Banks must sharpen up their onboarding process if they are to retain the lionshare of customers, according to John Erik Setsaas, VP of identity and innovation at Signicat.
Research from Signicat - the digital identity verifier fintech - has revealed that more than 50% of people abandon a financial services onboarding process. The reasons being that it took too long (34%) and needing too much personal information (40%).
“I would expect that number to be closer to 15-20%,” says Setsaas, “you’re losing nearly half of your customers before they’re even your customers.
“Traditional banks view onboarding in a binary fashion - you’re either onboarded or you’re not. They’re used to a model where you ask for everything up front,” he says.
Setsaas believes that banks are “extremely risk averse” and reluctant to have a non fully KYC’d individual in their system.
But this is an area that Setsaas thinks must change considering the high onboarding abandonment rate.
“Banks really need to take this seriously and act. I encourage them to view it as a step up model and make it easier to get a foot in the door and get the relationship going. You gradually ask the customer for more information - this is what a lot of newcomers are doing,” says Setsaas.
Digital challengers, Monzo most recently reaching 1m accounts in late September 2018 while contemporary Starling Bank has likewise seen a 500% increase in accounts. Both banks pioneer the use of mobile phone verification and lean heavily on lessons learned from tech giants.
“They’re making it very simple to become a customer. I did onboarding myself with Revolut and it’s very smooth and easy to get started and then they begin asking for more information the more you get into AML. People want something convenient and convenience always wins.
“Signicat is simplifying the process by providing one single API for a number of different onboarding methods in a single interface, making it very simple for banks. They can then set the initial onboarding on whatever level they would like and then step up at a later time.”
How banks should can smooth out their onboarding process
- Instead of assuming that all users in the system are fully KYC'd, also make a category "New customer"
- Make it simple to become a "New customer", e.g. verifying the phone number by a one-time-password
- Limit what a "new customer" can do and for how long, e.g. limit on amounts
- Do all the existing risk monitoring also on the "new customer" accounts
- Make a smooth step-up process, requesting additional information for full KYC
- Work on the UX. Use clear and simple language in all steps
For further information go to www.signicat.com