New technologies recalibrate convenience vs. compliance

By Alissa Fry-Harris

Published on CU Insight on June 20, 2016

In the fast-changing world of mobile account opening, the name of the game is convenience. Most attempts at mobile opening are abandoned, or the new accounts are never funded or used. The right solution is the one that gets your prospective accountholder in the door and fully engaged, preferably in one fast, smooth process.

The factor most working against you is friction created by the mobile opening process itself. Too many steps, too much information, multiple verifications, typing on tiny keys, loading page after page, long uploads, waiting for something to happen, having to visit a branch or mail information anyway, sorting through product offers…the list goes on.

Yet regulatory compliance is also critical—perhaps even more so because the prospect isn’t physically present to sign things and shake your hand. We need a better balance between simplifying the mobile experience so the door doesn’t slam in the prospect’s face, and sufficiently covering all your compliance bases.

It’s time to take a fresh look at exactly what information and verifications are actually required by regulations, or are currently part of your Customer Identification Program (CIP).

Here’s a quick overview of five non-negotiable requirements (the first three by the US Patriot Act):

  • Identity verification (Section 326) requires full name, DOB, address, DL# and SSN (paper copies and images not required)
  • Notification, acknowledged by the account opener, that their identity will be verified
  • Estimation of the expected purpose and activity level for the account, either by asking questions or from records obtained and reviewed by the institution
  • Ability-to-repay verification, such as credit, employment or income check, or risk assessment provider integration, for credit accounts (credit cards, loans or overdraft protection)
  • Mandatory compliance with OFAC and BSA/AML regulations

Information in the following two categories, although not strictly required, is a best practice for many institutions. Take the opportunity to carefully consider which to incorporate and how to minimize the friction they cause:

  • Institution-enacted credit scorecards to extend the assessment of a credit accountholder’s ability to pay
  • Institution-enacted identity extended practices such as geolocation, IP address filtering, and biometric data (g., facial recognition, fingerprint)

Finally, these three types of information are not required for compliance, although some are traditional for in-branch opening. Find ways to minimize these intrusions as much as possible, especially before the account opening is completed:

  • Signatures to comply with the Electronic Signatures in Global and National Commerce Act of 2000, which does not require physical signatures or signature samples. If desired, collect signatures from transaction data after account opening.
  • Images of identity documents and photos of accountholders are not required and demand a prohibitively large bandwidth. If you want additional verification, consider using knowledge-based ‘out-of-wallet’ questions, which require fewer, easier steps for applicants and no handling by the institution.
  • Inserted questions about applicant preferences and choices about additional financial products generate significant delays. They can quickly become overwhelming, and are unlikely to generate positive results. Instead, after the account is opened and in use, follow up to ask about ATMs, offer paper checks, and cross-sell other services.

Ensuring compliance in today’s mobile-first/mobile-only world is critically important, but it can’t be at the expense of applicants abandoning the opening process. Each information requirement or step you pile into the process could be proverbial last straw, so even a tiny added checkbox merits your careful scrutiny.

Make sure your mobile opening solution allows you to tailor every step to your specific needs—and that it streamlines the steps you retain. Experience shows how easy it is for a mobile applicant to walk away, so, once they’ve walked through your (virtual) door, be sure they stay.

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