Because banks must comply with stringent regulatory requirements as they strive to optimize risk management, they lean toward operating conservatively. This can result in a tendency to minimize risk by resisting change. However, in our ever-evolving world, many procedural security measures effective in the past have now become obstacles. For example, the requirement of proof of address issued by a bank or government institution within three months is deemed as outdated and cumbersome as relying on faxes for communications. Customer expectations of banks and financial institutions have changed significantly. So, what do today’s financial services customers need most?
Proof of address: Protection or trouble?
Banks are where people keep their wealth, which is why high-level security is important for both banks and customers. When someone borrows money from a bank, they expect the transaction to be protected. Theft of personal information or security breaches during the repayment process can lead to catastrophic consequences.
From the customer’s perspective, the most important issue during the process is not creating more trouble for ME. For example, a potential borrower may choose not to proceed with an application for a bank’s suitable loan offer because of the hurdles they must go through before the loan is granted. For someone who has never applied for lending account in that bank, they have to open new account in person, and must provide physical documents, such as proof of address and income. The idea of having to prepare all the necessary documents and physically go to the branch could be very discouraging.
Reluctance to handle banking issues in person is a new trend in the Internet era. Many day-to-day security procedures are conducted remotely, such as one-time passwords issued over the phone and fingerprint authentication on mobile apps. But when it comes to opening an account, banks rarely provide remote services to simplify procedures, as it’s usually the first encounter with a customer. Among all the requirements of physical documents, people are often frustrated most by the requirement of proof of address issued within three months by a bank or a government institution — especially because of the adoption of paperless banking.
To keep credit risk manageable without address proof
While the requirement of proof of address is indispensable, in order for Hong Kong to advance faster in terms of financial technology development, the HKMA announced it would relax the supervision of remote loan account opening and online lending. This would allow banks to lower the requirement of personal income and residential address certification when it comes to personal loans. However, banks are required to put in place tightened risk management measures for such loans, including loan size limitation, adequate information and time for consideration by consumers during the application process, and tighter monitoring of the borrowers’ repayment ability. By doing that, banks can improve the customer experience, in spite of the smaller amount of loans, by providing more convenience. It could be a stride toward smarter banking.
In response to the troubles of providing proof of address, TransUnion offers a solution that helps banks enhance the customer experience and improve control of credit risk. TransUnion has the most comprehensive address database in Hong Kong, which consists of consumer credit data accumulated over past years. When a new customer declares an address, TransUnion is able to provide information of its authenticity using its “Address Solutions” and algorithm. Meanwhile, it allows the bank to crosscheck the address with the applicant’s records in other lending institutions, to find out whether it’s the latest residential address or not. Such a solution saves new customers the trouble of submitting proof of address, while helping the bank effectively manage the risks involved, naturally giving the bank advantages in winning new customers.
Please contact TransUnion for further information.