Fully digitize the customer-bank relationship using the API ecosystem

11 September 2020

Whether in a private or business context, the importance of digital customer services is growing. However, banks are not yet positioned to offer all central processes digitally in an automated manner. 

Lockdown and home office have further strengthened the need for positive digital customer experiences but have also relentlessly exposed weaknesses. Recently, we came across two examples at a local bank:

  • Whoever wants to open a bank safe deposit box needs a bank account. At the chosen bank however, the latter can only be opened if you sign several papers in person.
  • If you want to give e-banking access to your accountant, you need a power of attorney in physical form, signed collectively. The bank then checks and activates the power of attorney manually.

Too rigid, too expensive

There are many reasons why most banks have not yet fully digitized and automated these everyday processes. Banks sell trust. Many customers prefer to trust the good old paper rather than a digital service. It is complex and expensive for banks to offer both. In any case, digitization is time and cost intensive. Accordingly, many banks prefer to invest continuously in improving the portal user experience rather than replacing paper processes. Finally, banks tend to develop expensive in-house solutions rather than using external solutions.

Four basic building blocks

The bank requires four basic modules for the complete digitization and automation of digital customer onboarding, power of attorney management and many other applications using electronic signatures. For each of these basic modules there are providers from the API ecosystem.

  1. Online identification. The bank must identify the person who wants to onboard. 
    Possible ecosystem solution: Use of a FINMA-compliant external identity verifier (e.g. IDnow) or an external, FINMA-compliant verified identity (such as SwissID could offer in the future). Soon, FINMA could equate auto-identification procedures (e.g. IDnow, PXL Vision) with video identification, thus considerably improving user acceptance of online identification.
  2. Know-your-customer check (KYC). The identified person is checked for various risks and compliance with FINMA requirements is ensured.
    Possible ecosystem solution: Use of a secure and efficient external service that offers person checks. The Swiss neo-bank Yapeal, for example, uses kyc.ch.
  3. Capability for qualified electronic signature (QES)
    For risk reasons, the bank will in some cases require a legally binding signature, e.g. for granting a power of attorney for legal entities.
    Possible ecosystem solution: In the best case, the external identity (ID) additionally provides the capability of QES. An ID user can easily issue the signature remotely based on his electronic ID. Providers such as SwissID or TrustID, for example, are likely to bring more qualified electronic signature-capable IDs to the market.
  4. Contract signing process, for the efficient collection of signatures from the right person 
    Obtaining electronic signatures, especially in the corporate environment, is a process. Depending on the company, different signature rules must be observed (collective, selected persons/groups, etc.). This process should be as intuitive and automated as possible.
    Potential ecosystem solution: Choose a signing provider that offers modern APIs for electronic signing. The provider can be the issuer of the external ID itself or cooperate with the same (e.g. Skribble works with TrustID, SwissID and other identity partners). The bank then sends the document to be signed to the signing API of the provider. The customer signs and the signed document is automatically returned to the bank. The bank then validates the signature and feeds the document into the correct process. Manual steps are only necessary in exceptional cases.


Magic word: API ecosystem

For the bank, the integration of trustworthy external providers has the great advantage that it only must take care of a few aspects. This enables it to achieve a very fast time-to-market. Internally, the bank needs a workflow component for signing and validating the signature. There is also some work to be done for overall integration and for an optimal user experience.
All in all, using the API ecosystem in the digitization of banking processes brings enormous advantages. It allows banks to better meet customer needs and focus on their core business without spending a lot of resources on certification or in-house development.

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Photo by Kelly Sikkema on Unsplash