CR2 in partnership with IBS Intelligence
This opinion piece looks at:
- What is driving adoption of digital onboarding for banks?
- Essentials of digital onboarding
- What is the business impact for banks that adopt digital onboarding?
- Outlook and way forward
What is driving adoption of digital onboarding for banks?
In today’s economic climate, it is critical for banks and other financial institutions (FIs) to retain their current customers while also attracting new ones. As a result, banks are attempting to create an easy, tailored, and frictionless end-to-end digital buying and contracting experience. Having the capability to digitally onboard customers simplifies and streamlines the very first user experience that a customer haswith the bank and significantly reduces the cost of customer onboarding.
The COVID-19 pandemic has further accelerated this trend. Banks and financial services providers have faced unanticipated challenges. As clients shift online to receive essential services, the financial industry needs to rethink the future of digital banking through quick adaption methods and a deeper focus on banks’ digital presence. Digital customer onboarding has become the buzzword in the industry as business leaders begin to recognise the enormous potential of digitisation.
The onboarding process begins when consumers express interest in your product and ends when they are ready to use their account. Making the customer’s journey seamless will boost engagement in the early stages of the relationship.
Each stage of the process must be examined when evaluating a new customer’s onboarding journey, whether for a current account, a new product, or a new feature of an existing product. Capturing the necessary data and authenticating the customer’s identity have typically been done through face-to-face or postal channels. Still, digital capabilities allow FIs to provide customers precisely with what they want. Adopting a digital onboarding strategy is a must for traditional FI’s to keep up with the growing number of digital options available, such as neobanks and challenger banks. Figure 1 covers some of the primary drivers of digital onboarding in banking.
Figure 1: Drivers of digital onboarding in banking
Customer Expectation: New customers are increasingly expecting to open new checking or savings accounts using their laptops or mobile devices. As a result, (FIs) invest in digital onboarding through online and mobile channels to adapt to current customer demands. IBSi Research believes digital account opening (DAO) is the most popular banking technology for a third consecutive year. In 2020, about 80% of all financial institutions implemented new DAO systems or improved existing ones.
Digitisation: In the modern era of widespread smartphone adoption and internet connectivity, digitisation is one of the primary drivers of digital onboarding. Any potential customer with an electronic device with internet access and an embedded camera can undertake a digital onboarding procedure that avoids unnecessary rerouting physical channels by interacting with the web interface or banking app.
Financial Inclusion: According to IBSi Research, 30%-35% of adults will remain unbanked in 2021. When asked why they don’t use financial services, people provide a variety of reasons: they don’t trust banks, it’s too far to travel, it’s too difficult to open an account, or they don’t have the appropriate documentation. As a result, various financial inclusion programmes focusing on digital activities are emerging to expand the number of ‘banked’ individuals.
Regulation: A fast-evolving global regulatory landscape is one of the critical drivers of digital onboarding. The digital authentication of documents and the easing of eKYC norms by regulators have propelled digital onboarding. As digital fraud becomes rampant globally, the regulatory environment for ID verification is becoming more stringent, costly and burdensome. RegTech solutions like Digital ID verification can help meet these standards more efficiently and costeffectively.
Cost Optimisation: Digital onboarding can reduce human capital and physical interaction between client and banker. Multiple variable costs associated with physical onboarding, such as printing documents are no longer necessary. Enhanced productivity of employees is one of the most crucial benefits of digital onboarding. Data errors, internal handling effort, and time are all minimised with the help of system-guided data validation.
Essentials of digital onboarding
The benefits and drivers of digital onboarding for banks are abundant, including higher efficiency and cost optimisation. IBS Intelligence’s 4 S framework sheds light on the essentials of digital onboarding (see figure 2). For a digital onboarding platform to provide the imagined benefits, it must have the following.
Speed: Offline/physical onboarding at banks and financial institutions can currently be a high-friction exercise: go to the branch, stand in lengthy queues, deal with messengers, fill out laborious paperwork, etcWhat usually would take three weeks in a traditional banking scenario can now be completed in ten minutes or even faster through digital onboarding. Faster onboarding has become a competitive advantage among FI’s, with some platforms even enabling onboarding in under two minutes. CR2’s onboarding process takes just four simple steps – the user downloads the app, creates a user login, verifies their identity, then opens, and selects their account type.
Seamless: Digital onboarding starts an omnichannel banking experience across mobile, internet, and physical channels. The digital onboarding process is simple to comprehend and implement. A shift from paper to data allows for improved rearrangement, autofill implementation to prevent asking the same questions, user-friendly and interactive information, and digital signatures, to name a few benefits.
Smart: The onboarding process can be digitalised to modernise the system and keep up with the fast-paced needs of an increasingly digital society. Trends and expectations change quickly in this influencer-driven world, and banks digital customer journeys need to keep pace with these fast-changing expectations. Previously, it could take weeks or months to tweak a customer journey. With digital onboarding, the customer journey can be tweaked in days and is highly adaptive.
Secure: Digital onboarding platforms need to be customisable to cater to local regulatory requirements. There are various built-in security measures in digital onboarding to maintain strict security. Real-time security precautions are also taken; the biometric pattern of the face certifies the accurate online identification and life existence of the individual. Such security features lead to the prevention of identity theft and enhanced data security.
What is the business impact for banks that adopt digital onboarding?
In the BFSI sector, digital onboarding addresses some of the long-standing issues with traditional onboarding models. It helps businesses onboard new clients remotely and quickly through integrated customer journeys.
Digital onboarding in banking addresses some of the primary issues stated previously in the following ways:
RPA can automate operations like data entry, verification, and credit checks. This improves employees’ efficiency and allows them to spend more time in the field.
Use AI to improve worker performance, make automatic product suggestions, and provide faster service resolution using data.
Deliver unified customer perspectives across the business, resulting in faster service delivery, more retention, and speedier lock-in.
Built-in analytical features allow managers to monitor real-time performance and identify weak and essential service delivery areas.
Today, digital onboarding is necessary for the survival of banks in a post-pandemic world. FinTech’s are redefining what a digital customer journey looks like, and innovation is at the forefront of this process. A seamless digital onboarding is the start of a modern digital customer journey. Banks must continue to expand their customer base while retaining their current customers. This is becoming increasingly difficult in a highly competitive climate owing to agile FinTech’s.
Banks can tap into underbanked sections of the population by removing physical barriers and geographical hurdles. Banks can enter unserved areas without having a physical presence. The need for physical branches is diminishing.
Outlook and way forward
Digital onboarding is the start of a digital banking customer journey. A holistic digital transformation must supplement a seamless digital onboarding experience, and a solid digital ecosystem is required to cater to higher customer expectations. The core must be digital and integrated through API’s to facilitate a smooth customer journey. The architecture of the bank must support this transformation.
In the future, the eKYC database on a distributed ledger or blockchain might be used as a central database, allowing each business linked as a node to check customer credentials and avoid duplication. The database can capture customers’ biometric credentials, and it can also serve as a repository for AML or Backlist databases.
To match and satisfy the expectations of digital-first clients, banks and financial institutions will need to digitally onboard customers in the future. Both digital banks and traditional financial institutions will need to develop strategies and solutions tailored to their specific environments.
To learn how CR2 can help you with your digital banking requirements, visit www.CR2.com.
