Digital customer onboarding beyond the pandemic

Sunil Madhu , Founder & CEO, Instnt

Why digital customer onboarding matters 

There’s nothing like a crisis to ignite innovation. The US financial market is becoming increasingly competitive with the optimisation of digital financial solutions. The pandemic has accelerated the need for those solutions but also exposed just how poor the adoption is by financial institutions in general. 

Beyond the immediate impact of the disease, regional banks and credit unions will likely face lower revenues and greater pressure on productivity. They may also come to see their branches as an unnecessary cost. Similarly, commercial banks will need to rely more heavily on digital channels to make it cost-effective to serve their customers and their increased needs. That will mean increased investment in digital and remote capabilities to replace in-person approaches. 

This isn’t just about cost. It is a wake-up call for businesses that previously focused too much on daily operational needs, instead of investing in creating long-term resilience and digital channels for the future.

How to implement digital customer onboarding without compromising risk and compliance

How can financial institutions adapt to the new normal? To a large degree the culture of both fintech and financial institutions has been broken. The desire to build a homegrown solution drives up costs, eventually forcing leadership to look at digitisation as a cost-cutting exercise instead of something to inspire growth. That thinking has to change. We should view the pandemic as a once-in-a-generation opportunity’ to create highly digitised banking operations. 

Change does not have to be difficult. Recognising when to change is a quality leaders should cultivate. We hear customers and prospects tell us they have integrated up to eight different vendors to verify users and reduce fraud. It takes time and money to get these services implemented, which in return makes it harder for businesses to change. Yet they know a better option exists and they know sticking with the status quo is a huge mistake.

On top of all this, they have to build orchestration rules and waterfall logic to validate a customer in the signup flow – all in order to comply with know your customer (KYC) and privacy rules and regulations. Integrated vendors allow for piecemeal verification of data, with revenue models usually priced per transaction. This means that waterfall logic is always optimised for cost. Businesses push customers through this waterfall in the hopes of getting them through as quickly and as cheaply as possible. When the automated waterfall fails to verify the customer, often because the customers are young and have “credit thin” files, the sign-up transaction falls into manual reviews, which can delay the process by up to two days and cost up to $5 per review. All this friction often leads impatient mobile-first customers to drop off.

What difference will digital customer onboarding make to your bottomline and customer satisfaction

Communities that bring together the standards to reduce operational risks, deliver new business models, and make it easier for the ecosystem to deliver value are the ones that have thrived. On the other hand, the de facto standards for risk management and the limitations of restricted, lengthy, complicated insurance contracts for mobile speed banking and commerce simply don’t scale. Fraud takes weeks to detect and the losses and risks go directly to the bottom line of the enterprise enrolling the fraudsters. Many financial institutions have adopted design patterns for onboarding risk and compliance that results in rejecting up to 40 per cent of good customers. Users are subjected to unnecessary friction and manual review delays that result in high abandonment rates. 

If your business has adopted these approaches and you think you don’t have a customer onboarding problem in the post-pandemic era, think again. If fraud is normal, then why are businesses still losing so much revenue? At Instnt, the first fully managed onboarding platform for businesses with fraud loss insurance, we believe that fraud shouldn’t be your problem. With one single line of code on websites or apps, businesses can shift their fraud problem to us so they can focus on what matters most: their product.  

See how Instnt can help you sign-up more good customers: www.instnt.org/getstarted