Today I represented Eurobits in a Digital Onboarding Workshop organised by the European Retail Financial Forum in the Euro Parliament in Brussels. Due to unfortunate circumstances one of the speakers could not attend the meeting and I was left as the person in charge of presenting the fintech perspective on this issue. I hope whatever the circumstances where, it all came out well.
While I love preparing presentations in taxis with no more help than my sleepy mind (this was 7:30 in the morning), and I do mean it, the risk of leaving out bits and pieces or not being completely clear in your message is higher than normal.
So, following is a beautified version of my presentation this morning.
- Eurobits is by far the oldest Account Information Service Provider in Europe*, and probably one of the oldest, if not the oldest, fintech company in Europe, whether that is a good or bad thing I leave for others to judge.
- Eurobits is thankful to Sophie In’t Veld, her staff, and the ERFF for the invitation and the opportunity to come here to learn and share information about this very interesting topic, crucial for the development of full digital financial services.
- Following is our view on digital onboarding, not necessarily (and probably not) a consensus position from the fintech “industry”.
- What is digital onboarding?
- It is a digital process
- Processed in real-time
- Conducted between man and machine or machine and machine
- What is the current market situation?
- As we see it, there are no compliant universal solutions. We are not aware of any solution available in the EU that complies with the EU legislation and is universal. That is, it is applicable to a large percent of the European population.
- Yes, there are remote analogue processes, such as video conference solutions. The fact that the streaming is digital is anecdotal, it is an analogue process that requires a man to man dialogue, albeit, remote and supported by technology. Mind you, it is an advancement, but it is not digital onboarding.
- Digital deferred processes, such as SEPA account holder identification transactions. This can be fully digital, but it can take up to 3 days. Not good to sign a customer in real time.
- There are also a number of processes that fit the definition, but that are either non-compliant and/or non-universal. For instance, in Spain you could onboard a customer with his electronic Id card. But to be honest, how many Spanish citizens have an electronic Id card and a smart car reader at hand when trying to open an account remotely? If you take into account the validity of the certificate and the user knowing the PIN code, the number gets pretty close to zero.
- What are the constraints that prevent digital onboarding to be a reality?
- Legal constraints, mostly anti-money laundering legislation. And for a good reason. This should be taken as a given constraint when designing a solution.
- A combination of technical, operational and social reasons. An example of a social reason would be people not having a certain technology at hand, or not feeling confident about using it. We often take people for granted, but I have come to find that it is probably the single most important reason for change to take place. Back in the late nineties, part of my job at IBM was pitching bank CEOs, Boards and Steering Committees on how e-business was going to change their world. I truly believed at the time, as did many, that this change was just around the corner. Believe me, there is very little in what is happening today in the fintech space that was not contemplated in those presentations. What we did not take into account is how long it would take for the technology, and people’s confidence in it, to become mainstream.
- So then, what is the solution?
- Short term: Account Information Services. That is, obtaining and presenting account holder information for digital onboarding purposes. This is a solution that relies on a chain of trust, as you have to trust other banks did their job as expected. Today I learned this is not the case 100% of the time, but it is as close to universal as we can get in a 1-2 years’ time-frame. In the end, it is up to the bank to decide which other banks they trust.
- Long term: certificates under eIdas and maybe biometry. But as Keynes liked to say, long term we will all be dead.
- What is needed to accomplish short term?
- It is required that banks are able to provide the following information via their electronic banking interface:
- Complete identification: all information required to open an account, such as full name, identification number (passport, id card or social security number), date of birth, address and marital status.
- Reliable information. The above information has to be reliable. Many would be amazed at the number of people in the EU that where born the fist of January 1.900, or that have an id card or passport number such as 00000000 or 11111111.
- And preferably structured, although this can be overcome at a reasonable cost.
- Since current anti-money laundering practices are obliging banks to identify their customers or block their accounts, the delta required by banks to fulfil the above is minimal, and could probably be achieved via minor legislative changes. I have to add as a disclaimer that I am far from being a legal expert.
- If not, we or other peers, will come with solutions. Probably not the best for the common benefit, but great for our bottom lines.
*While Eurobits started providing Account Information Services the 1st of August 2.004, we inherited Bankinter’s Account Aggregation Services Platform as well as part of the team. This platform started providing services to the public in early 2.001, being to my knowledge the first service of its kind in Europe. If anybody has any information that challenges this, I would love to know