For financial services, a significant number of customers is attracted online. The customer onboarding process is one of the first interactions the customer has with the organisation and therefore it should be rock solid. Something organisations seem to overlook. Increasingly they are becoming aware. In our daily lives consumers are grown with their mobile devices more and more. However, becoming a customer at a bank or insurance company still requires physically presence or paper evidence before they can use a service. For banking, it is estimated that over 40 percent of the prospected customers quit before becoming an actual customer. This blog reasons that in an increasingly competitive market with commoditised services, it is the onboarding process that can be the competitive advantage, if designed well. Different requirements need to be taken into consideration when (re)designing the onboarding process. This blogs explains what these requirements are and how they differ from current onboarding processes.
Different building blocks that shape the onboarding process
To clarify what the onboarding process should look like, let’s start with a definition of customer onboarding.
“Customer onboarding is creating a digital identity for a new customer and charging it with all attributes required to deliver the requested service”
These ‘attributes’ can differ per organisation, product and service or even per customer. However, in general the onboarding process for financial services can be divided into several building blocks (see figure 1), with comparable attributes requested and/or checked per block.
Current onboarding processes can take up days, whereby the end is defined as the moment the customer or prospect receives the outcome of acceptation or rejection. This is also where the current pain resides. Additional checks and determining the risk profile of the prospect is time consuming, mostly due to the use of old-fashioned techniques, manual processes and scattered data gathering. Additionally, the process is not designed in a way the prospect can perform it at once. A switch in channel (go to your email), a need to scan your documents and upload them, or waiting time between different steps can all be conversion killers.
With new techniques available the process can be accelerated towards minutes. Specialised third parties can help improving specific building blocks. Organisations that are able to connect these parties throughout the chain and offer a seamless onboarding experience, are those ahead of their competitors. With ‘old’ processes, the onboarding process starts when a prospect decides to become a customer and requests a product/service. But onboarding starts the moment a customer provides data to an organisation. This can be leaving an email-address to request additional information or to download the app without the need to go through the entire onboarding process at once. Prospects can look around in the app, are provided with further information and when they don’t start the onboarding process within a certain period, the organisation can reach out to them, for instance via push notifications or email. When a prospect decides to become a customer and to request a product/service, onboarding includes identification of the customer and the verification of that identity. Information already provided should not be requested again and a phased onboarding process is desired. For example, when the prospect does not carry his/her ID document, the prospect should be able to do this later.
Three drivers for the way the onboarding process is designed
For the onboarding process to result in a competitive advantage, organisations should consider different types of requirements:
- Regulatory requirements
- Customer capabilities and requirements
- Organisational capabilities and requirements
In the following paragraphs these are explained into more detail.
1. Regulatory requirements
Dependent on the risk appetite of the organisation and required level of compliance different blocks of the onboarding process apply and different techniques are available per building block. In figure 2 a classification is made for different sectors whereby financial services are split into different products.
Financial institutions face strong regulatory requirements, so the required level of compliance is high. For onboarding the AML directive (3,4,5) form the basis of the regulatory context. As this is a directive, countries across Europe have their own local implementations and specific requirements, which are not all clear yet. A challenge for organisations, who offer their services across borders. On average, the risk appetite of banks is low, often expressed in terms of financial and/or reputational damage. They can’t afford to make it to the headlines for example. It determines to large extent what safeguards need to be built into the customer onboarding process. For example, if a prospect needs to show their ID document, safeguard are triggered on how this document is verified. The incumbent banks are challenged by new banks who have a higher risk appetite, simply because less people are affected when it goes wrong. For example, Dutch challenger Bunq uses video identification, without an extra payment for derived identification purposes. It is this kind of challengers that set the norm for the market, and the incumbent banks are struggling to find a way to deliver on the changing expectations of the customer. Looking at insurance companies, the risk appetite is higher. Here there is no need to request the ID document and they could use derived identification only for example.
2. Customer capabilities and requirements
The onboarding process should fit the customer profile. Although financial institutions have a large customer segmentation and product offering, currently a “one size fits all” approach seems to be the norm. This results in lengthy processes with for example half of the questions asked not being relevant to the particular prospect. Appealing onboarding processes are tailored to the specific customer and can be executed via the channel of preference. Challenger banks go for a mobile only process, focusing mainly on Millennials. But the ‘traditional’ financial institutions have a more diversified customer base and should also design a process for the ‘not so tech savvy’ customer. Although sounding paradoxical, this can be achieved using smart techniques, such as OCR from uploaded documents. Here organisations need to know their customers and what trends and solutions apply to the market.
3. Organisational capabilities and requirements
For organisations to be able to respond to changing requirements (from both a regulatory and a customer perspective), the onboarding solution and architecture should be flexible. Current processes are often static and difficult to alter. The to-be situation is an onboarding process where the order of the building blocks can vary, the organisation can have local flavors within the building block and able to leave out or add building blocks in the future. This implies changes in the architecture and often a need for new solution providers that still need to fit the overall strategy and profile of the organisation. Changing the architecture may sound discouraging but going for a flexible process also means that you can start with improving one of the building blocks instead of touching them all at once.
Considering and including the aforementioned three drivers in the right way, results in the so-called “onboarding sweetspot” and the ability for the onboarding process to serve as a competitive advantage.
Figure 3: Requirements for onboarding as competitive advantage
The sweetspot implies that all requirements should be considered when (re)designing the onboarding process. In the following blogs these three requirements will be elaborated on further. Already thinking about (re)designing your onboarding process? Don’t hesitate to give us a call, we are happy to think along.
You can also meet us on Digital Transactions, where European Online retail bank MoneYou will share their experiences on improving their onboarding process or at the European Payment Summit, with a track on Digital Customer Onboarding.
Interested to join? Let us know and we can provide you with a discount code!
 Source: Signicat, 2016
 Source: Innopay, 2016
 Optical Character Recognition