don’t like to wait in line and have a long transaction,” said Clark. “This brings the digital and physical banking worlds closer together.”
Consumer Loans Approved in the Digital Channel will Double
“The race is on for digital lending but, to date, lenders have struggled to keep pace with consumer demand for a convenient, end-to-end digital process for loan applications and approvals,” said Clark. “That will change rapidly in 2018.”
She said that online lending is expected to reach $100 billion by 2020.
“That’s end-to-end digital, the entire process online,” explained Clark. “More people are expecting that when they go online for their loan that the full journey will be digital. It’s important for all lenders to keep up with consumers’ expectations—not just have part of the online lending experience be electronic.”
Approximately 20% of online lending is curretoy completely digital, said Clark.
There Will Be 150-Million Fraud Attempts Related to new Accounts at FIs
There were more than 80-million attacks on financial institutions reported in 2016 that involved the use of fake or stolen identity credentials, and that number will jump to 150-million in 2018, Clark predicted.
All of the data breaches, especially those that target more personal data than account numbers—such as the Equifax breach—are leading to a shift in fraudster focus, she said. Crooks are looking more for information they can use to create fake identities, rather than steal directly from compromised cards.
“With the flood of personally identifiable information in criminals’ hands now, we expect there will be double as many attempts in 2018 over 2017 to create fraudulent accounts, largely through digital account openings,” she said.
Clark added that is the reason why credit unions need a “strong front door” to effectively verify new members’ identities, especially online.
Fifty Percent of Marketplace Websites Will Require Users to Verify Their Identities
“eCommerce sites and online marketplaces such as online auctions, dating websites, social media platforms, travel sites and more are struggling to prevent fake profiles, bot accounts and fraudsters from overrunning their platforms. We believe that 2018 will be the year they start making identity verification a priority,” Clark said.
Clark said that the methods these sites use will shape consumer expectations on ID verification processes—including those of FIs—as the sites will likely turn to convenient, fast, secure and “friendly” ways to establish a person’s identity.