How to grow a business through digital customer onboarding you can trust
Reliable customer evaluation can make or break a business, especially in finance. Learn how implementing automated identification and digital onboarding in place of manual checks put Home Credit in the leading position of a very specific market.
Looking to improve their position in the Philippine microfinance market and take advantage of ever growing demands for loans, Home Credit was facing several challenges. With ID fakes in circulation, weak internet and slow customer verification, there was ample room for improving the customer onboarding process.
Today, Home Credit is the leading credit provider in the market. Through reliable fraud prevention and radically improving the efficiency and security of onboarding, the company was able to reach previously unavailable customers – even those unable to get a loan in the past.
The key to unlocking the market’s potential was to reliably verify the identity of the customer. And that’s where Home Credit turned to us at Innovatrics. Read on to see how we joined forces in order to help grow their market in the Philippines and gain a significant competitive advantage.
What’s inside this report:
1. Fraud, unreliable IDs and poor connectivity
How do you assess the situation?
2. A solid biometric framework
What do you need to make it work?
3. Fast and secure loans
Where do you go after it all works?
Is biometrics relevant for your company? It is, if you need to:
- Verify the identity of customers and establish a trusted relationship with them
- Speed up and automate customer onboarding
- Reduce staffing costs
- Eliminate human error
Banks, airports, casinos, ride-sharing services, governments – they all use biometrics to improve their business efficiency. And you?[Learn how biometrics can help your business.]
A tough nut to crack
Entering the Philippines’ loan market
Faced with the task of improving processes in a market of 110 million people spread over more than 7,500 islands with variable internet coverage, Home Credit’s Data Science Lead Jan Krpálek needed to address several issues in a single solution.
With more than 20 different IDs available both legally and illegally (a good fake costs around $20), identifying a customer wasn’t as straightforward as it would be elsewhere. Moreover, Jan had to think about how to include customers with slower internet connection and other country-specific challenges. Together with Donal Greene at Innovatrics, they set out to tackle these face to face. Literally.
Slow processes, difficult scaling
Understanding the market
Although Home Credit had had a fingerprint-based customer identification system in place since 2012, the situation in 2019 called for an improvement. Demand for microfinance products was booming – and by speeding up the processes, Home Credit could grow their business significantly, all the while helping the local population with greater credit availability.
“With the old system, customer verification took weeks and was very vulnerable to fraud attempts, raising suspicion. Poor internet and point-of-sales coverage made scaling risky and difficult to manage.”– Jan Krpálek, Home Credit Philippines
From the customer’s point of view, getting a micro-loan before 2019 was a bit of a stretch: with uncertain results and weeks of waiting time, one couldn’t rely on getting financed in time (if at all). In the Philippines, this could easily make or break a family business.
From the technological viewpoint, we needed to answer a whole pool of difficult questions. How do you reliably verify new customers using a slow internet connection? How do you manage fake IDs in circulation? How do you cut the time needed for verification so the service is attractive? And, most importantly – how do you keep it viable for the business?
In the end, a little bit of everything was needed to make all of this fall into place. Using biometric onboarding meant every smartphone could be used as a reliable and safe identification tool, and also allowed for a complete rebuilding of the whole application process. Employing machine-learning and optimising data transmissions on top of this, made the whole thing technologically viable and reliable.
But before we could start implementing technology, we had to thoroughly understand the specifics of the challenges. Let’s look at them, one by one.
Three steps to securing a loan, the new way:
3. You have the obtain credit and are good to go.
From manual verification to instant smartphone onboarding
The overall performance of the user onboarding process greatly depends on four key factors, each of which is significantly influenced by what identity verification system is in place.
Factor #1: Fraud avoidance
Originally, customer onboarding entailed a lengthy process of manual data processing, and was vulnerable to fraud – repeatedly. There was no reliable, permanent solution for fraud prevention. We needed something to verify the applicant’s identity against an existing database, fast.
Factor #2: Creditworthiness check
Facial recognition is useful not only for onboarding: improved identification reliability aids in accurate creditworthiness assessment, often marking the difference between getting or losing a customer. Setting up credible assessments of creditworthiness would allow Home Credit to reach previously unavailable customers and enable their financial inclusion at the same time.
#3: Resource management
Implementing facial recognition into physical points of sale would fix the most pressing issues, but it wasn’t the game changer Jan and Donal were looking for. Even if Home Credit had enough branches to reach all potential customers, the process would still require a lot of physical resources, seriously limiting business growth.
Instead of expanding the physical presence of Home Credit, they set out to develop an automated, digital solution. This would cut the verification time from weeks to minutes as well as improve safety and accuracy.
#4: Access to onboarding
While points of sale are necessary for some operations, they also have associated costs and are not infinitely scalable. Jan and Donal found the answer to business growth through enabling remote and mobile onboarding through smartphones.
“Biometric face identification coupled with the smartphone app we developed, enabled Home Credit to onboard customers remotely and automatically, requiring no human staff involvement in most cases.”
What’s more, after going through the verification once, customers could have access to Home Credit products repeatedly and at any time.
Technological challenges: speed, internet connection and costs
After understanding the shortcomings of the current system, it was Innovatrics’ turn to propose a sound technological solution. In order for Home Credit to successfully expand, the technical aspects needed to be investigated, specified and paired with appropriate solutions.
How to tell a real face from an image or video?
Did you know there is a thing called Liveness Check that can differentiate humans from digital media? Learn more about how it works from the white paper.
Challenge #5: Profit is impacted by long durations and high costs of onboarding
If the onboarding process takes days, or even weeks, and requires a lot of manpower, the cost of onboarding a single client mounts fast. This makes the business model potentially unsustainable in the long term. Keeping costs down was therefore not only beneficial, but necessary.
Challenge #6: Relying on physical POS limits growth
Even if Home Credit managed to build and maintain tens of thousands of points of sale necessary to reach those millions of potential customers, business growth would be limited by requirements to rent branches, train and pay staff and adhere to opening hours. The only way around this was a remote, digital solution.
Biometrics are in use in a variety of fields already. Some examples:
Biometrics reliably identify government employees and voters during elections.
Biometric identification protects secure premises and data.
Banks and financial services
Fast and reliable customer identification and verification provides better service, prevents fraud and onboards customers faster.
Numerous ways of ensuring reliable identification help during investigations and court proceedings.
Biometric identification increases overall airport security, and improves speed and ease of access.
High security requirements in your industry
If you handle lots of sensitive data and the potential risks of security breach are severe, top-notch security is a priority. From research laboratories and airports to casinos and government offices, biometric credentials can rapidly increase security and make its breach next to impossible.
Human error is costly in your industry
If your business security and profitability heavily depend on error-prevention, human factor can put it at risk, requiring you to work hard on preventing it. In such cases, biometrics can take human error out of the equation, significantly improving security and stability.
Staffing costs are too high
Due to complicated processes spanning across different teams, you may be employing more people than necessary, negatively impacting your profit and efficiency. Verification, onboarding or security clearances are good examples of where biometric solutions might automate processes, cutting down staff requirements to a minimum.
AUTHOR: Oliver Meres, Tomáš Beňadik