‘Selfies’ could soon be acceptable as identification by compliance departments
With major British banks at the very top level of the FX interbank business now allowing retail customers to use selfies as ID, we investigate how this could translate into the FX industry, whereby retail traders could use selfies to make withdrawal requests and changes to their accounts, from a regulatory, brokerage and platform perspective
Such good quality are today’s forward-facing cameras that are integral to most smartphones that compliance departments within major financial institutions are beginning to adopt ‘selfies’, literally a photograph taken by oneself of his or her face, are beginning to be adopted as acceptable proof of client identification.
Leading the way with regard to this dynamic is not a lowbrow white label firm with its offices registered on an unpopulated island, but no less than HSBC, which is one of the world’s largest financial giants and the largest FX dealer for corporate clients in the world, having toppled Citigroup’s firm grip over the corporate sector in 2015 after 36 years at the top.
Indeed Citigroup still holds the largest overall share of global FX order flow at 16%, however HSBC is a major contributor to today’s Tier 1 interbank FX business with 7.83% of all global order flow, placing it in fifth position worldwide.
HSBC has begun implementing ‘selfies’ as a method of replacing traditional security measures, pioneering this methodology in its retail banking division by using facial tracking technology which is a type of biometrics which is becoming increasingly popular within companies that are seeking to make online banking more secure.
In terms of operation, the ‘selfie’ is verified against a passport or driving license photograph that is held on the bank’s central system and can be verified by using Apple or Android phones for mobile banking, which is another method of centralizing the business and ensuring that customers do not need to go to their branch.
Today, Richard Davies, HSBC Head of Global Propositions for Commercial Banking stated “Through simplifying the ID verification process, we’ll be able to save our business customers time and open accounts quicker.”
“We also expect the convenience and speed of a ‘selfie’ to become the verification method of choice for our customers, who no longer need to visit a branch to complete the process” said Mr. Davies.
The question is, could this method become widespread in the retail FX industry, where brokerages have clients who are often thousands of miles from the brokerage’s base and where the entire business is online, yet requires extremely stringent security methods to satisfy regulatory demands on how client assets are kept as well as to ensure that no unauthorized withdrawals can be made or positions taken.
For FX firms to be able to follow this lead, specific functionality with regard to back office systems would be required, as well as a regulatory standpoint on how ‘selfies’ should be presented in order to qualify as correct and secure methods of allowing customer access to trading accounts.
Today, FinanceFeeds spoke to James Glyde, Business Development Manager at Spotware Systems, the developer of the cTrader platform, in order to gain his perspective. Mr. Glyde said “Nobody uses photo copiers anymore. Phone pictures generate higher quality and lower file sizes. I’m amazed when a 5 page black and white contract becomes 25 mb.”
Mr. Glyde, himself a very urbane Millennial with a very comprehensive understanding of modern platform technology as well as current developments outside the FX world said “Sharing files from mobile is just too easy. All apps such as the default mailbox, Gmail, Skype, Facebook are tightly integrated with the device OS and gallery / camera app. I expect soon enough one of those integration could be a trading platform or brokers client area app to authenticate their account.”
“On the other hand it does seem comical, the whole world practicing sending kidnap ransoms with themselves holding their passport and todays news paper!” surmised Mr. Glyde in his usual charismatic and all-observing style.
From a platform development point of view of course this is a poignant matter. Just as importantly, how it can become part of a brokerage’s back office procedure is also important. We did ask a series of brokerages on this, and opinions varied – some considered the idea of selfie in its current state as being too little detail and easily misused, others considered that if brokers could find a suitable way of using it, it could be a very good idea.
Certainly from a regulatory perspective, with the new ‘regtech’ approach that is being taken by not only specialist companies that are automatic the entire procedure from reporting to trade processing, but the actual regulatory authorities themselves with new initiatives from Britain’s FCA including the Fintech sandbox which provides an environment for developers to be able to advance the cause of regulatory technology, the framework is there for the refinement of selfie distribution for compliance purposes.
It will indeed be very interesting should this take on a widespread direction, especially with the biometric technology already in place that can be refined by exactly the abovementioned regtech framework, as it will likely be a welcome reducer of workload for brokerages.