Onboarding is the process by which a prospective customer’s information is collected, assessed and verified by a financial institution – before services are extended. The aim is not just to ensure all relevant legal and regulatory requirements are satisfied;
it is to avoid customer abandonment along the way.
This is both a business and a compliance matter, which must be balanced. According to Deloitte,
38% of new banking customers abandon the account creation process if it takes too long or demands more information than they are willing to disclose. On the other hand, if due diligence is not observed, financial institutions risk penalisation by the regulator,
or worse, facilitating serious crimes such as money laundering or terrorism financing.
This short read touches on the issues, key considerations, and evolution of onboarding in financial services.
The evolution of onboarding
Historically, customer onboarding has been a laborious process – involving mountains of paperwork and heavy bureaucracy. Thanks to the technological revolution, with its internet connectivity and mobile phone ubiquity, inefficiencies and potential for human
error have been greatly reduced.
Today, most banking consumers expect onboarding to be digital. This is achieved through the completion of online forms, e-signatures, and automated verification processes. For the institutions, this has reduced costs, increased efficiencies, and – most importantly
– improved the customer experience.
Looking ahead, the increasing deployment of data analytics and artificial intelligence (AI) will help banks tailor each onboarding experience, and offer chatbots or bespoke products and services, on-the-fly.
Key components of onboarding
There are a number of integral processes associated with onboarding, including
identity verification, and Know Your Customer (KYC) or Know Your Business (KYB) compliance. There are also data security and privacy concerns, as well as risk assessments to run.
Identity verification involves receiving and checking personal data, such as name, address and date of birth. This ensures that the person being onboarded is the person the institution believes it to be. Compliance with KYC, meanwhile, ensures the individual
meets regulatory requirements, such as Anti-Money Laundering (AML) rules. Methods might include document verification, biometric authentication, or more recently, AI algorithms to analyse vast amounts of data.
Throughout the information collection process, stringent security measures must be observed, such as encryption, secure data storage, and controlled access. Not only does this shield personal and financial data from unauthorised access, it gives prospective
customers the confidence to complete the onboarding journey.
All these components are packaged and delivered through the user interface (UI) and experience (UE), which makes the provision of data easy-to-navigate, intuitive, and visually appealing.
Innovative onboarding considerations
Institutions looking to get an edge on the competition may wish to make additional tweaks, and fine tune their onboarding process.
One way to do this is by deploying customisable onboarding forms, which respond and adapt to customers’ specific needs. Based on responses, form fields can be displayed or hidden, via conditional logic and predictive analytics. Other tailored features might
include drag-and-drop interfaces and flexible formats that align with the institution’s brand and objectives. These are the precursors to personalisation – the holy grail of customer service.
Another consideration would be enhanced data collection and validation techniques, which ensure greater precision and information completeness. This might involve integrating verification fields, validation logic and document uploads, to comply with KYC
rules. Machine learning and AI can help here too – serving to automate tasks and enhance operational efficiency by intaking documents and extracting structured data at speed. Research from Deloitte recently revealed that
86% of financial services AI adopters say it will be “very” or “critically” important to their success in the next two years.
Finally, financial institutions should be prepared to continually improve their onboarding process, through both internal reviews and client feedback. This may be garnered via surveys, behavior tracking, or performance metrics. As ever in the world of financial
services provision; reacting to technological developments, shifting consumer expectations, and regulatory changes is the key to staying afloat.
The onboarding balancing act
Naturally, customer onboarding processes vary from institution to institution. It all hinges on the software used, the chosen UI, as well as the information that is collected. Fundamentally, though, there are a few factors that must always be appealed to:
speed, onboarding tracking, multi-device capability, and privacy. If these elements are guaranteed, institutions will find that abandonment rates fall.
Ultimately, onboarding is a balancing act. It is the institution’s responsibility to ensure that risk management is just as robust and reliable as the customer experience. Of course, one cannot be had without the other – but each cannot be dialed to 100%.
Tailored, dynamic strategies – powered by AI technology – are the key and have the potential to set apart banks from fintechs.
To learn more about best practices for onboarding, read Finextra’s article: ‘How to onboard a new customer’.