The Power of Digital Identity: Key to Remaining Competitive in Financial Services

Here, Adam Preis, director at identity software company Ping Identity, offers five actionable strategies that enable financial institutions to seize new opportunities and deliver seamless customer experiences, bolster security, and drive innovation.

Financial institutions stand at a juncture in this era defined by rapid digital transformation. The rise in digital-first, digital-only providers has introduced competition and fundamentally transformed customer expectations.The demand for seamless, secure, and personalised financial experiences is fierce.

As Charles Darwin observed, it is not the strongest that survive, nor the most intelligent, but those most adaptable to change. This is especially true in today’s financial services landscape, where adaptability and the embrace of digital identity technologies are central to meeting customer demand.

The digital identity imperative

Challenger banks, neobanks, fintechs, and techfins set a new standard for the customer experience by creating streamlined, connected customer journeys unencumbered by legacy technology. This legacy technology presents many challenges, from being a security risk to an unsustainable cost, and it limits the ability to deliver innovative customer experiences. This is a new battleground with different rules of engagement.

Research shows that the top six challenger and neobanks accounted for approximately 24 per cent of the global banking market in 2022, with forecast CAGR of 28 per cent through 2028. Back in 2016, 50 per cent of financial services executives (70 per cent in banking) felt that fintechs posed a threat to the incumbents’ market share, according to PWC. And while perceptions have shifted over the years, these very nimble challengers continue to pose multiple threats when it comes to two important aspects:

• Profitability: Their greenfield tech allows for lower-cost operations
• Trust: They focus efforts to identify and mitigate risk of account takeover (ATO), unauthorised access, and fraud to protect customers’ identifiable information (PII).
• Customer experience: They excel at streamlined, connected journeys, leaving clunky interfaces in the dust.

Incumbent financial institutions have an opportunity, however: to use established brand recognition, extensive regulatory knowledge, and robust infrastructural capabilities to deploy digital identity technologies that will quickly level the playing field and secure a competitive edge.

Enter IAM platform convergence

Many financial institutions still rely on home-grown and/or legacy Identity and Access Management (IAM) solutions to meet their authentication, identity verification and authorisation needs. Not only does this inhibit their ability to respond to threats and meet their know your customer and anti-money laundering obligations, but it also puts them at a disadvantage compared to more nimble peers. That’s largely because challengers typically operate greenfield IAM implementation across the full breadth customer identity (CIAM), workforce identity (WIAM), and partner (B2B2X) needs.

Unsurprisingly, the most progressive providers in the industry increasingly have thrown the proverbial kitchen-sink at the problem. They do this by extricating themselves from IAM legacy and fragmented point solutions that are both expensive to maintain and unable to be future-proofed.

This is precisely why, according to Gartner, 70 per cent  of all planned IAM investments are expected to be funnelled into ‘converged’ solutions that provide full coverage across most, if not all, identity needs and use-cases. Put simply, converged IAM meets the needs of all identity types, all identity deployment settings, and identity ecosystems across the financial services industry while driving sustained return on investment.

Drawing from my experiences at Ping Identity, these five actionable strategies are for financial institutions to harness digital identity and thrive in this new era:

1. Modernise the IAM infrastructure

IAM modernisation drives agility, innovation and a better form of digital transformation. Legacy solutions, often siloed and cumbersome, hinder the ability to deliver frictionless customer experiences and adapt to evolving security threats. Financial institutions can enhance security, improve customer experience, and drive innovation by transitioning to a unified scalable platform. This approach simplifies the way in which customers access services, and facilitates compliance with increasingly stringent regulatory requirements.

2. Build a single view of the customer

Understanding your customer is paramount in the digital economy. Fragmented data obstruct the delivery of personalised services and diminishes customer satisfaction. By integrating data across systems to build a single customer view, financial institutions unlock real time understanding that drive hyper-personalisation, enhancing customer engagement and loyalty. This customer insight supports the development of tailored financial products and services and meets the individual needs of consumers.

3. Orchestrate customer journeys

The digital age demands customer journeys that are secure, seamless and intuitive. Having the ability to build, test and deploy seamless, secure and scalable digital interactions from onboarding to transaction processing enables rapid deployment and iteration. This approach ensures that customer experiences are both engaging and secure, fostering trust and satisfaction.

4. Secure sustained customer trust

Trust is the cornerstone of financial services. In a landscape where cyber threats are ever-present, securing customer trust necessitates robust identity verification and authentication strategies. Implementing frictionless, multi-factor authentication and leveraging advanced risk analysis techniques are crucial in protecting against fraud and enhancing customer confidence. In addition, having the ability to control which third parties data is shared with is a key step in driving greater trust with end customers

5. Expand the value ecosystem through an API-first 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 allows financial institutions to engage with third-party providers securely and efficiently, unlocking new opportunities for value creation. By embracing APIs, institutions can extend their service offerings, entering new markets and driving customer-centric innovation.

Embrace the future

The journey towards digital excellence is both a challenge and an opportunity for financial institutions. They can transform the challenge posed by 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, ensuring our survival and success in the digital financial age.