Problems with Identity Verification Online
The following could have been a story about any bank or credit union, large or small, and represents an industry-wide problem with online identity verification. Ally Bank happened to be the bank where I applied, but I am confident that I would have had a similar experience or worse at almost any other institution.
I graduated from college five months ago and began working for Andera, a company that provides account opening and loan origination software to banks and credit unions. Like many graduates, I had a checking account and a savings account with the giant on the block, Bank of America, and nothing else. Thrown headfirst into the world of fintech, I needed to update my personal finances, and fast. I started using mobile banking applications, I downloaded Mint and Betterment, I carefully compared credit cards, and I exhaustively examined rates, ATMs networks, fee structures, customer reviews and convenience features like P2P transfers and Remote Deposit Capture to choose my most important financial relationship: my bank.
I settled on Ally, a credit to that institution’s balance of innovation, service, pricing, and savvy marketing. I made sure they would have RDC soon before I applied. I submitted my application online and prepared to enter my funding information, excited to have a purple card arrive in the mail later that week.
Then I got this screen:
Coincidentally, I was at the time doing research to prepare for an Andera webinar on identity verification. I knew that, at that step in the application process, Ally had probably called out to a third-party data provider like Experian or Equifax to verify that a real person named Melanie Friedrichs matched the information I had entered to open my account. I also knew that, because I’ve had only a few years to accumulate credit data and because I had recently moved, the data provider had drawn a blank and sent me into review.
In general, the online identity verification process works like this:
Review processes differ by financial institution, but most applications that must be reviewed manually are sent to call center or branch staff, who ask the applicant to provide additional identity documentation, like a driver license. Then, they manually approve or reject the application. Discover also sent me into review when I applied for a Discover More card, and their online workflow automatically prompted me to mail, fax, upload, or email a photo of my driver license to confirm my identity. I whipped out my iPhone, snapped a photo, emailed from my photo app, and bam, I was done. A representative called me the next day to ask a few “out of wallet questions” in person, and my card arrived in the mail about four days later.
Unfortunately, Discover is the exception, not the rule. Most financial institutions deal quite poorly with identity verification online, and Ally turned out to be one of them.
Ally didn’t have an automated photo upload option, so I pulled out my phone and called them. The representative asked me to mail or fax a copy of my license. I made a face; I didn’t own a printer, scanner, or any stamps at the time, and I had never used a fax machine in my life. Still I decided to opt for the latter; I dreaded the sluggishness and uncertainty of the postal service. I made a mental note and hung up.
Of course, I completely forgot I needed to send the fax, and I didn’t receive an email from Ally to remind me, even though they had collected my address on the first page of their application. I also misplaced my Bank of America debit card that week, and by Friday, I realized that I was unable to get cash.
Thankfully, an Ally representative called me to remind me to follow up, and I finally dragged myself to Kinko’s on Sunday and laughed helplessly as I tried to feed my photocopied license into the wrong end of the fax machine. I called Ally the next day to see if they had received it; they said they had and that it would take ~24 hours to open my account. I called Ally two days later to see what the hold-up was (I was still cashless) and spent 10 minutes on the phone with a very helpful representative, who returned to me flustered and said “The only thing I can say is that it is on someone’s desk.”
By the following Friday I was so desperate for cash that I did what my company preaches against: I went to the branch of a big bank downtown with horrible rates and opened an account. It was slow, painful, in person, and with paper. At least I walked out with plastic in my hand.
A week or so went by. Nothing from Ally. Then I got a letter in the mail:
When I was writing this story I reapplied to experience the process again so I could report more accurately on it. I already had a bank account and didn’t call to initiate the dreaded review process again, but much to my surprise, I received an email a few days later saying my account had been opened! This time the data providers must have returned a match.
What’s the moral of this story? Review is a time-consuming, frustrating process for both applicants and employees. Both Ally and I wasted time playing phone tag, remembering, reminding, faxing, and receiving. Plus, had I not reapplied to write this story, they would have lost me.
Andera tries to minimize review by offering a waterfall service that calls out to multiple data providers, including non-credit bureau public record compilers like RSA, so that financial institutions can positively identify more applicants automatically and avoid the time-sensitive manual review process. Our oFlows platform does one better and allows applicants to securely upload a photo ID within the application, making the process of review much easier for all applicants involved. Neither of our solutions eliminates the problem of identity verification online, though we, along with companies like miicard are working to get there. I’m excited to see what other innovative companies will be able to accomplish in the next few years.