(SPONSORED) A lot of banks recognize that customers want more digital access, not just to manage accounts, but also to shop for and buy financial products. Digital-only customers now approach half of all US retail banking customers, compared to one third before the pandemic. Legacy banks need to reconsider their current offerings and processes to keep pace with fintech banking services, which they can do through seamless digital onboarding.
But many banks see the digital onboarding process as an expense center, rather than an ROI enhancer. As a result they find many reasons to avoid offering a digital onboarding environment to customers, unwittingly giving up the golden opportunities for the improved customer experience, loyalty, and ROI that it it brings. Once you realize the advantage this gives you, the competitive nature of the marketplace recognize challenges, and where the golden nuggets lie, you’ll be ready to map out your own onboarding venture. Which isn’t as hard as you might think.
The first challenge often comes from an overwhelmed IT department: “We don’t have the talent to enable digital onboarding, and we can’t afford to hire it.” IT is almost always suffering under the weight of project backlogs, and considers this objection obvious. Your response should be that you’ll be outsourcing most of the complexity of digital onboarding. There are turnkey, cloud-based solutions in the market that start with fundamental origination requirements and grow to build sophisticated, extensible solutions. There is no need to build, when you can buy a world-class solution.
For financial services firms, the next hurdle is typically from Compliance. Traditionally compliance processes depend on a mountain of paperwork: policy documents, operational procedures, audit trails, and a massive security infrastructure. It’s true that legacy banking requires this “back-office” complexity. But quality onboarding platforms design compliance and security capabilities in at the start, with fully automated policy enforcement, procedural workflows, extensive audit controls, and multiple layers of security. Most risks are programmed out of processes, by dint of hard and fast algorithmic controls.
The last obstacle can be the customer-facing marketing staff: “Our customers require a personal touch, along with guidance from our decades of financial expertise. They value that personal relationship, and won’t give it up.” But the facts don’t support that objection. Not only do customers not rely on local banker expertise, they would prefer to have their hands directly on the levers of financial power. A 2021 Forbes survey reports that 76% of Americans prefer banking via mobile app over branch visits or even phone calls. Online is expanding across sectors — a fact that fintech companies have exploited to capture low hanging profitable business from legacy banks.
The entire objective of digital onboarding is to improve customer experience while growing portfolio profitability without taking on added risk or jeopardizing compliance. It does this by reducing customer and back-office friction in two ways:
- By segmenting the onboarding process at the customer’s convenience, through regulatory “know your client” (KYC) identification checkpoints. As customers gradually increase their “KYC level,” new products become available to them automatically.
- Reducing manual data input errors, through instant validation, which lets customers onboard within minutes.
The customer can’t buy anything until they’re digitally “on board”, making onboarding the first step to revenue generation. But just having customers doesn’t make them profitable. You also need the means to engage customers in various marketing activities.
Onboarding streamlines that engagement through in-app messaging and transaction alerts, SMS notifications, and incremental “bite sized” learning dialogs. The best platforms use Machine Learning (ML) to adapt to customer preferences, dispensing helpful product recommendations, and addressing common support questions.
On top of that, security automatically gets a boost through end-to-end encryption, two-factor authentication, AI-based fraud detection, and geo-location tracking. Typically users already have an authentication layer just to access their mobile device, and biometric authentication — in the form of fingerprint- or face-ID — gives them instant launching of your app. App-based, secure-channel 2FA quickly completes login, so that customers get highly secure access in a matter of seconds.
Once fully digitized, the gold starts accumulating, as labor costs plummet, and gross profits increase.
A digital onboarding project begins with a defined goal: do you want to digitize a single product, specific customer groups, or your entire operation? Digital is an opportunity to build something fundamentally new. You don’t want to carry over analogue assumptions or digitize a legacy, paper-based process. Start with this three-step approach:
- Gather the correct data and analytics: Capture actionable and objective data required to make an onboarding decision. Leverage third-party data and scoring services to enrich your view of applicants. Eliminate manual data entry by ingesting internal data from disparate sources. Reduce judgmental underwriting decision making while creating consistency through automation.
- Automate as much of the underwriting as possible: Minimizing human interventions will help ensure more consistent decisions while increasing speed to the first transaction, reducing overheads, and creating a better customer experience.
- Leverage analytics and rules: Implement a solution that is configurable from a business user perspective and can allow you to import models, scorecards, trees, and tables, as well as create these elements natively in a browser-based user interface.
Next, go platform shopping. Choosing the right partner is essential for operationalizing an onboarding plan balanced between speed and risk tolerance. Keep in mind that you don’t need to limit your choices to platforms that replicate your current business operations. Also ensure that a platform has growth capabilities beyond your initial deployment, especially for limited product or customer rollouts. Don’t be afraid to exploit vendor expertise. They want your business, and should be willing to give you decision-making assistance up front.
Banks don’t have to digital onboard. But they’ll be missing out on a lot of gold!