One in five Americans started using a new bank amid the pandemic, according to a March 2021 FIS study. Whether they’re looking to take advantage of better rates or lower fees, new banking customers will jump ship if the process for opening an account is anything less than seamless. New account onboarding is one of the most crucial areas where banks and FIs are failing — 63% of consumers abandoned digital bank applications in 2020, up from 38% the previous year, according to Signicat. This is particularly scary considering how much banks spend to acquire new customers.
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Banks typically perform a common set of steps when onboarding a new customer, though the process differs depending on whether it occurs at a physical branch or online. While banks are required to perform the necessary due diligence as part of their KYC obligations, there are a number of onboarding steps that can be automated, streamlined and simplified to deliver a better customer experience.
Any new account onboarding process must ask and answer these five fundamental questions in order to get onboarding right.
1. Is this really you?
Signicat also found that 32% of consumers refuse to start an application if they are required to take ID credentials to a bank branch. Instead of requiring an in-person ID verification and relying on a teller’s ability to discern a genuine ID document from a fraudulent one, a better online onboarding process uses purpose-built identity verification solutions that capture pictures of ID documents and assess their legitimacy in seconds. These solutions rely on AI, machine learning, biometrics and computer vision to determine whether the ID presented matches known templates of ID documents from around the globe — taking the decision away from the tellers who are ill-equipped to make technical decisions. In the case of remote onboarding, it’s generally considered a best practice to capture a picture of the customer’s ID document and a corroborating selfie to ensure that the applicant is who they claim to be online.
2. Do you pose a money-laundering risk?
Banks can now customize and automate their Anti-Money Laundering (AML) programs while reducing the number of false positives within an integrated API and online dashboard. Two key elements of an AML program are screening solutions that help banks know the new user isn’t a known threat by checking against PEPs, sanctions and watchlists, and ongoing transaction monitoring to detect suspicious activity that may suggest money laundering or other types of financial crime.
3. Are you creditworthy?
Lenders use FICO scores along with other credit report details to assess credit risk and determine whether to extend credit to borrowers. FICO scores take into account various factors in five areas to determine creditworthiness: payment history, current level of debt, types of credit used, length of credit history and number of new credit accounts.
4. Should we trust you?
Banks should continue to leverage third-party databases to determine whether to open the account and which services to offer based on first-party fraud and customer default probabilities for the next nine to 12 months. Third-party services can also determine the authorization for the funding account and the associated funding risk.
5. How can we authenticate your identity online in the future?
Modern identity verification solutions have embedded liveness detection functionality to determine if someone is physically present when conducting an online transaction. As part of the identity proofing process, more advanced solutions will create a biometric template of the user (during the onboarding process) which can be used as a form of authentication down the road. If the bank electronically captures a picture of the customer’s ID and biometric template in-branch, that information can be used whenever the customer initiates a high-risk transaction online, such as a password reset or wire transfer.
Despite all the talk about delivering a great customer experience, most financial institutions stumble out of the starting gates in the early stages of building a new banking relationship.
Whether you’re trying to create an Amazon-like onboarding experience or just looking to streamline the in-branch experience, banks need to make the right investments to fuel digital transformation, fraud detection, compliance and customer satisfaction.
