Digital Banking Disrupts Traditional Banking: FICO Report & CEO Insights

One Finance CEO: Expect disruptions in the banking space

ONE CEO Brian Hamilton discusses his company's alternatives to traditional banking

With the coronavirus pandemic, digital banking has been on the rise in North America as people continue to try and keep their distance from strangers.

FICO’s second-annual Consumer Digital Banking study found that 41% of consumers throughout the U.S. and Canada were more likely to turn to mobile banking applications to open a new account. 

Meanwhile, 32% told the credit scoring agency they are less likely to open a new account in person at their chosen banking institution.

In a statement that supports its findings, FICO Vice President Liz Lasher said consumers who use digital banking apps are increasingly placing importance on authentication.

"As a result, consumers' expectations have shifted, placing higher priority on having a seamless and engaging digital experience, which includes establishing account security," Lasher shared. "For financial service providers, this means tomorrow's success will rely on having the right platform to deliver enhanced customer experiences, improved fraud protection and financial crime compliance."

According to FICO’s study, three-quarters of North American consumers are willing to provide their bank biometric data to confirm their identity when managing finances, including facial or fingerprint scanning or voice-matching. For U.S. adults, this identity authentication method is approved by 76%, while Canadian adults approved by 74%.

Consumer demand for digital banking security is seemingly increasing while 11% of Americans and 6% of Canadians report they believe their personal information has been used to open a fraudulent account, which FICO equates to 23 million and 600,000 potentially compromised accounts in the U.S. and Canada, respectively.

When online banking systems ask account holders to use authentication methods that direct them away from the app, more than one-fifth of North American consumers told FICO they would look to a competitor for the sake of convenience.

Twenty-five percent of Americans on average told FICO they’d be willing to ditch their bank if they perceived identity authentication obstacles at their banking institution. Twenty-one percent of Canadians said the same.

Undesirable identity authentication methods include mailing or scanning and emailing documents, or visiting a bank branch in person, according to FICO’s respondents.

With COVID-19, digital banking has been on the rise in North America as people continue to try and keep their distance from strangers. And this shift has made consumers demand biometric security methods on banking apps. (iStock)

Preferred methods include uploading a selfie (U.S., 37% vs. Canada, 38%) and scanning a QR code (U.S., 41% vs. Canada, 42%) or fingerprint (U.S. and Canada, 41%) through a bank’s app. Meanwhile, North American consumers indicated they don’t mind scanning a passport or driver’s license (U.S., 46% vs. Canada, 47%) as long as they can do so within the app rather than having to email the scanned documents.

Fifty-three percent of American consumers told FICO they have their bank’s app downloaded while 57% of Canadians said the same.

"Consumers embraced the digital first economy during the past 12 months, but how, when and what digital channels they prefer still varies greatly across demographics," Lasher said, in a statement. "For banks, it's critical they understand their customers and deploy solutions and policies that can operate across channels and adapt to their customers evolving preferences."