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Efficient Digital Customer Onboarding: A Key To Empowering Banks

A vast majority of banks will inevitably witness a shift from physical to digital channels, mostly web and mobile. This will result in huge consequences for how they do business. Effective digital sales capabilities and streamlined, end-to-end digital origination processes will start to play an integral part as banks plan their digitization strategy. One-to-one targeted campaigns, micro-segmentation, dynamic, personalized pricing and product bundling, third-party integration (e.g. with social networks), product white labeling, and distribution through aggregators — banks need to be good at all. Such capabilities are essential for the promotion of distinctive mobile and online offerings. It sounds like a lot of work, and it is, but the delay is not really an alternative, and banks that get it right will benefit in the long run.

The need for Digital Onboarding

In the current financial scenario, it is imperative for banks and other financial institutions to retain their existing customers while acquiring new ones. Today, therefore, banks are trying to provide an end-to-end digital buying and contracting experience that is easy, personalized and friction less. Digital onboarding is one such mechanism used in the banking sector to open up accounts and gain new customers. The introduction of digital on-boarding for new customers transforms the process of opening an account to a seamless and convenient one.

Digital Onboarding can Foster Financial Inclusion

In developed markets, a vast majority of the population—>93% in almost all cases—is ‘banked’ meaning they have access to banking and credit. But this is not necessarily the case in emerging markets. According to the World Bank, almost 1.7 billion people — nearly one-third of the world’s population — were not included in the formal financial system in 2017.[1] When asked, people offer a whole range of reasons why they don’t use financial services — they don’t trust banks, it’s too far to travel, it’s too hard to open an account, or they don’t have the proper documentation. Therefore, to increase the number of ‘banked’ individuals several financial inclusion initiatives, with a particular focus on digital initiatives are emerging.

Citi estimates that an additional 700-800 million adults will be banked for the first time by the end of 2022 as opposed to 2017. This drastic change would reduce the overall unbanked population down to just 15%.[2] Digital financial services, enabled by digital identities, have the ability to introduce financial inclusion to people who have been shut out of the financial environment, promote access to economic development and education, and contribute to the reduction of inequalities. Adults worldwide, particularly in Africa, Asia and Latin America are still excluded from the formal financial system without any bank account or mobile money provider. This affects the most marginalized segments of society. According to McKinsey, the widespread use of digital finance will accelerate the annual GDP of all emerging economies by $3.7 trillion by 2025, a 6% increase versus a business-as-usual scenario.[3]

Using digital IDs to enable electronic KYC (e-KYC) and completely digitize the onboarding process makes it easier for people to open an account and more affordable for financial service providers to reach out to underserved customers, especially in rural and remote areas where the establishment of a brick and mortar branch is not economically viable. According to McKinsey, e-KYC processes have the ability to reduce onboarding costs by up to 90%.[4]

As trust is the cornerstone of financial services, digital identity is important for creating an online trust model that helps to verify transactions and user identities reliably. The convenience brought about by smooth and intuitive authentication, such as the use of biometrics and mobile devices, is also important, particularly for people who are often not used to digital services. Digital financial services and branchless banking services can be offered across several platforms, such as mobile phones, retail point of sales, other commonly available access points and field agent banking. Users can also select which channel is best suited to their needs. Mobile ubiquity, in particular, is a huge opportunity in this regard, considering that about 1.1 billion or around two-thirds of all unbanked adults have mobile phones worldwide.[5]

The comfort of having financial services at their doorstep is huge for people who often have to travel long hours and lose a day’s wages to reach a bank branch. Finally, by achieving a critical mass of customers and reducing the operating costs with digital processes, the financial services provider is able to deliver services at affordable costs.

Advantages of Digital Onboarding

Leveraging their long-standing customer relationships and an established track record of reliability and sustainability, many traditional banks are now developing financial technology and collaborating with technology providers to expand their digital offering. As the industry shifts towards the digitization of banking services, digital onboarding will soon become the standard, providing the banks with advantages such as

Customer centricity – Keeping the customer at the center of focus is the only sustainable way to develop a business and enhance CX with intuitive navigation. It means not only the gathering of data and bearing an inevitable administrative inconvenience, but also understanding the needs of the prospect. The digitized workflow allows the process to be built around users and their preferences

Fast Onboarding – Bank onboarding is normally a cycle of high friction: go to the office, stand in endless queues, messengers and tedious paperwork. What has taken an average of 3 weeks in a traditional banking scenario so far can be completed in 3 minutes. The digital onboarding of clients incorporated in a bank can register an individual at that time with all the needed requirements and additional documentation that the bank itself may require for their needs

Easy to use – The process itself and the details involved are easy to understand and implement. A big advantage is a change from paper to data that allows for improved rearrangement, autofill implementation to avoid asking the same questions, user-friendly and interactive information and digital signatures. Any person who has an electronic device with Internet access and an integrated camera can operate a digital onboarding procedure that prevents needless rerouting to physical channels by interacting with the web interface or the banking app.

Robust and real-time security – Digital onboarding has several built-in measures to ensure that stringent security is maintained. Security measures are also taken in real-time; the biometric pattern of the face validates accurate online identity authentication and the life existence of the individual.

Enhance productivity – One of the most important advantages of digital onboarding is productivity. With the help of system-guided data validation — data errors, internal handling effort and time are all reduced. Here are some of the ways digital onboarding brings in productivity:

  • Workflow guidelines eradicate errors: all data and signatures are captured correctly for the first time, whereas a manual process results in errors such as missing signatures and empty data fields on paper forms.
  • E-Signatures save time and energy and accelerate the process: compressing it from days or weeks to a single session.
  • Mobile-first customers now have an alternative to paper: it is simpler and more convenient to sign on a mobile device besides being personal and accessible than on desktops or laptops. Giving customers the benefit of e-signatures using their smartphone eliminates obstacles and allows customers the freedom to select their method of transaction.

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