The issue can provide competitive advantage if customer service, efficiency and integrity are balanced, argues Andrew Hooke
Establishing the true identity of customers, employees and partners has never been harder or more important as the need for cost efficiencies drives ever-greater use of remote channels and technology-based transactions.
It is a significant challenge for both private sector and governments.
US lenders, for example, report losses of $1bn a year because of identity fraud and the UK government has estimated that identity fraud costs the UK economy more than £1.7bn a year.
The answer to the problem lies with establishing a unique, secure identity for the individual, underwritten by the combination of reliable biometrics, such as finger scans, and secure tokens (cards) that can readily be used to prove who you are.
Governments globally are investing in such approaches. For example, there are European agreements to strengthen visa and passport travel documents by including finger scans. However, the lead times are long and the identity issues are pressing.
While the public sector is moving ahead, few private sector organisations have so far recognised the full potential of identity management. Most view it is as a necessary evil to enhance security measures or to achieve regulatory compliance. However, the opportunity is much greater, particularly when considered in the context of gaining competitive advantage.
One such example is enhanced customer service. Effective identity management in this environment enables immediate and accurate recognition of customers, leading to greater insights into their behaviours and the tailoring of services to that individual, creating a market segment of one.
It is an attractive proposition, but any solution must be affordable and efficient, while also being secure and maintaining operational integrity. Achieving enhanced customer service from identity management therefore depends also on efficiency and integrity.
Unfortunately these three needs – customer service, efficiency and integrity – often conflict and demand a trade-off. Measures to improve customer service, for example, can have a detrimental effect on integrity and efficiency: a bank may offer services over the internet resulting for some customer groups in an increase in service, while conversely exposing the business to new channels of attack from fraudsters.
Conversely, increasing integrity measures can reduce efficiency and customer service as business processes are lengthened, as seen in new airport integrity measures, which have reduced customer service and air travel efficiency.
Successful integration of identity management is about balancing the trade-offs between these three dimensions appropriately for your business. Only if these three elements are appropriately co-ordinated can this lead to sustainable competitive advantage.
So how can organisations make this happen? They must consider short, medium and long-term strategies now, while plotting a journey to leverage government initiatives globally.
Short-term approaches address today’s priorities and do not rely on others to get their house in order to achieve results.
A well-known retail bank recently adopted identity management to help address online impersonation, which some banks report to be growing as fast as 30 per cent a month. Characteristics of the customer’s computer are used, in addition to the usual passwords to authenticate the transaction. Customer-specific images and information are displayed at log-on so customers can check the site is genuine.
This gives confidence to the customer, reinforces their trust in the bank, enhances their experience and improves the integrity of the service.
Medium-term solutions often rely on community approaches where peers from an industry act together to tackle a common issue. One example is the UK payments association – Apacs. Its solution will allow British banks to identify consumers and small businesses by using chip-and-pin technology to “sign” online transactions (in other words, authenticate the originator). This approach enhances the experience for consumers and small businesses, and offers significant operational efficiencies.
Long-term approaches focus on the strategic business needs of the future. Here, private sector organisations may be in a good position to benefit from leveraging long-term government initiatives in identity management. The trick is to know what is happening and be involved in shaping such initiatives early, so that you know where you need to be and by when.
Inevitably, business focus is on today’s issues, making it easier to ignore the long-term. However, sustaining competitive advantage relies on preparing for the future. Your competitors may already be setting their identity management strategy and engaging in opportunities to leverage government initiatives.
It comes down to knowing what you want to achieve, and how long it takes to deliver. Are you leading or lagging?
The time to get started on optimising identity management in the private sector is now. The majority of governments are investing in shared identity management infrastructures in the expectation of making their economies attractive, secure, cost-effective environments for business. However, these initiatives have long lead times and it would be a mistake for business to wait for their conclusion before pressing on with corporate efforts.
Organisations need to take note of any relevant community, global or government initiatives and engage with them. They need to plot a path that ensures they will leverage and harmonise with these initiatives once they reach fruition.
There is a window of opportunity available for any organisation whose board makes identity management an agenda item in its own right. Identity management needs a rethink. It is not just about security, it is about competitive advantage, and the time for that rethink is now.
Andrew Hooke is COO and Head of Identity Management at PA Consulting Group.
For a copy of PA’s briefing on 'Delivering the full potential of Identity Management' please contact identitymanagement@paconsulting.com
