The European Banking Authority (EBA) has launched a new consultation to align standards in the EU on how customers can be remotely onboarded to financial institutions.
As society has become more digitised, financial Institutions have seen a growing demand for remote customer onboarding solutions.
For example, a February 2020 study released by US data analytics company J.D. Power found that the number of new account openings at US bank branches now comprises just 55 percent of all new account openings.
This statistic showed a decrease of ten percentage points from a year ago.
J.D. Power also found that 31 percent of new account openings are undertaken through a bank website or mobile app, up from 22 percent in 2019, and therefore a 50 percent increase in just a year.
This figure is likely to have significantly increased as these numbers are based on pre-COVID trends. Although similar data was not available for the EU, expectations are that the same shifts in how customers are opening accounts is occurring.
These changes, as well as the European Commission’s focus on a digital single market, make it important for competent authorities and financial sector operators to understand the capabilities of these new remote solutions to make the most of the opportunities they offer, the EU’s banking watchdog has said.
New draft guidelines from the EBA put in place EU-wide, common standards on the development and implementation of sound, risk-sensitive initial customer due diligence (CDD) policies and processes in the remote customer onboarding context.
For example, this includes guidance on proof of identity. Financial institutions are advised that in situations where the evidence provided is of insufficient quality resulting in ambiguity or uncertainty so that the performance of remote checks is affected, the individual remote customer onboarding process should be discontinued and redirected, where possible, to a face-to-face verification, in the same physical location.
The EBA also sets out the steps financial institutions should take when choosing remote customer onboarding tools and when assessing the adequacy and reliability of such tools, in order to comply effectively with their anti-money laundering/counter-terrorism financing (AML/CTF) obligations.
For example, where financial sector operators use features to automatically read information from documents, such as Optical Character Recognition (OCR) algorithms or Machine Readable Zone (MRZ) verifications, those tools should be sufficient to ensure that information is captured in an accurate and consistent manner.
The consultation runs until March next year. Stakeholders can also attend a public hearing on the matter on February 24.
The EBA's proposed guidelines to improve remote customer onboarding also come at a time when the EU is looking to develop a pan-European digital identity scheme, as first announced in last year’s Retail Payments Strategy.
In June, the European Commission released a proposal for the scheme that it wants to make available to all EU citizens and businesses, ultimately allowing citizens to share electronic documents that they can keep in their eID (electronic identification) wallets.