Hong Kong last year issued eight digital bank licenses while Singapore will award two full bank digital licenses by the middle of this year. In a crowded space for banks, how can new banks stand out? finews.asia finds out more.

The Philippines has no shortage of banks, with big players such as BDO Unibank, Metrobank and BPI being common household names. Yet, CIMB Bank, a newcomer in the Philippines, managed to onboard close to two million new customers in about one and a half years since its official launch. 

«Coming in as a brand new name in a market that is saturated with big names, how can you differentiate? In Hong Kong, users can now have eight new banks on his/her mobile phone. If your response time is next business day, he would have opened a bank account with someone else,» said Frederic Ho, Vice President of Jumio Asia Pacific, whose firm provides AI-powered identity verification for mobile and web transactions.

Big Risk

Electronic Know-Your-Customer (eKYC) is a process that poses big risks for banks launching into new countries. While «selfies» – photos taken of oneself can prove ownership, it is «liveliness» that proves human presence. For newly launched banks, the time to market is very important and must be a conscious decision of a strategy.

«As an eKYC solutions provider, we already have the identity types plus the best practices, that are valuable for digital onboarding,» said Ho. He further explains that actions such as rolling one's eyes, turning one's head up and down, are not enough to prove a person's real presence.

Hijacked Identity

In fact, there is a risk that one's face can get hijacked and used to log into a bank or financial account. «Hollywood versions of deep fakes have flooded the market, that step was used to hack into banks in the U.S.,» shares Ho.

So the industry came up with «liveness» detection. In this area, Jumio uses a 3D face map for identity detection, which is certified by NIST - an industry cybersecurity standard. 

User Onboarding Journey

While many fintech can claim to do eKYC, not everyone can execute well, as there are skill sets involved beyond the product level, such as a smooth user interface for onboarding new users and certainty of conversion rates. If not done properly, close to 40 percent will drop off at the eKYC process, notes Ho.

Banks are familiar with building branches at locations with high traffic, but they sometimes fail to think of the user onboarding journey when designing their virtual bank strategy. «eKYC is very new. Even when using photos of ID in the onboarding process, the majority of people will give up once it's a hassle.»

Instant Feedback

To facilitate user onboarding, Jumio uses a feature called course correction, which gives a new user instant feedback to tell them what is wrong with the photo of the identity card or the picture taken of themselves. This helps them to know what is «wrong» straight away and makes them feel assisted in the process rather than being frustrated.

In the process of working with their corporate clients, Jumio educates them in terms of the best practices for identity verification. The need to deploy more than one identity proofing capability to build a robust process leads to challenges for some new virtual banks who may be unfamiliar in the space. 

Database Edge

Lastly, Jumio holds an edge over other e-KYC providers due to its database with over two hundred million identifications worldwide, and it allows banks to onboard clients who may not be native to where the bank is operating, subject to local regulations. A case in point is players like Transferwise and Monzo bank, who have started their business with a global perspective, rather than focusing on a single country for their growth strategy. 

«These challenger banks - they knew that to grow quickly, they are never going to own the whole eKYC infrastructure, but work with those that could easily access 4000 customers quickly,» shared Ho. «Our biometrics model is changing every day based on what we have built, I cannot imagine any banks will want to build the database or technology in-house when their core business is not even doing this,» said Ho.