It’s no secret that every day, more and more of our interactions take
place online. We bank, pay bills, shop and can even receive an education
virtually, from the comfort of our own homes. We all do it. As consumers, digital
interactions create convenience for us – we’re able to perform many of life’s
daily tasks on our own time. The same can be said for the credit union space.
Members expect high-level service from their credit unions and access to many
services online, including loan applications, money transfers, and checking and
However, the anonymity of the online world has its drawbacks. Criminals
can leverage the same technology and online platforms for nefarious purposes. It
goes without saying, the ability for credit unions to effectively verify a
member’s identity is emerging as the most critical component of commerce. Whether
it’s the issuance of a new loan, monitoring the movement of funds, or allowing
a member to log into their account, continuous confidence in the authenticity
of the member is crucial.
Amid this digital revolution, there are two other important factors for
credit unions to consider. First, the number of people in our country that are
underserved by traditional financial services is estimated to be a staggering
100 million people. These are individuals with little-to-no credit history,
making it difficult for lenders to properly assess credit risk. Add to this the
estimated 11,000 people who turn 18 years old in the U.S. every day who are
newly enabled to participate in our financial system, and credit unions have
enormous opportunity to help these individuals gain access to financial
resources. Second, after interviewing more than 10,000 people for our most
recent Global Identity and Fraud Report, we found that security is the number
one priority for people interacting online, and that online trust is formed
through the use of visible verification efforts, with a strong preference for
Take a minute and consider the story that’s developing. Within the next
10-15 years, online access will become nearly universal. With nearly every
person on the planet reliant on the digital economy, the opportunities, risks
and critical significance of identity will be the driving forces of commercial
activity. For those that are online, security is an expectation and a more harmonious
customer relationship can be built by ensuring it. That said, while people’s
access to online services are growing quickly, their access to financial
services is not. They might be online, but large numbers of our neighbors and
potential credit union members struggle for access to resources that can
improve their lives.
Fortunately for credit unions, this is where the story gets
interesting—and where there’s potential benefit.
Part of the challenge for people who can’t access financial services
and resources is the “credit-first” paradigm. In most lending situations,
identity assessment doesn’t even begin unless an individual qualifies for
credit. For those people who have limited credit histories and can’t access
financial services, it’s not only hard to enter the system, but from an
identity standpoint, there isn’t much reason for institutions to build a
relationship with the prospective borrower and establish confidence in the
authenticity of their identities.
With a unique, two-tiered approach that allows credit unions to
cultivate “members” separate from “borrowers,” these organizations have an
opportunity to establish a relationship with all prospective members. As more
underserved people move online, real opportunities will emerge to authenticate documents
remotely, verify identities, capture biometrics and establish their legitimacy
and engage them as community members who have—or will have a need for financial
services. As the migration toward digital interactions continues and establishing
identity online becomes even more important, credit unions can build a relationship
that potentially lasts a lifetime.
Moving beyond identity management at the point of loan qualification, credit
unions could expand membership prior to taking on lending risk. Once a member
is established with a confirmed identity, credit unions can offer education,
financial literacy and other resources, such as Experian Boost, which allows the
use of utility and mobile phone payments to increase credit scores through the
online environment. This small shift in approach to identity can bind members
to the credit union as a preferred source for the services that will be needed
over time. There’s an opportunity to leverage the digital revolution to
confidently identify those community members with current or future financial
needs and position credit unions to meet those needs. Other financial
institutions that disregard identity where credit is lacking will miss out. Regardless
of a person’s capacity to use financial services today, there’s value in
knowing that they are people with needs that can be coached and nurtured to
become members with who credit unions can find mutual benefit.
Credit unions have a unique opportunity to expand the role of identity management and positively impact their membership base, as well as the financial health of consumers. Many people lack the extensive credit history needed to secure a line of credit. By connecting with prospective borrowers (even those that may not currently qualify for a loan), credit unions can make a difference in the financial health of many individuals.
Chris Ryan is a Senior Fraud Solutions Consultant at Experian. He delivers expertise that helps clients make the most from data, technology and investigative resources to combat and mitigate fraud risks across the industries that Experian serves. Ryan provides clients with strategies that reduce losses attributable to fraudulent activity. He has an impressive track record of stopping fraud in retail banking, auto lending, deposits, consumer and student lending sectors, and government identity proofing. Ryan is an expert in consumer identity verification, fraud scoring and knowledge-based authentication. His expertise is his ability to understand fraud issues and how they impact customer acquisition, customer management and collections.