The customer onboarding process has always been imperative for all businesses as that is the first experience a customer has with a business It is the entire process that a person goes through when they start their relationship with any business institution and banks are no different. The onboarding experience also plays a vital role in defining the nature of relationship the customer would have with the bank going forward. This process is key because variables such as user experience, loyalty, referrals, and profitability highly depend on it. When banks onboard customers, there isn’t just one process for all types of customers. The onboarding process for a retail customer is significantly different from that of a corporate or an institutional customer. This is because corporate customer onboarding is highly complex and nuanced as it requires compliance with different regulatory bodies, involves lengthy negotiations, stringent documentation, and complex processes dealing with multiple parties.
Retail customer onboarding vs. corporate customer onboarding
A typical onboarding process for a retail customer involves understanding the customer’s requirements, further consultation of the customer’s needs, completion of legal prerequisites, opening of the account, and finally making it operational. However, the corporate customer onboarding process isn’t a one-time-activity, it is an ongoing process that requires constant communication. And this on-going process can be troublesome to both the customer and the bank. In the customer’s perspective, the process can be complex and time-consuming as they need to fill out applications without adequate guidance. Many a times, since the process involves heavy documentation, duplication of data entry becomes a huge hassle. For a customer, the onboarding turnaround time also affects their business transactions and cash flows. Lastly, if there’s a lack of personalisation of products and services, customers are more likely to switch banks. The top challenges associated with corporate customer onboarding are:
1.Ever changing regulatory environment- Onboarding processes are dynamic as regulatory frameworks in the banking sector keep changing. According to a research done by Thomson Reuters in 2017, 92% of firms estimated that current know your customer (KYC) onboarding processes cost roughly around $28.5 million. Another report by KPMG pointed out that banks globally paid more than $15 billion for regulatory violations of client onboarding gaps in 2017.
2. Legacy systems which can’t adapt quickly- Legacy systems that can’t offer flexibility and scalability are a major bottleneck that leads to increased onboarding costs.
3. Time-to-revenue – the longer a bank takes to open an account or a product, the longer it takes for them to start making money out of that customer.
4.Frustrated customers due to delays, complex processes and bureaucracy- According to Bain & Company’s benchmarking study on major banks, half of three quarters of all onboarding requests never reach the final stage of account opening.
The onboarding process for corporate customers has drastically changed for the better today. With the use of technology, it is now possible to have a single repository of customer data like KYC, pricing, and workflows. This single repository should integrate with all applications in order to feed the customer’s data automatically into all applications. This is where an automated process can help in the reduction of data duplication, resolve data inconsistency issues, and ensure data integrity. In order to streamline the onboarding process for corporate customers, it is important to first have a well-defined workflow. Integrating the onboarding workflow into a business rules engine can encourage continuous processing. It must be configured to control user access and ensure data protection, and data confidentiality. So how does all this translate in a real life scenario? For example, in April 2019, Citi launched CitiDirect BE Digital Onboarding for institutional clients in Asia Pacific. This solution has a completely digitized onboarding process that enables clients to open accounts in as quickly as two days. And it does not get over there; the list of banks leveraging digital technology to improve the efficiency and speed of onboarding processes is constantly growing.
The road ahead
As we move towards an era of open banking, banks of the future will need to adopt emerging technologies to further streamline the strenuous process of customer onboarding. Moreover, as fintech’s challenge legacy banks with their innovative customer experience, banks must realize that the value proposition depends on their customer relations. It is high time banks shift to smarter, flexible and customer-centric processes, as the onboarding experience of customers is critical for developing or breaking relations with banks.
Views expressed in the article are the personal opinion of S Sundararajan, Executive Director, i-exceed.