Identity Verification during Account Opening: A Hidden Way Banks Lose Clients

As a member of Corporate Insight’s Project Team, I regularly analyze and write about bank and credit card account openings. There are likely few people on earth more prepared to open a bank account (an exciting achievement, I know). However, when it came time for me to open a new savings account for myself, I was nervous. The process of opening a new account can be lengthy and confusing, and firms may ask questions that even the most prepared clients do not know the answer to.

For these reasons it was especially frustrating when the bank was unable to verify my identity as part of its account opening process and did not clarify why it was unable to do so. To rectify the situation, I would have had to call the firm during business hours, or worse, go to a branch. So instead I opened a different account at a different firm who was able to quickly verify my information online. My first-choice bank potentially lost years of my business not just because they could not verify my identity, but because they lacked an efficient way to remedy the situation.

Screenshots showing bank requests for further identity verification
Various Requests for Identity Verification from Banks

A common problem for banks

I am far from the first customer to abandon an application journey due to unexpected difficulties. While data on the subject is scarce, a 2016 study estimates over a quarter of applications are abandoned before completion. This represents no small number of applications either, as the vast majority of U.S. adults open bank accounts online. Moreover, potential clients are increasingly unwilling to spend large amounts of time filling out application forms. Between 2020 and 2022 the number of minutes people were willing to spend within the application process dropped by over seven, down to just under 19 minutes. Such short attention spans mean firms cannot afford to offer a clunky or confusing application experience.

The number of minutes people were willing to spend within the application process dropped by over seven, down to just under 19 minutes

CI handles dozens of account openings annually as part of our monitor services as well as our consulting work and custom research. We have noticed that firms often struggle to verify the identities of applicants. This is especially the case for large, established brands whose application experiences typically rely exclusively on back-end verification via the applicant’s personal information. However, newer, more dynamic firms and fintechs are increasingly relying on additional forms of ID verification, either to prevent failed application journeys or to allow applicants who cannot be verified through traditional means to continue their applications online. This avoids them having to call the firm, go to a branch, or, in my case, abandon the application all together.

Physical IDs in a digital world

Across the industry, firms are increasingly relying on physical forms of ID to authenticate clients. Some firms such as Citi ask for an image of prospects’ social security cards while others accept more traditional forms of ID such as a driver’s license, state ID, or passport. While offering any remedial steps that don’t send clients to a branch or direct them to make a call should be considered a step in the right direction, firms must keep this process simple and, above all, secure. Some firms ask clients to email copies of sensitive documentation which may preclude them from continuing the process.

Capital One offers a good example of how failed identity verification can be handled. Prospects are prompted to upload a photo of their government ID along with a selfie taken in real time from their phone. Critically, Capital One provides a secure link from which prospective clients can upload sensitive documentation. One flaw in Capital One’s process, however, is it excludes clients who do not have access to a mobile device.

Two screenshots from Capital One's ID verification process
Capital One SavorOne Credit Card – Additional Identity Verification

ID capture is not limited to failed account applications. Some firms such as Venmo include it in every application to ensure the client’s ID is verified. It is also being used in other instances when ID verification may be difficult. When speaking with a live rep, Venmo requires clients to authenticate themselves for certain actions by sending the live rep a selfie while holding their photo ID next to their face.

Two screenshots from Venmo's application process
Venmo Credit Card – Application

Ideally, back-end identity verification would work every time, but even in 2023 this is far from the case. Having the right digital tools in place when these forms of verification fail can be the difference in onboarding a new client who will use their account for a lifetime or losing them forever.

ID scanning represents one of a growing number of methods firms are using to protect both themselves and their clients from fraud. Corporate Insight will continue to closely monitor developments in this space. If you are interested in learning more about prospect identity verification, the changing landscape of cybersecurity, or other developments in the financial services industry, learn more about our subscription research services or contact us about custom work.