Making Online Banking a Reality in The US: All You Need to Know About the MOBILE Act

February 16, 2018
ID Verification on Phones and Computers

Although providing an end-to-end digital banking experience has been at the core of financial institutions’ digital transformation plans for a while, the truth is that U.S. financial services providers lacked a legal framework that enabled them to make that aspiration into a reality.

Furthermore, in a handful of states, it was specifically prohibited to scan IDs or use electronic copies of driver’s licenses to verify the customer’s identity. This caused unnecessary friction for both consumers and FIs, which had to go through inefficient, expensive, and time-consuming manual Know Your Customer (KYC) checks.

This changed in 2017 with the introduction of the H.R. 1457 Bill, ‘Making Online Banking Initiation Legal and Easy’, better known as the MOBILE Act.

Championed by Rep. Scott Tipton (R-Colo.), this bill has counted on an enthusiastic bipartisan support at both the House of Representatives and the Senate.  The MOBILE Act creates a national standard to authorize banks to scan and retain information from driver’s licenses and identity cards when a consumer starts the process to open a bank account online, either using a mobile app or through the financial institution’s website.

Making Online Banking Origination Legal and Easy with Digital Identity Verification

According to Pew Research Center, nearly 7 in 10 adults have smartphones, meaning mobile banking is a potential point of access to mainstream financial services for the majority of the country.

However, until now, some states had rules expressly banning the use of mobile banking applications to scan driver’s licenses and other ID cards for customer’s identity verification. The MOBILE Act contains an express preemption provision to overrule state laws that do not permit the scanning of state-issued personal identification cards to verify a customer’s identity. 

This bill expands the documentation a bank can use to verify a customer’s identity online, making it easier and quicker it does not require a bank to accept such documentation or limit a bank’s ability to decide who is eligible to open an account.

MOBILE Act – What’s in it For Financial Institutions

1)     The new regulation would allow financial institutions to use electronic copies of IDs for customer’s identification and onboarding.

2)     Specifically, the MOBILE Act would allow financial institutions, with an individual’s consent, to record personal information from a scan, copy, or image of a driver’s license or other government-issued personal identification cards.

3)     It would also let the financial institution to store the information electronically when some individual initiates an online request to open an account or obtain a financial product.

4)     The financial institution would be permitted to use the information for the purpose of verifying the authenticity of the driver’s license or identification card, verifying the identity of the customer, or complying with legal requirements such as KYC compliance or Anti-Money Laundering regulations.

5)     The financial institution would be required to delete any copy or image of an individual’s driver’s license or personal identification card after use.


New online bank account regulation - a huge win for FIs and consumers alike

Commercial banks, credit unions, and innovative lenders have been among the first in supporting the H.R. 1457 digital banking bill. The proposed act also counts on the support of state regulators and national watchdogs.

In addition to help banks, credit unions, and other financial services providers achieve their digital transformation goals and seamlessly shift customers to the more cost-efficient digital channel, the MOBILE Act will also benefit end users.

The new bill would streamline the process for consumers wishing to open bank accounts electronically and ensure they are protected by the participating bank’s identity theft and financial fraud policies. To address security and privacy concerns and further foster mutual trust between FIs and consumers, the legislation requires financial institutions to delete the driver’s license copies after the consumer’s identity has been verified.

Additionally, facilitating legitimate and easy online access to bank accounts and other financial products will help financial inclusion: a 2016 report issued by the Federal Deposit Insurance Corporation (FDIC) found that consumers in underserved areas who utilized mobile financial services felt more financial stability because they had increased access and control over their finances. 

A 2016 Federal Reserve study found that 31% of Americans were unbanked or underbanked, but widely used mobile phones. This represents a great opportunity for those financial services providers willing to leverage digital identity verification as endorsed in the MOBILE Act to help circa 67 million unbanked or underbanked people in the U.S. access financial services from their mobile devices. The Conference of State Bank Supervisors (CSBS) also thinks implementing this new online banking regulation will help banks with their efforts “to innovate in a safe and sound manner to reach unbanked and underbanked consumers, especially in remote areas where the MOBILE Act would have the greatest impact.”