In the new "normal", banks and financial services companies are looking to adopt a refreshed approach towards customer interactions that emphasize the digital rather than the physical. More transactions are moving to online channels and the value customers get from the digital relationship is growing.
But with the continued emphasis on digital transformation and technology, banking customers are expecting nothing short of a premium banking experience right from the time they are onboarded.
As Fintech investor, Arvind Sankaran puts it, “We’re witnessing the creative destruction of financial services, rearranging itself around the customer.” Simply put, banks can only acquire new (or retain existing) customers through a personalized digital experience. No longer can they rely on the “traditional” mode of onboarding new clients that takes between 2-12 weeks (according to Forrester Consulting).
In its “Banking the Next Billion” study, Citigroup estimates that an additional 700-800 million Americans will enter banking (for the first time) by the end of 2022. To accommodate new customers, how can banks leverage the power of digital onboarding?
The Growing move towards Digital Customer Onboarding in the current scenario
Apart from nurturing the financial inclusion of the "unbanked," digital onboarding is a mechanism that is providing an easy and frictionless customer experience without the need to travel to the nearest branch. Right from the time customers start their banking experience, they have access to "banking at their fingertips" through a mobile banking app.
Further, digital KYC (or e-KYC) is making it easy for banks to onboard new customers particularly from remote areas as well as reduce their operational costs. McKinsey estimates e-KYC can reduce operational costs by 90%. However, banks need to make sure to steer clear of various challenges in digital onboarding.
4 Main Challenges in Digital Onboarding
1. The long and complex onboarding process
Going by the findings of the Millennial Disruption Index study, 33% of American millennials find traditional banking to be obsolete with four of the leading U.S banks ranked among the least-loved brands among millennials. The primary reason behind this seems to be poor customer experience.
Additionally, improper migration between branch-led and mobile-first channels hampers a smooth client experience across multiple touchpoints.
Yet even banks with digital onboarding are unable to onboard their new customers without any need to collect some physical documentation or some delays. Similarly, banks offering multiple services (like retail banking and insurance) end up needing to go through the long and complex process of onboarding the same customer multiple times for these services.
2. Growing demand for full-access banking services
Customers have started to expect the full range of all banking services on their laptops or smartphones. In this regard, the US seems set to catch up with a trend that has already become well-established in other markets. For instance, the 2018 McKinsey survey found that between 55-80% of customers would consider banking with a completely branchless and digital-only bank.
3. High customer abandonment rate
Customer abandonment continues to be the biggest hurdle for banks when registering new customers through the digital onboarding process. As US banks start going down this road, there are some lessons to be learned from those that have already walked this road. For instance, a Signicat study found that the percentage of European banking customers abandoning their banking app grew from 38% (in 2019) to 63% (in 2020).
A lengthy application process is one of the leading reasons behind customer abandonment. According to the "Built for Mars” study, online account opening at leading U.K-based banks takes between 70 to 120 clicks. For today’s digital-focused customers with a short attention span, this can translate into poor client experience.
4. Frequent regulatory changes
According to Bain & Company, anti-money laundering breaches cost banks over $200 billion between 2009 and 2016.
In the aftermath of the 2008 global banking crisis, banks are now required to comply with constant changes in financial regulations designed to safeguard banking customers.
Even as banks focus on providing exceptional client experience, they also need to adapt their onboarding process to comply with the latest changes in the regulatory framework. In this scenario, banks need to quickly adopt even minor changes in financial regulations into their existing process or operation.
How Banks Can Streamline the Onboarding Process
How do banks streamline their digital onboarding process to overcome these challenges? Here are some essential elements of an optimized customer onboarding process that can work across the entire customer journey:
- Centralize customer data and documents for better customer experience and cross selling : For a start, banks need a single repository (or framework) that store all customer data automatically and integrate with other banking applications. An automated framework helps in reducing data duplication and resolving inconsistency problems. Additionally, a centralized document management system can go a long way in managing KYC documents and regulations. Based on the offered banking service and geographical location, banks can store the relevant documents in the central repository and integrate them with the onboarding workflow to make them readily available whenever needed.
- Personalize and optimize onboarding workflow : A well-defined onboarding workflow can work towards providing a seamless customer experience. Understand your customer persona before designing the workflows. New retail customers could be mainly millennials, while commercial customers will be from different demographics, having different personas. Further personalize the workflows depending on the type and size of the commercial customer. Consider balancing compliance and the customer experience. Avoid cross selling during the onboarding process.
- Design customer experience with mobile first strategy : Despite a 14.5% rise in online account opening, just 40% of banks provide account opening facilities using the mobile phone. In addition to opening bank accounts, a “mobile-first” strategy must be adopted when it comes to customer experience. A McKinsey study also finds that banking customers are already embracing various digital channels to get their queries answered. For exceptional client experience, banks must be able to integrate their mobile-first strategy with seamless human interaction at various touchpoints.
- Governance : Banks require end-to-end governance that can span across leadership levels. Dedicated teams can oversee onboarding activities including KYC procedures and service level agreements. Define metrics like conversion and abandonment rate, time required to onboard, and conversion rate post abandonment - and measure them at leadership level.
- Automate customer follow-ups post onboarding : onboarding: Digital onboarding is new for the customer as well. This means the customer often needs more handholding and it may be harder for them to find all the information they need to get the process done accurately, completely, and quickly. New customers will often seek important information that the onboarding process may have excluded. As a solution, banks must look to automate the customer follow-up (after the onboarding) by providing them with information about product features, facilities, or ongoing promotions (if any). This will ensure the process gets completed and the customers stay engaged through the cycle.
Finally, a streamlined onboarding system can be "perfected" through smart testing and validating. For example, user testing methods are effective for learning from the user onboarding experience. A well-developed testing strategy can help in narrowing down what needs to be included (or left out) from the onboarding flow.
Conclusion
With Fintech companies disrupting the traditional retail banking model, the future of banking depends on how banks can transform their customer relationships through an efficient digital onboarding process. Smooth onboarding can be achieved only through smart, agile, and customer-focused processes. Contact Go-Live Faster for more information on the best way to digitally onboard clients.
