Advancements in technology have shaped the world we live in today, making it more competitive than ever. Because of those rapid changes, banks and other financial institutions felt the need to create better and customized solutions for their customers to improve their overall banking experience. This shifted their focus towards improving customer onboarding as it is the first point of perception building for a bank.
Enhancing customer onboarding is an opportunity for banks to provide an outstanding experience to their customers. McKinsey reports that banks can increase their profits by 40%, provided they introduce digitization in their onboarding processes. However, traditional banks are yet to catch up with this trend, resulting in arduous, time-consuming, and costly onboarding processes. Technology evolves fast and as a financial institution, it is essential to be aware of those advancements to provide the best customer experience to every customer.
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Customer onboarding process in banks includes various activities such as gathering and validating customer’s details, opening the account, and making it operational. On the other hand, the process for the customer includes filling up forms and applications, sharing documents, and in-person identification.
Banking customers today expect services to be faster and convenient. Unfortunately, traditional onboarding experience for banks is often bogged down by time-consuming and repetitive steps that frustrate users, and at times, make them abandon the process. According to the report published by Forbes, 70% of millennials would rather go to the dentist than listen to what banks tell them, while 75% say they would switch banks for a better mobile experience.
Let us explore some of the challenges of traditional customer onboarding:
- Multiple cross-functional teams: A traditional customer onboarding process in a bank involves multiple cross-functional teams such as sales, marketing, legal, operations, and technology. Due to the sheer number of stakeholders involved, there is a lack of ownership of the onboarding process and responsibility towards the customer. Lack of efficient collaboration between teams fails to provide a seamless and frictionless customer experience to the end-customer.
- Legacy systems: Banks capture customer data from various sources and is stored in an unstructured way. Legacy systems are not capable of processing and organizing such volumes of unstructured and phygital data. This leads to complex customizations of such legacy systems and increases significant friction in customer onboarding.
- Technical Flexibility: Banks offering mobility in their services must deliver a competitive and seamless onboarding process where users can open a bank account on any device, whenever they want. However, to make this work, banks will need a new level of technical flexibility. To provide their personnel with a 360-degree customer view, data must be accessible through APIs, systems, and form fields that are easy to use, thereby creating an open-banking ecosystem.
The need for Digital Onboarding
According to the World Bank, almost 1.7 billion people — nearly one-fifth of the world’s population — are unbanked. The top reasons why they don’t use financial services being – they don’t trust banks, it’s too far to travel, it’s too hard to open an account, or they do not have the proper documentation. Therefore, it is important for banks to leverage digital technologies to increase the number of ‘banked’ individuals.
Using digital IDs, e-KYCs and contactless biometrics, banks can make it easier for people to open an account and increase its footprint among the underserved, especially in rural and remote areas where having a physical branch is not economically viable. According to McKinsey, e-KYC processes can reduce onboarding costs by up to 90 percent. In 2021, about 80% of all financial institutions implemented new systems or improved existing ones to create digital accounts.
Benefits of Digital Onboarding
This is how digital onboarding in banking helps to solve some of the major challenges of traditional onboarding:
- Gather & store data at one place and eliminate data silos across the organization
- Deliver unified customer views across the organization, improving the speed of service delivery.
- Automate repetitive tasks such as data entry, verification, and credit checks using RPA, thereby saving time and resources.
- Build-in analytical capabilities that allow leaders with a single pane of glass view to assess real-time performance.
With omni-channel onboarding, customers can start their onboarding journey anywhere (a search result, a homepage, a social media post, or a link from an ad) and continue where they left off from any of their devices. Omni-onboarding follows the customer around between platforms, remembers the information they have already shared, and makes it easy for them to continue later, which lowers the chances of a drop-out.
RPA in customer onboarding
RPA (robotic process automation) and cognitive technologies such as OCR (optical character recognition) can be useful with all verification checks and compliance. For instance, end customer can upload the required documentation, and RPA at the back-end will scan them to spot and report any inconsistencies immediately.
Biometrics in customer onboarding
Traditional onboarding involves physical presence of the customer for their due diligence such as signatures, physical copies of documents, etc. With contactless biometric technology such as voice & face recognition, device authentication, etc. banks can reduce the onboarding friction which leads to a successful onboarding.
For banks, where legacy processes dominate the workflow, embracing digital technology can be an operational challenge. But early adopters are already writing their success stories and redefining the baseline for customer expectations. This calls for an industry-wide response, and with solutions like digital onboarding, the banking industry is well poised to create the banks of tomorrow.