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Engineering the frictionless user experience through password-free identity

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Passwords are stuck in the past.

It recently took me several minutes to check a balance on my bank’s mobile website. I’m not the only one finding it difficult to navigate mobile apps, password vaults and resets, security questions and other everyday elements of the login process.

I’d like to check my balance from a smart watch, inquire about an insurance claim through a voice-activated home assistant and receive important portfolio alerts sent directly to my smart television — all without having to enter a password.

A related issue, more important for new customers, is being able to open an account without waiting for days or weeks. Gen Z and millennial clients are accustomed to instant response from digital services, and they expect similar convenience from financial services providers. (For a deeper dive on the forces reshaping the financial services industry, I suggest a six-minute read, “Five actions to achieve adaptive risk management.”)

Banks, insurers and asset managers that continue solely with passwords will not only lose their best customers but also struggle to acquire younger customers. They will likely also have higher costs than competitors due to high call volumes for password resets, fraud losses from password theft and continued data breaches.

Financial services (FS) firms can address these issues with frictionless user experiences based on password-free authentication and instant identity verification. The good news is that technologies exist to replace passwords completely with easier-to-use, more secure alternatives. They include:

  • Biometric identifiers such as fingerprint, face and voice, captured via mobile devices or other means.
  • Hardware authentication provided through physical devices issued directly to consumers.
  • Digital wallets that maintain credentials for traditional FS firms while also supporting cryptocurrency offerings, blockchain-based identity providers, bring-your-own-identity and other related use cases.
  • Identity-as-a-Service offerings that are similar to authenticators provided by global technology firms and can be deployed by financial institutions to extend their position of trust with customers

The transition to a frictionless registration and login experience will not happen overnight. Many consumers will be slow to adopt new technologies, leaving FS firms to support passwords alongside newer approaches to authentication. Also, consumers may balk at having to manage multiple approaches to authentication across different providers (e.g., financial services, health care and digital content).

I would eventually expect a convergence of authentication technologies, but in all likelihood this will take some time. Consequently, FS firms face the risk of moving too quickly into technologies that may fail to gain mass-market traction.
However, the far larger risk would be to do nothing. As fast-moving FS firms and FinTech companies adopt password-free identity those that lag behind will lose their younger and tech-savvier customers to competitors offering better authentication experiences.

That’s why I recommend a comprehensive approach that goes beyond merely looking at the technology:

  • Assemble a cross-functional team. Include representatives from business lines and functional areas, such as marketing, security, IT, digital transformation, compliance and customer experience.
  • Start evaluating the technology now. Implement proof-of-concept experiments to understand how the technology works. Test how it integrates with mobile apps and other parts of your business. Enable end users and volunteer employees to experience it, and carefully evaluate their feedback.
  • Consider your customers. The right password-free authentication platform may be different for the customers of a private bank, an agricultural bank or an employee credit union. Review demographics, wealth levels and propensity to adopt new technology to determine how fast and how far to move.
  • Get involved with standard-setting organizations. Particularly for larger FS firms but not limited to them, take the opportunity to participate in alliances and consortia involving identity and authentication. This is the best way to successfully apply the lessons learned from customer testing during a broader rollout.
  • Employ ancillary technologies for risk mitigation. Artificial intelligence is critical for protecting against fraud and abuse. Confirm that your core systems and customer-facing systems can connect with the expanding range of AI services available via APIs (application programming interfaces) through the cloud, so that login, verification and authentication processes use the highest levels of intelligent and automated protection.

Through this approach, banks can migrate their customers to password-free authentication safely, predictably and effectively.

The transition will steadily reduce operational costs with each customer that switches to password-free identity, due to lower help desk call volumes and lower rates of fraud.

Moreover, the user experience of password-free authentication will yield increasing benefits with the expansion in the number and type of intelligent devices.

Engineering the password-free authentication experience will be the launching point for a wide range of new possibilities. Whether it’s checking a bank balance using voice control from home or sending money with the touch of a button on a smartwatch, password-free identity will be a centerpiece for anyone involved in the amazing future of financial services.

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