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Challenger banks and On-Boarding

Ben Luddington

Five years ago Metro Bank was the first new high-street bank to be granted a banking licence in over 100 years. Now, over 20 new challenger banks have also been granted banking licences and are starting to put pressure on the large established banks.

Many of these challenger banks are basing their business models on technology eschewing expensive branch networks.  Their banking is strictly on-line only and in many case, mobile first.  This does away with the high cost of branches and branch staff and allows them to focus on serving their customer’s needs.

The day to day advantages of these mobile focussed challenger banks is clear, however, the lack of a branch network poses certain regulatory issues, none more pressing than how do you open an account with them?  With no branches you cannot just pop into your local branch, hand over your passport and a copy of a recent bill for them to authenticate you.  On-boarding is a key aspect challenger banks need to resolve, on one hand they need to comply with all the AML/KYC regulations and on the other they need to ensure that the customer experience is the best it can be.

On-boarding is a key aspect challenger banks need to resolve, on one hand they need to comply with all the AML/KYC regulations and on the other they need to ensure that the customer experience is the best it can be.

One option is for customers to get copies of your ID and proof of address and take them to a Post Office for them to be certified and passed to the bank, however this is a long-winded process and undoes much of the appeal of mobile.

Other banks have reportedly adopted a different approach. Atom bank1, which has not yet formally launched, will request you to scan in your ID before you can open an account.  Many other challenger banks are testing possible solutions as they await their banking licence and have not released details on how they will on-board customers.

PwC is active in London’s vibrant FinTech market where many new entrants are trying to solve this mobile on-boarding challenge. In particular we are working with a company called Paycasso to understand the practical, regulatory and technical challenges involved.

Paycasso uses traditional government issued identity documents combined with sophisticated facial recognition technology to provide its solution. The utility of this approach is being enhanced by the increased prevalence of biometric identification documents, such as the modern British passport, which provides the Paycasso approach with additional data to validate the identity of the customer.

Paycasso is just one of the many possible approaches that digital banks can adopt. PwC is working with banks and technology vendors to understand their changing requirements in this digital world.

[1] http://www.bbc.co.uk/news/business-34963590

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Ben Luddington

Director, PwC United Kingdom

Tel: +44 (0)7764 958062

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