This opinion piece looks at:

1. What is driving adoption of digital onboarding for banks?

2. Essentials of digital onboarding

3. What is the business impact for banks that adopt digital onboarding?

4. Outlook and way forward

What is driving adoption of digital onboarding for banks?

In today’s economic climate, it is critical for banks and other financial institutions (FIs) to retain their current customers while also attracting new ones. As a result, banks are attempting to create an easy, tailored, and frictionless end-to-end digital buying and contracting experience. Having the capability to digitally onboard customers simplifies and streamlines the very first user experience that a customer has with the bank and significantly reduces the cost of customer onboarding.

The COVID-19 pandemic has further accelerated this trend. Banks and financial services providers have faced unanticipated challenges. As clients shift online to receive essential services, the financial industry needs to rethink the future of digital banking through quick adaption methods and a deeper focus on banks’ digital presence. Digital customer onboarding has become the buzzword in the industry as business leaders begin to recognise the  enormous potential of digitisation. The onboarding process begins when consumers express interest in your product and ends when they are ready to use their account. Making the customer’s journey seamless will boost engagement in the early stages of the relationship.

Each stage of the process must be examined when evaluating a new customer’s onboarding journey, whether for a current account, a new product, or a new feature of an existing product. Capturing the necessary data and  authenticating the customer’s identity have typically been done through face-to-face or postal channels. Still, digital

capabilities allow FIs to provide customers precisely with what they want. Adopting a digital onboarding strategy is a must for traditional FI’s to keep up with the growing number of digital options available, such as neobanks and challenger banks. Figure 1 covers some of the primary drivers of digital onboarding in banking.

Customer Expectation: New customers are increasingly expecting to open new checking or savings accounts using

their laptops or mobile devices. As a result, (FIs) invest in digital onboarding through online and mobile channels to

adapt to current customer demands. IBSi Research believes digital account opening (DAO) is the most popular banking technology for a third consecutive year. In 2020, about 80% of all financial institutions implemented new DAO systems or improved existing ones.

Digitisation: In the modern era of widespread smartphone adoption and internet connectivity, digitisation is one of the primary drivers of digital onboarding. Any potential customer with an electronic device with internet access and an embedded camera can undertake a digital onboarding procedure that avoids unnecessary rerouting physical channels by interacting with the web interface or banking app.

Financial Inclusion: According to IBSi Research, 30%-35% of adults will remain unbanked in 2021. When asked why they don’t use financial services, people provide a variety of reasons: they don’t trust banks, it’s too far to travel, it’s too difficult to open an account, or they don’t have the appropriate documentation. As a result, various financial inclusion programmes focusing on digital activities are emerging to expand the number of ‘banked’ individuals.

Regulation: A fast-evolving global regulatory landscape is one of the critical drivers of digital onboarding. The digital

authentication of documents and the easing of eKYC norms by regulators have propelled digital onboarding. As digital fraud becomes rampant globally, the regulatory environment for ID verification is becoming more stringent, costly and burdensome. RegTech solutions like Digital ID verification can help meet these standards more efficiently and costeffectively.

Cost Optimisation: Digital onboarding can reduce human capital and physical interaction between client and banker.

Multiple variable costs associated with physical onboarding, such asprinting documents are no longer necessary. Enhanced productivity of employees is one of the most crucial benefits of digital onboarding. Data errors, internal handling effort, and time are all minimised with the help of system-guided data validation

Essentials of digital onboarding

The benefits and drivers of digital onboarding for banks are abundant, including higher efficiency and cost optimisation. IBS Intelligence’s 4 S framework sheds light on the essentials of digital onboarding (see figure 2). For a digital onboarding platform to provide the imagined benefits, it must have the following Speed: Offline/physical onboarding at banks and financial institutions can currently be a high-friction exercise: go to the branch, stand in lengthy queues, deal with messengers, fill out laborious paperwork, etc.

What usually would take three weeks in a traditional banking scenario can now be completed in ten minutes or even faster through digital onboarding.