Worldwide bank branch closure is a factor that may contribute to the spread of digital onboarding tools in markets where FIs still heavily rely on in-person authentication checks. In fact, some incumbent banks have already begun to build some digital onboarding capability. But just having a solution to Onboard customers 'online does not suffice. It has to be truly digital eliminating as many manual entries and checks as possible because Inefficient onboarding abandonment rate and customer support requests are on the rise.
What we have seen is that over the years the customers who onboard Digitally through the web or mobile application, will most likely use these channels in the future to either complete transactions or ask for support. With the app/web being self-service which we’ve seen drastically reduce the costs to serve each customer but the same cannot be said about the customers who are onboarded using traditional banking methods.
An overview of the Onboarding solution and how it can help you acquire new customers during the lockdown and social distancing measures
These solutions must span across various channels from Web/Mobile/USSD/Branches/Agents to even ATM’s where possible. The main objective of digital onboarding is to reduce customer & Back-office friction in two ways:
- The ability to break up the onboarding process if the customer desires. These can be considered KYC Levels, the higher the level the more data the customer has provided, and the more access to products/services they have.
- Using technology to reduce manual data input errors, and enable the customer to onboard within minutes.
KYC Level: Level 1 - Customer Engagement
The objective behind level 1 KYC is to onboard as many users as possible as seamlessly as possible, so that you can start building user-profiles and personalise their banking experience. But to have non-customers sign up for this service, you need to provide value to the users. A couple of examples of how this can be done:
- Customer Engagement channels can include a Community Platform which is a Social Media Platform owned by the bank, where users can discuss financial topics, savings tips, and directly engage with the Bank via feedback/suggestions etc. Community users are rewarded for their participation within the Community which can be redeemed as Cashback/Points/Vouchers etc only if they convert as complete KYC customers.
- Other Engagement channels could include Applications like Split Bill or Group Finances where users can settle groups of expenses by the fewest transfers transaction. For example, a scenario where a group of friends/students living together: Friend A pays utilities, other friends B & C pay for groceries, etc. Split bill calculates the least number of payments needed to settle the group -Friend A pays Friend B $40 (even though there could have been hundreds of transactions from multiple people in that month)
The key considerations here are to make sure your bank is providing users value, and ensuring that the sign-up process is as seamless as possible. Since there are no banking-related services in this context, this can be as simple as an email/phone number and a password or where we have realized ample traction, that is enabling the ability to log in or register with social media with these engagement channels. This allows the bank to leverage their Social Media Following.
Banks must ask themselves questions like: “How many followers do we have on Facebook/Twitter/LinkedIn compared to the number of users using our application?” Most likely the result may be that the bank has more followers on social media, this means that there’s a big opportunity to leverage and convert those users to banking customers.
A couple of reasons why users convert from a level 1 customer to level 2 customer:
- Community users now have a bonus points balance which they want to redeem - meaning they need to continue the onboarding journey.
- Group Finance users may want to seamlessly pay their friends, and to do so they need to use the bank-specific wallet/account
- Banks currently have opened their apps for anyone to add their card/bank/mobile money details to pay for bills/airtime etc without having a Wallet or Bank account
And in all these scenarios, banks have built a profile of that user in either their financial interests or how they’re spending their money. With this information, banks can recommend personalised products/services relevant to the customer. For example, a Community User has liked a post-discussion about savings and investment options in your market. A marketing automation flow can be triggered to send that customer more information about your market-leading investment and savings products, with a link to continue their onboarding journey in just minutes.
KYC Level: Level 2- Wallet Platform
After showing value to users, banks could look to onboard them onto a lite platform like a wallet and the reason for not necessarily going to a full bank account is simply because less regulation and data are required for the customer to onboard the wallet platform. Questions that banks need to ask themselves: “What is the customer interested in?” A solution to instantly pay some friends within Group Finance or seamlessly pay bills only.
- Maybe a bank has a large merchant network that they have onboarded and the customer wants to pay instantly by scanning a QR code
- Maybe a bank offers a virtual card with the Wallet platform to enable users to use on eCommerce Platforms or connect to Google/Apple pay to pay contactlessly
We’ve seen solutions onboard to their wallets even using USSD, by simply adding their national ID Number. The solution can then query a national database to get all of the information on that card, including name, DOB, address, etc. which is all the information which the FI needs to create a wallet account for that customer.
Why would these customers now convert from wallet customers to Full KYC customers?
This can happen when customers have deposited more money than is allowed for this wallet account so they need to ‘upgrade’ their account or they have exceeded their transaction limits for that month or within one transaction or that they’ve seen the other products and services available on the application which are ‘greyed’ out and unavailable to them until they upgrade.
KYC Level: Level 3 - Full KYC Customer
There are a number of standard processes which can be replicated globally, like ID Legitimation, however, banks also need to be flexible to the market-specific regulations, and also adhere to their risk appetite. There are a number of ways to tackle ID Legitimation
1. The best customer experience we’ve seen is the scanning of the ID documents using your phone/web, and taking a selfie and a number of checks happen during this process:
- Is the ID real? Has it been tampered?
- During the process of taking a selfie, is this a real person?is it a Picture? Has a liveness check been performed?
- Now that these two documents are real, does the ID match the face in the selfie? Using the right algorithms and AI - this facial reconciliation can be more accurate than the human eye which is something that regulators like to see.
OCR - Optical Character Recognition
- Since ID cards are standardised, the reading of the documents can be done real-time and shown to the customer to review. Reducing the time and effort for customers to input this information themselves, and reducing the error rate of manual entry.
