Money 20/20 - the battle to on-board

The first few month of 2016 have been busy for Signicat, culminating in several exciting announcements and developments at Money 20/20 Europe. The event, which took place in Copenhagen in April, is a new spin-off from the successful Las Vegas event, and was very well attended by financial technology innovators. This made it the perfect place to launch our unique research into bank onboarding.

The battle to on-board

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 along with reams of personal information. 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 retail their place in the value chain.

Moving from analog to digital

In order to understand consumers attitudes to current on-boarding processes, Signicat surveyed 2,000 bank account holders and analyzed their responses in a report entitled “The Battle to On-Board”.

The research found that the onboarding process led to many potential customers abandoning their applications, either because it took too long (39%) or because too much personal information was required (34%). Both retail banks and fintech providers need to put a lot of time and effort into attracting customers, so they need to know that onboarding is the weak link in the chain – 40% of potential applicants are abandoning the process at this vital step.

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% 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. Our research found that 97% of people have documentation that could form the basis of a digital ID – a passport, driving license or a similar form of identity. By making it possible to create and use digital IDs, banks will be able to on-board customers far more quickly and completely online.

If banks continue to make it difficult for consumers to apply for services, they will simply stop applying.