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Summary

Lloyds has moved to improve the customer experience and speed its digital transformation with a service that allows its customers to verify their identity digitally and reduces the time taken for account origination to seven minutes. This may result in wider adoption of digital account origination in the UK, as has happened in Germany. However, although digital account origination potentially strengthens the customer experience and reduces costs and financial crime, the loss in branch visits may result in decreased sales.

Lloyds moves toward fully digital origination with online identity verification

Lloyds is the first UK retail bank to enable customers to identify themselves digitally when opening an account online. The service will be trialed among customers looking to add a person to an existing account, with wider rollout to new account applications depending on the trial’s success. Using identity verification software developed by Jumio, Lloyds expects to reduce the origination process to seven minutes, as it only requires customers to upload their identification documents and submit a live photo to be compared for likeness. One limitation is that it is only available via the online channel; the need for a flash plug-in limits use via mobile. However, Lloyds plans to build an app to enable identification on the majority of mobiles and tablets in addition to computers equipped with cameras.

If Lloyds’ digital account origination experiment is a success, it is likely that other banks in the UK will start to adopt similar account origination processes. Opening an account digitally offers a far more convenient service to the customer, as it does not require a branch appointment (which can sometimes take several days to arrange). Moreover, moving the verification of identity documents away from branch staff has the potential to expose attempts to commit financial crime.

Lloyds’ investment in digital banking is part of its stated strategy, of course, but it also reflects a wider trend in the industry. Around half of the 463 retail bank CIOs and IT directors surveyed in Ovum’s most recent ICT Enterprise Insights survey reported plans to spend more on mobile and online banking in 2015, and nearly 35% ranked mobile banking projects among the top 3 IT projects.

There are also precedents in this area from outside the UK. In Germany, the possibility to verify identity by video chat on a smartphone, tablet, or Internet device was allowed by the regulator in March 2014, and a number of retail banks including Deutsche Kreditbank and ING-DiBa have launched online account origination services. The spread of VideoIdent has even resulted in emergence of Number 26, a bank that is only available online and on mobile.

Removing the need for at least one visit to the branch robs Lloyds of a cross-sale opportunity, but the bank may be hoping to offset this with a stronger customer experience in the digital channel. The branch remains a major sales point for UK retail banks, but it’s worth noting that digitized identity verification reduces the costs of account opening. The customer experience will be key, especially minimizing failed origination attempts or requests to take documents to the bank for an additional check.

Appendix

Further reading

2015 Trends to Watch: Retail Banking, IT0003-000634 (December 2014)

2015 ICT Enterprise Insights in the Retail Banking Industry, IT0003-000631 (October 2014)

Author

Noora Haapajärvi, Associate Analyst, Financial Services Technology

noora.haapajarvi@ovum.com

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