Data drives the digital cogs that allow U.S. Bank to pursue an open banking model, but it knows better ID&V solutions are needed if everyone is to benefit fully. Executive VP of Omnichannel, Gareth Gaston, outlines the bank’s approach.
As the US grapples with the complex issue of how better to protect its citizens’ digital identities to thwart spiralling cybercrime, the bank that bears the nation’s name is forging into a new, ‘open’ world.
U.S. Bank, the fifth largest in the US with about 3,000 branches, is sealing deals with fintech firms to offer services that range in scale from instantaneous person-to-person payments to mortgages in minutes, embracing the concept of ‘open banking’ through the sharing of data. And that rests on it having confidence in, and also being able to protect, the aforementioned digital identities of its customers.
The two issues – data sharing to extend financial services’ reach, including to the under- and unbanked, and that of secure identity and verification (ID&V) – are inextricably linked and stirring up quite a debate in the US, which is yet to develop a federal regulatory framework for opening banking, such as Europe’s revised Payment Services Directive and the Open Banking initiative in the UK.
The discussion comes against a background of rising financial fraud in the US. Federal Reserve figures show that losses to synthetic identity fraud, carried out by constructing fictitious individuals in full view of financial service providers and credit bureaux, totalled $6billion last year, with some estimates raising that to $8billion. Meanwhile, new account fraud, whereby hackers steal, wholesale, another person’s personal information and good credit rating, also soared by 13 per cent, incurring losses of $4.3billion to the financial services industry.
Banks are aware that for all the opportunities that open banking offersto create a great customer experience, it could leave them financially and legally exposed. Which is why, in 2018, firms across the financial services and fintech sectors, including U.S. Bank, formed the Better Identity Coalition (BIC) to lobby for the adoption of better solutions to identity verification and authentication.
BIC has since laid out a five-point plan of action to try to fix the ‘critical vulnerabilities’ in the digital identity fabric, with the priority being the development of a ‘next generation’ remote identity proofing and verification system. Its coordinator, Jeremy Grant, recently warned the US House Financial Services Committee Task Force for Artificial Intelligence that government help was needed as industry could not do it alone.
“Open banking is creating a need for more sophisticated industry solutions, as banks and fintech firms alike seek to enable consumers to authorise access to certain data or permissions in their accounts on a granular level, and enable consumers to revoke access at anytime,” Grant told the committee.
“And getting identity right is key to making sure that the US leads the way in the next generation of banking solutions.”
Gareth Gaston, U.S. Bank’s executive vice president of omnichannel, acknowledges there ‘is a great need for a more robust digital identity offering’. But, in the absence of federal ID&V policy, the bank is forming its own, considered approach.
Open to partnerships U.S. bank, which is embarking on a determined drive to transform the services it provides to customers through an open banking model, has surrounded itself with experts in the data sharing field – internally and externally.
The bank has teamed up with Personetics, which has also worked with Tandem and Metro banks in the UK, to rebuild its app ‘from the ground up’, using the input of 5,000 of its customers. The result is a mobile banking service that features real-time spending analysis, cash flow tracking, recurring payment changes and reminders about forthcoming payments, as well as advice to encourage and boost savings.
The bank has also partnered with US person-to-person (P2P) payments specialist Zelle and with mortgage specialist Blend, in doing so becoming one of the first banks to use Blend’s one-tap service to enable a mortgage decision in minutes.
Gaston is excited about the potential of further collaborations.
“In this country, the advent of open banking is still relatively in its infancy, we haven’t had the same regulatory pressures that PSD2 brought to Europe, but we certainly believe that our customers should be able to share their data where they’d like to share their data, and that they should be able to have a rich experience, if they want to, with any given fintech,” he says.
“We want to make sure, as we deliver that kind of service to our customers, that they are very aware of what information they’re sharing with third parties, and that they are able to revoke that information at any given point in time.
“We also partner with fintechs directly, so we have a great partnership with Blend, for example, for our mortgage applications, and they’ve enabled us to go from what was ostensibly a paper-based process that took more than 30 days, to a fully digital process where, literally, if you are standing in the home of your dreams and you’re thinking that you would quite like to buy it, we can give you a firm offer of credit, right there and then. That’s a great example of a fintech partnership that has helped us propel our mortgage experience forward.
“We are extremely open to fintech partnerships. Many, we’ve found, are more business-to-business (B2B) in nature, and achieve success by partnering and empowering bank experiences. We are certainly not naïve enough to think we can do all this stuff ourselves. I have a saying, ‘spend your money on the wrapper, not the ingredients’ – where I think banks will be very successful is by having a lot of partnerships, vendors, and fintechs, underneath that wrapper, all brought together by the banks in a nice, seamless experience for the customer.”
Gaston describes the arc of change in the industry as moving from the ‘brick era’, where all banking was done at branches, to the ‘glass era’ where PCs, laptops and phones came to the fore, and now, finally, the ‘air era’ where smart devices, such as Amazon’s Alexa or Google Home, will be increasingly used for banking tasks using voice.
But, despite that, he sees a continuing place for banks’ branches in their omnichannel future in which the vast majority of customers will have the ability and technology to ‘self serve’ routine banking tasks and transactions.
“We know that our customers really value talking to people, and we know that even millennials, who everyone frames as being digital natives, actually value having a conversation,” he says.
“But what we see, and what we think will be more apparent in the future, is that we will move away from branches and contact centres being about transactional tasks, because these transactional things are now able to be DIY. Then the conversation, which is very exciting for the customer and very exciting for our employees, can move much more towards being advice-based.
“So, what we really want to be doing with customers is not cashing or depositing cheques and wiring money. What we want to be doing is understanding what they want to get out of their life, and how can we help them achieve their dreams and goals.
“I think this concept of advice and goal setting, and achieving your hopes and dreams, can be done in person, as part of a really great conversation. But when you leave that conversation, you’ve a suite of digital tools to help you understand your financial health.”
Gaston believes that U.S. Bank’s size – being big enough to afford to do what it needs to do, while being agile enough to make quick decisions – has put it in a sweet spot as the digital revolution continues to roll through the financial services industry.
He says: “It’s actually about your ability to execute, and that comes in a couple of different forms. First, you have the speed of execution; secondly, there’s the quality of what it is that you’re producing. What we’ve found is that co-locating teams in the same place and having all the skillsets – not just designers and developers, but risk analysts and lawyers – and empowering them to make a decision, is enabling us to move really fast. So much so that you might be surprised to hear one of the big tech companies we work with said ‘you’re moving faster than we are!’.
“We were certainly quite humbled to hear that.”