Traditional banks’ dominant position in the value chain is under threat. They are involved in a growing battle for consumers’ business, driven by an increasing amount of competition from challengers, new fintech players, and each other. Many are investing in digital transformation with the aim of both increasing customer engagement through convenience and simplicity, and reducing costs.
In this effort to digitise, one area that is consistently overlooked is the beginning of the customer journey: on-boarding. Under current regulatory schemes, on-boarding is complex and painful. Banks must comply with Know Your Customer (KYC) and Anti Money Laundering (AML) requirements, which necessitate the physical presentation of personal information and several proofs of identity.
While much of the on-boarding process can be completed online, throughout the majority of Europe ,customers must present original proofs of identity either in person at a branch, or via the post. This extends an already lengthy set-up process.
On-boarding is one of the last strongholds for antiquated paper processes for an industry hell-bent on being digital. This must be addressed if banks are going to remain competitive, let alone dominate.
Moving from analogue to digital
In order to understand consumers attitudes to current on-boarding processes, we surveyed 2,000 UK bank account holders and analysed their responses in a report entitled ‘The Battle to On-Board’.
The report found that a staggering 40 per cent of consumers have abandoned the on-boarding process when applying for a banking product or service. 39 per cent of those abandonments were due to the length of time the process took, and over a third were as a result of having to supply too much personal information.
Unsurprisingly 55 per cent of respondents said they would be more likely to apply for new products or services if they could complete the entire application online. Furthermore, 52 per cent would be more likely to apply for a new service if they didn’t need to present physical identity documents.
Fundamentally, the report found that consumers want to move to purely digital on-boarding where they can verify their identity online without the hassle involved in presenting a physical form of ID to the bank.
A federated ID model
The major barrier to a 100 per cent online application process is identity verification but the need for customers to go into the branch is, from the report, doing more harm than good. Customers find the in-branch experience is hugely frustrating, with almost three out of every four customers unhappy with the service.
While ID scanning can help, it makes more sense for customers to provide digital versions of their existing ID credentials – passport, driving license, utility bill, etc. – to banks in order to verify their identity and accelerate KYC. As an example, in the UK consumers could use their GOV.UK Verify ID to circumvent the need to present a physical proof of identity, and reduce the amount of personal information required. Admittedly the GOV.UK ID is not in wide use and would require significant uptake for it to be a feasible alternative.
The long-term solution is in finding a way to turn the physical process into a digital one. A federated ID model, operated by an independent identity assurance provider, would allow the connection and re-use of existing public and private ID systems, as well as social logins like Twitter and Facebook. If identity has already been proven, why should consumers need to prove it again whenever they apply for a new service?
Such a process would address the 97 per cent of consumers that have access to either a driving licence, a passport, or a utility bill, providing near total coverage.
Banks are spending a massive amount of money on attracting new customers, as well as on encouraging existing customers to apply for additional services. Poor on-boarding is undermining the work they are doing to attract customers at the last hurdle, impacting the sales of new products and ultimately reducing revenues.
If banks continue to make it difficult for consumers to apply for services, they will simply stop applying.
Gunnar Nordseth, CEO of Signicat
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