Account-opening solutions offer financial firms and other organizations a return on investment (ROI) of $3.50 for every dollar spent, according to research conducted by market-advisory firm Liminal.
"The ROI stems from various factors, including fraud and compliance cost savings, increased revenue due to improved user experience, and savings from automated processes," writes Liminal's Travis Jarae in an article summarizing the research. "Comprehensive solutions can lead to a 17% reduction in fraud at account opening and a 17% reduction in abandonment, further enhancing the buyer's value proposition."
Account-opening solutions are software platforms that use data aggregation and machine learning to quickly verify the identity and financial status of individuals or entities seeking to open financial accounts. Manual verification of customers can be expensive and time-consuming, and account-opening solutions seek to make the process cheaper and more efficient.
Such verification is required by Know Your Customer (KYC) and Know Your Business (KYB) regulations and guidelines in various countries that seek to crack down on money laundering, corruption, terrorist financing and fraud. The associated processes and software solutions can also be used as part of regular due diligence.
Despite the increased prevalence of KYC and KYB regulations, account-opening fraud appears to be rising. Liminal's Executive Summary of account opening in financial services cites a Financial Times report that $2.2 billion will be lost to synthetic-identity fraud by the end of 2023. (Synthetic-identity fraud involves mixing verifiable information with fake data to create a convincing but fraudulent profile.)
There are already more than 150 vendors in this account-opening-solution space, but only 32 currently offer the seven essential features that buyers demand, says Liminal's overview of the executive summary. Those features include customer risk scoring and verification of the potential customer's date of birth, address, government ID, tax ID, telephone number and name.
"While many providers are building out key capabilities, no one vendor has won this market yet," notes the Executive Summary.
Most of the 32 vendors qualify as "large incumbents" that possess abundant "momentum, market strength, stability and success, product scope, and leadership" to set them apart. But Liminal suggests that potential buyers also consider a handful of "new, innovative solutions and regionally focused vendors" that offer "strong product capabilities," including enhanced user experiences.
For more information about account-opening solutions and which 32 vendors made the cut, please download Liminal's Executive Summary here.