Banks after PSD2: achieving a 50% increase in conversion of clients can be a reality for every bank

There are many reasons and benefits for financial institutions to cooperate with fintech companies — Commerzbank increased conversion for customers sought and downloaded the app by 50% through collaboration with IDnow fintech. PSD2 requirements for Strong Consumer Authentication and the rise of open banking are a good start to think of this collaboration in the wider context. Banks already have credibility, stability and consumer knowledge and what they need from young start-ups are their speed and the innovative technology not only to battle SCA. AI-based fintech firms might open new paths for financial institutions to intelligent offerings by using data and Machine Learning to truly understand users’ motives and needs.

SMS does not give you a competitive advantage

This form of authentication is also full of friction, it’s not user-friendly and in the digital reality user experience is the key ingredient to make clients satisfied. 92% of consumers demand a fast, frictionless experience while also getting one that is as trustworthy and secure as possible. It is then critical for banks to use identification methods that do not cause a negative UX, and at the same time, guarantees top-tier security. The good news here is that the extra layer of the authentication itself is not an obstacle for users — studies show the opposite. 28.3 percent of respondents would be more likely to use their banking apps if their financial institutions added authentication options for specific transactions, and 33.2% of respondents would be more likely to use their banking apps if their FI covers potential mobile app fraud.

The problem then lies in the speed and the quality of this process and it all comes to selecting the correct method and technology that can be provided by fintech companies.

Behavioral biometry — intro to the power of data analysis

It collects a massive set of individual, physical interactions between the user and his/her device. That includes, among others, keystroke dynamics — a piece of detailed timing information describing when each particular key was pressed and released as a user was typing, including such data as flight time (the period between releasing a key and pressing next one) or dwell time (duration of a key being pressed) to recognize whether it’s an imposter or a real user.

All those gathered data, that is the heart of behavioral biometry, needs to be analyzed by Machine Learning algorithms to create and spot those specific connections and patterns of each user. ML with behavioral biometry as a whole can set totally new standards for banks, merchants, customers not only as a fraud prevention method. The big picture here is the precise user profiling, thanks to all gathered data, allowing banks to truly understand the user’s behavior, needs, what there are doing with the money, and as a result to customize the offer to each customer. So, while adjusting to SCA banks can at the same time gain an additional competitive advantage for future purposes. Unfortunately, only one-third of CIO’s state that they see the implementation of digital capabilities such as AI/ML-based banking solutions as the most important technology area to be focused upon.

Turn data into opportunities

Also as Benny Boye Johansen Senior Director & Head of OpenAPI, Saxo Bank said: “Every bank that wants to stay on the market until 2030 must already start developing its own open banking strategy”. With PSD2 which demands a new approach to banking, the timing is perfect to introduce the strategy, which includes cooperation with fintech firms. The sooner banks see the advantage of this partnership, the better for their future. With the right mixture of fintech companies and banks, it’s a win-win game for both sides.

This article was originally published on Nethone blog.

Know Your Users to resolve fraud. Gain more loyal customers, reject only fraudsters. #ecommerce, #frauddetection #payments