to stay ahead of the competition in financial services

Five concrete strategies to promote innovation, take advantage of new opportunities, ensure a seamless customer experience and strengthen security in the financial sector.

Financial institutions are at a tipping point. The rise of digital-only providers has brought competition and fundamentally changed customer expectations. The demand for transparent, secure and personalized financial experiences is unprecedented. As Charles Darwin noted, it is not the strongest, nor the most intelligent that survive, but those that best adapt to change. This is especially true in today’s financial services environment, where adaptability and adoption of digital identity technologies is critical to meeting customer demand.

The necessity of a digital identity

Neobanks and fintech are setting a new standard for customer experience by creating efficient, connected customer journeys, unencumbered by existing technology that presents many challenges such as security risk or unsustainable costs. These technologies also limit the ability to deliver innovative customer experiences. A recent study shows that the top six challengers and non-banks accounted for approximately 24% of the global banking market in 2022, with a projected CAGR of 28% to 2028. In 2016, 50% of financial services executives (70% in banking) believed, according to PWC, that fintechs pose a threat to incumbents’ market share. And while perceptions have evolved over the years, these highly agile challengers continue to pose a threat. However, incumbent banks have the opportunity to leverage their brand awareness, deep regulatory knowledge and strong infrastructure capabilities to deploy digital identity technologies that will quickly level the playing field and give them a competitive advantage.

Convergence of IAM platforms

Many financial institutions still rely on internally developed and/or legacy identity and access management (IAM) solutions to meet their authentication, identity verification, and authorization needs. Not only does this prevent them from responding to threats and fulfilling their KYC and anti-money laundering obligations, it also puts them at a disadvantage compared to their more agile counterparts. These five strategies will help financial institutions leverage digital identity and thrive in this new era:

  1. Modernizing IAM infrastructure: Modernizing IAM drives agility, innovation and a better form of digital transformation. Legacy solutions hinder the ability to provide seamless customer experiences and adapt to evolving security threats. Financial institutions can strengthen security, improve customer experience and drive innovation by moving to a single, scalable platform. This approach simplifies customer access to services and facilitates compliance with increasingly stringent regulatory requirements
  2. Creating a single view: Understanding the customer is essential in the digital economy. Fragmented data hinders the provision of personalized services and reduces customer satisfaction. By integrating data across systems to create a unified view of the customer, financial institutions unlock real-time insights that drive hyper-personalization and improve customer engagement and loyalty. This knowledge of the customer makes it possible to develop tailor-made financial products and services to meet the individual needs of consumers.
  3. Organize customer journeys: The digital age requires secure, seamless and intuitive customer journeys. The ability to create, test and deploy seamless, secure and scalable digital interactions, from onboarding to transaction processing, enables rapid deployment and iteration. This approach ensures that the customer experience is engaging and secure, which promotes trust and satisfaction.
  4. Ensuring customer trust: Trust is the cornerstone of financial services. In a context where cyber threats are ubiquitous, robust identity verification and authentication strategies must be in place to maintain customer trust. Implementing frictionless multi-factor authentication and leveraging advanced risk analysis techniques are critical to protecting against fraud and building customer trust. Additionally, the ability to control the third parties with whom data is shared is a key step in building trust with end customers.
  5. Expanding the value ecosystem with an API-based approach: The future of financial services is inherently collaborative with open banking and API-driven integrations facilitating a new ecosystem of financial innovation. An API-first strategy enables financial institutions to work with third-party providers securely and efficiently, opening up new opportunities for value creation. By adopting APIs, institutions can expand their service offering, enter new markets and support customer-centric innovation.

Welcome to the future

The journey to digital excellence is both a challenge and an opportunity for financial institutions. They can turn the challenge of digital disruption into a strategic advantage by embracing converged identity and access management and delivering experiences that exceed customer expectations.

The most successful financial institutions are those that adapt and view digital identity not as a compliance requirement, but as a strategic asset. In the spirit of Darwin, let us adapt and evolve to ensure our survival and success in the age of digital finance.

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