2. However in markets with more restrictive regulations you can look to utilize a couple of different options:
- A Video Conference call with the call centre support to provide the ID and answer some short questions (however need to be careful with the bandwidth, and long wait times)
- Using a delivery company to complete the KYC verification when they deliver the welcome pack to the customer
- If you have an extensive branch/agents network. Even if not, banks could look to partner with 3rd parties to provide this service for those that have a large network - like a Post office for example.
Within each market, there are normally a number of nationwide databases/repositories which can be leveraged to gain more information on that customer, without the customer manually inputting this information. Questions a bank must ask:
- Is there a national database to query when given a National ID number?
- Does the National ID card have an NFC chip that can be used to download data?
Proof of Residence and or Proof of Employment are also tricky to make seamless as many of the documents that are accepted by banks are not standardised.For example, a tenancy contract is normally different depending on the landlord or estate agent. We have seen the likes of Utility bills be automatically verified, similar to ID document verification discussed above. There’s the need for Sanction/AML/Blacklist checks, to be able to vet the customer before onboarding.
There isn’t a one size fits all onboarding solution that can plug in and play worldwide. Banks need to understand the regulation of the local market, and the specific segments need to be able to build a successful digital onboarding journey.
Level 2a/3a - Fund Account
Getting your customers onboarded as early as possible is great, but if they don’t fund their accounts and become active, then this can get very costly depending on your contracts with your wallet/CBS provider.For markets with high card penetration, and high bancarisation rates, there are some familiar and quick wins for customers to fund their accounts. Including:
- Card/Debit Card transactions - we often see these being ‘free’ for the initial deposit due to the fees, but it’s a very quick way of funding these accounts
- Bank Transfers, either linking existing accounts, or just transferring as and when
- Taking pictures of Cheques instead of manually depositing them, which is popular within the US
- Customers transfer their salary every month, which is what every bank wants all of their customers to do, but this is where customers are particularly sticky
From experience, we see that it’s effective to offer Loyalty points to customers to make a new bank account their primary account. Even in markets which mandate simple current account switching services, these are not as popular as you would expect, with less than 2% of current account switches in the UK in a recent 12 month period.We’ve even seen solutions which can draft emails to customer’s HR with all their bank information to transfer their salaries and be quite effective.
For developing markets, one needs to understand that not everyone is going to either have a bank account, or a debit card. There are normally a high % of mobile money accounts and cash dominated society where solutions of Agency Banking/ATM & Branch Deposits are popular solutions, but not always the best customer experience, as popular locations can get very busy. But a popular and convenient alternative is adding mobile money integrations, and allowing customers to top up their accounts with just their mobile number. For some users or regions, it seems that ‘Mobile Agents’ can bring the agents service to those customers.
Level 4+ - Further Verifications
A bank’s onboarding journey and principles shouldn’t stop once the user has become a full KYC customer. The onboarding journey is throughout the customer's lifecycle with the Bank, not just onboarding to accounts, but onboarding onto other products as well.For example what if the customer wants to take out a loan, or an investment product which requires additional documentation? From a customer experience point of view, if he/she has provided documentation to a bank during the onboarding, they shouldn’t have to provide this again. Their Proof of Employment details should be reviewed and updated if necessary and additional information needs to be sought from the customer, hence banks need to complete this process in the most frictionless way possible.
When banks are calculating the credit decision, they need to understand the customer's finances. Questions banks need to ask:
- What if this account isn’t the customer's primary bank account? The typical process would be to get the customer to send either bank statements or salary slips for the last 3/6 months. And an Employee to manual review these documents?
- What if their banking market offers open banking? Banks could then ask consent from the customer to be able to review his/her primary bank account statements, then seamlessly use this information to instantly make a less risky decision.
- How many banks here have an issue with out of date documentation, or having to constantly ask customers for updated documentation due to their risk profile?
- Shouldn’t this be also managed digitally and seamlessly using the same solution? Banks can scan their passport/ID within seconds via the app in collaboration with Digital ID verification partners rather than a customer service agent having to call/email.
Once the digital onboarding solution is live, there should be a Continuous monitoring, Continuous customer feedback, and Continuous Iterations of the onboarding journey. If there are spikes in insights where the customer drops off. Banks need to ask questions like:
- Was this because there is a long-form for them to complete?
- Providing Proof of Residency etc?
- When we dig deeper into the different segments of customers, are there higher spikes in different areas?
It’s a given that not even the best-designed onboarding solution will have 0 drop-offs, however having the ability to review, and continuously update your solution will get the bank close to achieving the 0 drop-offs.
With Digital Onboarding capability, you can improve your conversion rate and reach, orchestrate localised and uninterrupted onboarding and adapt end to end automation. Fidor Digital Onboarding brings innovative ways to engage and onboard customers in a friendly yet compliant manner right from their smart devices, web and mobile, increasingly the primary channel for onboarding new customers. To know more about Fidor Digital Onboarding Proposition, schedule a session with us.
About the Author
Max Johnson-Head of Business Solutions, Fidor Solutions
Max brings to the table extensive banking knowledge with experience of designing digital banks across Europe, West & Sub-Saharan Africa and SE Asia. Combining this knowledge with his prior experience of heading an analytics team that designed global complex reporting solutions, facilitates his ability to build complete digital banking solutions. We can affirm his skills through his comprehensive experience in creating business cases and business modelling for digital banks all over the world.