Customer onboarding describes the process by which banks and financial institutions take uninitiated individuals and give them access to pre-agreed products. The challenges around this journey include bringing numerous segments of the bank together; ensuring
communication with the customer is clear and concise; as well as that all compliance boxes are thoroughly ticked.
According to Deloitte,
38% of bank customers exit halfway through the onboarding process. One of the reasons for this, among many, is a confusing, sluggish and bureaucratic journey.
To ensure the onboarding experience is as streamlined and effective as possible, there are five stages banks should undertake, namely: pre-application, application, identity verification, account opening, and product enrollment. Here is a summary of each.
1. Pre-application
This is a bank’s pre-liminary phase of engagement with a potential customer.
At this stage, the prospective is undertaking her very first touch with the institution – be it online or in-store – on the back of, for example, a recommendation, promotion or advertisement.
Now is the moment to capture her business by establishing the kinds of products she is interested in (be it a savings account, mortgage, or loan); how the bank can tailor them to her unique needs; and how the process will unfold, should she proceed.
Pre-application can be thought of as a threefold step, involving contact, requirement presentation, then the
bank’s proposition.
2. Application
Assuming the offering is of interest, then begins the onboarding process proper. To do this, the customer should fill out an application form – physically or online – which seeks to capture all the relevant details needed to adequately serve her needs throughout
her lifecycle with the bank.
Also captured by the form are the products or services the customer will be signing up for, along with her financial situation. These details help to categorise the individual for
data analytics and future sales opportunities.
Finally, it will be up to the institution to decide whether the customer is accepted, declined, or asked for further information.
3. Identity verification
The third, but perhaps most important, step:
identity verification. This stage protects not only the bank from financial crimes like money laundering and fraud, but also from regulators – which place strict rules on the data firms should hold on their customers.
The kinds of information captured may include:
- Know Your Customer (KYC) data – individuals are asked to hand over their full name, title, date of birth, marital status,
gender, nationality, home address, as well as identification number, such as national insurance.
- Personal documents – to confirm the individual’s identity, those details must then be cross-checked against two personal documents, such as a passport, birth certificate, driving license, and three months of banks statements. A proof of address should also
be surrendered.
- Anti Money Laundering (AML) and Customer Due Diligence (CDD) data – the aforementioned information contributes to the wider efforts of AML and CDD regulations,
which work to confirm customers’ identities, and create systemic safeguards against potential fraudsters.
- Income and expenditure – the bank can qualify the kind of customer it is taking on by processing the individual’s employment status and professional title; annual income; how much will be paid into the account monthly; and how it will be used.
- Miscellaneous – there are other pieces of information firms may choose to ask for, such as contact details (email, phone numbers, as well as marketing preferences, for data protection reasons) and overdraft expectations (including the required limit value,
any upcoming changes in financial circumstance, et cetera).
4. Account opening
Assuming the customer successfully passed the identity verification phase – and the in-house due diligence team did not flag any issues – the bank can legally open an account. This may be a current account, savings account, or simply an internal record of
the customer, if she is only looking for a short-term loan, for instance.
Nota bene, the preservation, management and use of the customer’s data is tightly controlled by the European Union’s
General Data Protection Regulation (GDPR). The seven key tenets of this directive promote lawfulness, fairness, transparency, information minimisation, accuracy, integrity, confidentiality, accountability, purpose limitation,
and storage limitation in banks’ handling of customer data.
5. Product enrollment
The fifth and final step to onboarding a new customer is giving access to the product or service itself.
If it’s a current account, the bank must check that all the customer’s funds, direct debits and standing orders have been successfully transferred and are displayed on statements and in-app. Any pre-agreed overdrafts should be functional, payments must be
actionable, and the debit card must work at ATMs and in-branch.
If it’s a loan, the funds must land in the account at the right time – enabling the customer to use it for all their short-term liquidity needs, be it holiday expenses or home improvements.
Lastly, the bank should be on-hand to answer any of the customer’s queries and resolve issues. This is an opportunity to not only deliver a service, but forge a close, long-lasting, and mutually beneficial relationship.
The bottom line
Providing these steps are followed – and all the requisite legal directives are adhered to – banks can have full confidence in their process and retain as many customers as possible across the onboarding journey. The best-in-class experience may even result
in recommendations and further sign-ups!