Money is a sensitive subject, and new customers often approach banks with scepticism. It’s crucial for financial institutions (FIs) to address these concerns through a smooth and effective customer onboarding process. Poor onboarding is driving them away, with 67% of global banks losing clients during the Know Your Customer (KYC) process.
The onboarding process is the FI’s moment of truth,” setting the foundation for the entire customer relationship. A poor experience can lead to lost clients, reduced revenue, and damaged brand perception. In this article, we’ll explore how to simplify the digital customer onboarding process in financial services.
Understanding customer onboarding for financial services
Customer onboarding in financial services is a critical step that involves integrating new users into the bank’s system and verifying their legitimacy to prevent money laundering and fraud. This process includes regulatory compliance measures like KYC procedures, identity verification, and collecting personal details such as name, address, and age.
A seamless onboarding experience not only enhances customer satisfaction but also ensures compliance with necessary legal and regulatory checks. It reduces the friction caused by manual processes and fosters a stronger relationship between the customer and the financial service.
Challenges in digital customer onboarding for financial services
Traditional customer onboarding (manual process of collecting, verifying, and approving customer information through paper forms, in-person checks, and physical documentation) in banks faces limitations such as limited accessibility, time-consuming procedures, security risks, and high operational costs. Key challenges include maintaining regulatory compliance, ensuring data quality, enhancing the customer experience, and providing adequate staff training. The introduction of automation and technology adds another layer of complexity. Specifically, in-person onboarding is slow, repetitive, and complex, often resulting in dissatisfaction and the risk of losing clients to competitors. Some of the challenges in digital customer onboarding include:
- Complicated user experience
According to Capgemini’s World Retail Banking Report 2024, banks experience an 18% customer abandonment rate during onboarding, often due to the slow and disorganized nature of their processes. The time it takes to complete onboarding is one of the biggest challenges financial services face. - Stringent regulations
Banks must comply with strict regulations, such as KYC mandates, to prevent fraud and money laundering. While essential, these regulations can complicate and lengthen the digital customer onboarding process, negatively impacting customer experience.
Compliance with KYC regulations
Supernational organizations such as Financial Action Task Force (FATF) and the European Central Bank (ECB) are setting international standards and frameworks and supervise national bodies, such as Financial Crimes Enforcement Network (FinCEN, US), Financial Conduct Authority (FCA, UK), and Monetary Authority of Singapore (MAS) that implement national laws and monitor compliance within their borders.
They are generally designed to help steer clear of money laundering, lower the risk of transactions with sanctioned entities or politically exposed persons (PEPs), and facilitate fraud prevention measures. Non-compliance is typically enforced through financial penalties and/or sanctions, but media coverage of enforcement actions can also harm your brand and reputation.
How to align your onboarding process with risk profiles
To enhance customer onboarding in financial services, it’s crucial to match your processes with the appropriate risk levels of your customers. Below is a checklist to help you assess and refine your onboarding approach:
- Identify customer risk levels early: Implement tools that automatically assess risk levels based on verified customer data, such as citizenship, residential address, demographics, full name, and PEP, sanctions, and negative media screenings, allowing for faster onboarding of low-risk customers.
- Customize KYC checks: Ensure that your KYC and identity verification methods match the risk level of each customer, reducing unnecessary friction.
- Use multi-layered verification: Combine biometrics, government-issued IDs, and trusted data sources to create a seamless yet secure onboarding process.
- Adapt to international regulations: Make sure your onboarding process complies with global and regional regulations to avoid penalties and delays.
- Leverage automated risk management: Use automated tools to detect fraud, such as forged documents, face masks, or spoof identities, and adjust security measures based on real-time risk assessments.
- Optimize for speed and security: Balance quick onboarding with robust security to enhance customer satisfaction without sacrificing compliance.
Provide a smooth onboarding experience through digital customer onboarding
Implementing a digital customer onboarding process can provide a smooth customer experience without compromising on security. Here’s how:
Fast-tracked process with increased security
For financial services to build trust and succeed, onboarding must be secure, fast, and convenient. Consumers have little patience for poor digital experiences and prefer services with minimal delay:
- KYC checks need to be completed within minutes
- No sacrifices of compliance standards
- Secure processes with minimal customer effort
Enhanced customer loyalty
Effective onboarding boosts customer retention. With many banks to choose from, superior service and meeting customer needs can win lifelong customers:
- Smooth and trustworthy onboarding experience
- Converts users into loyal customers
Improved customer experience
Opening a new bank account can often be frustrating—submitting the same documents multiple times, answering repetitive questions, and waiting a long time for verification before you can use the account. Digital onboarding reduces this friction with:
- Straightforward requests
- Shorter wait times
- Help using advanced features
Build trust and reputation with G2RS’s identity verification solutions
In the digital financial services market, where trust holds significant brand value, KYC checks and identity verification are integral to the customer experience.
By combining personal identifiers, identity documents, biometrics, behaviours, and signals at key touchpoints, FIs can establish mutual trust with customers from the start. This boosts confidence, removes onboarding barriers, and ensures access to financial services while reducing opportunities for fraud.
At G2RS, we provide a comprehensive identity verification solution for financial services, delivering a seamless, compliant onboarding process that protects both the customer and your services. Our suite of solutions includes:
- ID and Biometric Verification
- Electronic Identification (eID)
- PEP & Sanctions and Adverse Media Checks
- Document Forensics
- Identity Data Verification
- Proof of Address Verification
- Phone and Email Verification
To learn more about how our solutions can help you with a smooth onboarding process, contact us.