In an increasingly competitive environment on industries such as fintech, onboarding new customers becomes a challenging race in many aspects. Companies that are leading the way are appealing to 100% digital solutions that make such processes simpler and more secure.
This becomes essential at a time when abandonment rates of digital onboarding processes in banking are on the rise, rising from 63% in 2020 to 68% today in Europe alone.
Increasingly demanding onboarding users are abandoning processes because of factors ranging from delays in completion, the requirement for too much information or because they simply changed their minds, according to a survey conducted in Europe as part of the Battle to Onboard 2022: The Growing Power of Consumer Demands report
So why is it so important to adopt a simpler, more digital identity onboarding process? Here are five keys:
From the companies' perspective, digital onboarding allows them to generate operational efficiencies by reducing physical processes that represented substantial additional costs, while at the same time generating savings in infrastructure expenses by dispensing with face-to-face presence.
Current customer onboarding processes, which include pioneering tools such as biometrics and voice authentication, have significantly reduced time from several days to just 60 seconds, according to Preventor, a firm specializing in identity verification solutions.
At a time when users are appealing to digital solutions, large companies in sectors such as finance have migrated to technology and now their model is trying to get closer to that of fintechs, which were born with this digital DNA that allows them to complete processes faster and more efficiently.
It is not for nothing that the Brazilian neobank Nubank became the most valuable financial institution in Latin America without having a single physical branch. This was achieved by adopting 100% digital processes from the beginning, incorporating new customers by means of digital identity verification through a selfie or by verifying their documents remotely.
Preventor has found that digital experience is one of the main factors in recommending a financial service today, as more and better solutions appear in the market in order to solve users' needs from the onboarding process.
Building this trust with customers can take a lot of time and effort for companies, but losing it can be a simpler matter, so they must be prepared to offer top-notch digital services at all times, which means keeping their users' sensitive data secure.
U.S. management consulting firm Oliver Wyman notes that "customer trust is hard to value, but there is no doubt that it is playing a central role in the evolution of the financial services industry," which may explain to some extent why nearly a third of the top 50 financial institutions are now data and technology companies.
Digitization and the consequent easing of customer onboarding processes has helped increase access to services such as financial services, in line with the rising global rate of smartphone access that already stands at 80%.
According to the World Bank's Global Findex survey, 71% of adults in developing economies now have a formal financial account, compared to just 42% in 2011. Furthermore, in developing economies, the number of adults making or receiving digital payments increased from 35% in 2014 to 57% in 2021.
Technology has brought more people closer to this kind of services, but at the same time it generates several associated challenges that the public and private sectors have to start looking at, given that, according to the World Bank, "the lack of verifiable identity is one of the main reasons that keep some adults excluded from financial services".
At the same time that opportunities are generated to promote access to digital services through more user-friendly onboarding processes, extra responsibilities also begin to arise for companies in an environment that, while highly digitized, is also exposed to cybercriminals, multiple fraud attempts and even money laundering.
With the speed at which companies are adopting technology, incorporating more flexible processes through automated tools becomes imperative for their survival in the coming decades, whereby making these investments and having specialized personnel in this area ceased long ago to be a luxury, as some CEOs considered it.
Pioneering companies are making their processes more flexible through technology, but at the same time they are aware of the gaps that are generated in the midst of this digital revolution that has put data at the forefront, so more and more cyber attackers are going after them.
This is why the concept of flexibilization also aims to improve the experience, but at the same time support those process facilities with solutions that can guarantee not only the customer onboarding process but also the monitoring of the behavior of these users to identify and respond in the face of certain anomalies.
On this point, the report Battle to Onboard 2022: The Growing Power of Consumer Demands points out that "more mature digital identity systems can make consumers more demanding and less likely to tolerate a bad experience".
This is why Preventor sees it as essential for companies that need to perform customer onboarding processes to set aside old methods and open the door to biometric authentication, voice recognition and life-scanning systems in order to address fraud techniques such as deepfakes, which involve artificial intelligence manipulations of images or voice in order to trick systems into believing they are dealing with a specific person.
A key point, as highlighted by Preventor, is multi-factor authentication, which allows companies that have carried out onboarding processes to mitigate identity theft and impersonation, which are the most recurrent threats based on company statistics.
These authentication tools can combine different technologies such as facial and voice biometrics, as well as device and geolocation verification. And one of the biggest advantages is that they can be executed at any time from access to systems for transaction approval, process authorization, among other tasks.
The rise of digital services has led regulators to put more and more the magnifying glass on the incorporation processes and therefore KYC (Know Your Customer) policies gain more prominence within organizations in order to combat money laundering and all types of fraud.
Simpler digital processes also entail a lot of rigor when it comes to complying with regulations, so the adoption of these technological tools requires due support to respond to the requirements according to the different jurisdictions.
Digital fraud not only threatens organizations' finances, but also their reputation and credibility in the eyes of customers, who "want the process to be as efficient as possible, but are often unaware of the inherent risks that can arise if onboarding compliance is not completed correctly," as analyzed by Mike Eaton, an analyst at KPMG in the UK.
So it is vital to maintain a balance between flexibility and compliance that allows for long-term relationships to be built and reputation to be nurtured in a highly competitive environment where any advantage that companies give can be seized by companies that are guiding their future on these principles and putting digital onboarding at the center, with a full ecosystem of technologies to respond.