The first interaction and experience a customer has with a bank is during the initial phase: the onboarding process. It is a make-or-break situation, and can be a delicate operation, during which banks can either create customers for life or lose them at the first hurdle. It will either develop into a fruitful relationship, full of opportunities for both customer and bank, or lead down a path of obstacles and unnecessary complexities.
The onboarding process is when banks sell the first of many products to a new customer. More importantly, they sell their brands. There is no underestimating the importance of an excellent onboarding experience, and banks are well aware of the future revenue potential that a seamless experience can bring. And yet, most financial institutions struggle to meet customers’ expectations. So what is going on?
The fast-paced, evolving market
The market is moving incredibly fast. New apps are being released on a daily basis, making consumers’ lives easier and more efficient. We can order a taxi at the click of a button, and it will show up almost instantaneously. We can shop for the most obscure item, and it will turn up on our doorstep the very next day, possibly within a few hours.
These new developments are causing customer expectations to rise considerably. Customers are able to use their Facebook credentials to create a profile in seconds. They now expect pre-filled or even non-existent application forms. They want an immediate result; they have no time to wait for some back-office process. Having to go to a branch with tons of application paperwork, requiring a driver’s license and utility bill to prove who they are—all this just isn’t good enough anymore. Today’s imperatives are now! and make it easy!
At the same time, technology has evolved, and we live in a digital-first, even mobile-first, world. Video chat has become a mainstream technology, and thousands of images are created and shared across the globe every second. Biometrics used to be something found only in sci-fi movies, but now we are able to unlock our phones just by looking at or touching them. Organisations are using social data to build up profiles of their customers, so they can personalize each experience and sell more products—even in advance of a customer commencing an application. These advancements are lowering the barriers to entry, and some banks have been slow to react. These two things combined have led to the emergence of disruptors, taking advantage of this changing ecosystem, deploying technologies and raising customer expectations even further as incumbent banks strive to catch up.
Banks also cannot say that regulators have been getting in the way of innovation. In fact, regulations have moved forward, and regulators are responding in pace with new technological advancements—or at least they’re not far behind. For example, the US FDIC (Federal Deposit Insurance Corporation) regulation section 1020.220 allows for non-documentary customer verification. Whilst in Europe, the PSD2 (Revised Payment Service Directive) will force banks to open up their APIs (application program interfaces) to third parties. These changes give banks the opportunity to access competitor information, and they become relationship hubs, helping to keep customers engaged and propositions fresh. Banks are responding to these changes, and we see them spending large sums on their onboarding processes; but they are still struggling to keep up with the pace of change. So why is this?
Inflexible legacy systems are holding banks back.
It is widely understood that banks are burdened by inflexible legacy systems. They may have the vision to create intelligent and innovative systems in the front office to impress their customers, with technologies such as the conversational UI on Alexa; but if the back office cannot keep up with these demands, then customers will have a negative experience. There is no area in which these issues are more pronounced than in the onboarding process.
The problem is, in many banks, each product is linked to a separate system, with unique origination processes and workflows. Issues can occur when a customer requests to open two products at the same time. The separate product-origination processes are often unable to run in parallel, and so banks have to request the same third-party checks twice for one customer, or send uncoordinated updates back to the customer.
Delays in product origination can also occur due to older core-banking systems. At the extreme end, old core-system versions may require daily batch cycles to be run before they are able to update applications. This makes instantaneous product origination impossible, not something you want when customers are used to receiving things at the touch of a button. So why aren’t banks resolving these key issues?
Costs, risks, and fraud
The legacy systems banks use have been around for decades, meaning these issues are complex as processes have become entwined. Replacing these systems is risky; it takes time to unbundle multiple processes and map how each process works. No bank wants to risk losing customer data, as the results could be catastrophic. It can also be a prohibitively expensive project. This makes deploying a transformative programme across end-to-end onboarding and origination an even more daunting task. And in fact, many banks do not have the capacity or even the expertise to deliver on such a mammoth programme. As a result, management often focuses money on delivering quick wins within the end-to-end journey—such as an enhanced mobile app, in isolation. This means that back offices remain a tangle of expensive manual workarounds with multiple potential points of failure.
Intrinsically, banks are sensitive to risk, particularly when it comes to possibilities for fraud, which can land them with some hefty fines. Advanced digital technologies provide new ways to identify fraud risks, but many banks have been slow to progress. Some banks fear that by removing documentary evidence from the onboarding process, they will open themselves up to more exposure to potential fraudulent activity. However, there are many fintech disrupters that have already made this jump—and have managed the implications.
The perception that existing onboarding processes work just fine, and customers are not looking for something new, is a big risk. If banks don’t act now, they will be confined to becoming a back-end service provider. Leaving challenger banks and fintech disruptors to develop relationships with existing bank customers would limit banks’ ability to understand and meet customer-product needs. These disruptors are launching in greater abundance, all around the globe. For example, new entrants such as Starling Bank and Monzo in the United Kingdom and Moven in the United States are creating seamless customer journeys based on good user experience, design and technology.
They are already offering new services to customers that make payments and money management simple. Customers can create new accounts from the comfort of their sofas without having to collate a ton of paperwork. Banks are running the risk of losing significant market share in new account opening.
Banks need to seize the moment.
If banks want to combat the threat from disruptors, then they must redesign onboarding as an end-to-end process. A cool mobile app, poorly integrated with a legacy system that is barely coping, is the proverbial lipstick on a pig. Banks shouldn’t fear the advances in new technology; instead, they should view them as opportunities to deliver credible transformation, improving their customers’ experiences and reducing costs.
By taking advantage of new technologies, banks can reap the rewards. For example, by embedding video chat or chatbots powered by neural intelligence into their customer-service processes, they can create a seamless customer experience. Deploying intelligent and dynamic workflow management on top of existing legacy systems can help a bank modernize outdated silos. Through the use of third-party data from social-media applications, underpinned by sophisticated fraud analytics, they can enable document-free customer verification. They can even use biometric facial recognition to match selfies with photo IDs. Ultimately, the use of wearable devices (from glasses to watches) connected to a wider consumer Internet of Things will enable banks to incorporate chatbot-enabled virtual assistants with data from connected devices. That could include location and contextual data or biometric information, often held by wearable devices.
Banks can use all of these technologies to make the onboarding process simpler and more robust, which gives them more data to analyse and validate. At the same time, the new wearable platform gives the customer an even simpler experience. And incorporating robotic-process automation in the back office during account creation can reduce error rates, cycle times and unit costs.
These are just a handful of opportunities of which banks can take advantage and implement without re-architecting legacy systems. Customer experience and satisfaction will increase, and a happy customer will keep returning, on the hunt for new products—which banks will be able to offer up as they hold all the data. By taking a holistic view of onboarding transformation and delivering across the end-to-end process, banks can reduce costs and ensure that their initial interaction with a new customer leads to a happy and fruitful relationship.