The Ultimate Guide for Digital Onboarding in Banking: Definition, Best Practices, and How Does It Work?

The Global Banking Consumer Study conducted by Accenture reveals that bank user interactions via websites and mobile applications rose from 32% in 2018 to 50% in 2020. The world is rapidly shifting to digitisation and modernisation, even in banking and finance. Customer onboarding in banking is shifting from traditional and manual to digital means.

We live in an era where digital onboarding in banking is a reality. Banks can onboard customers from any part of the world, anytime and anywhere. Similarly, users and customers no longer need to run to banks for onboarding or basic queries. 

But what is digital onboarding in banking? How does it work? What are its benefits in 2024? Are there any examples of successful implementation of this? Read along with this comprehensive blog to learn more about digital onboarding in banking.

Digital Onboarding in Banking: What Is It? 

Digital onboarding is the process of welcoming and guiding new customers into a company's digital ecosystem via the Internet. It mirrors the way someone would assist you when you visit a new place in person, but it's all done online.

For instance, when you sign up for a social media account, they walk you through setting up your profile, connecting with friends, and sharing content. They may also verify your identity using your email or phone number.

Digital onboarding in banking entails opening a new account online. This involves collecting your personal information, ensuring your identity is legitimate, and enabling you to access online services like checking your balance, transferring funds, and paying bills. 

However, digital onboarding in banking goes beyond just onboarding a customer. It also includes loan applications and associations with digital or neobanks. It is characterised by its emphasis on speed, simplicity, security, and adherence to legal regulations, mirroring offline procedures.

Digital onboarding in banking streamlines and automates the bank onboarding processes. This eliminates the need for cumbersome paperwork, in-person visits, and manual submissions.

To improve digital onboarding & customer service in banking, here are some key focal areas to pay attention to;

1. User-Centric Approach: Banks should prioritise a customer-centric onboarding experience with clear instructions, in-line support, and user-friendly interfaces.
2. Robust Identity Verification: Employing robust identity verification technologies ensures accurate and efficient verification of customers.
3. Regulatory Compliance: Banks must adhere to regulatory standards like Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations in their digital onboarding process.
4. Efficiency: Banks should leverage digital tools to automate form-filling, connect to other accounts, and minimise the need for document uploads, simplifying the process for customers and staff.
5. Customer Retention: Ensuring a consistent onboarding experience across all channels, including physical locations, fosters trust and encourages customer loyalty.

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How Does the Bank's Digital Onboarding Process Work?

 The banking sector's digital onboarding process mirrors its counterpart, encompassing tasks like form completion, information validation, and account establishment. However, the digital approach leverages online platforms and automation to deliver a swift, user-friendly, and secure experience.

The bank's digital onboarding journey comprises eight distinct stages. These eight meticulously structured steps enable banks to deliver a seamless and efficient digital onboarding experience, enhancing customer satisfaction and operational efficiency.

1. Pre-application

Firstly, customers receive comprehensive information about their desired product or service, including its features, advantages, and prerequisites. With all the information at their fingertips, customers can decide which product they wish to go for moving ahead.

2. Application

Subsequently, customers complete an online application form, inputting personal particulars like their name, address, and contact information. This form is basically an online form that users can fill out right from home.

3. Identity Verification

To ensure security, robust identity verification methods, such as facial recognition and biometric authentication, are employed to validate the customer's identity. Regulatory standards like Know Your Customer (KYC) and Anti-Money Laundering (AML) laws must also be complied with by the customer.

4. Account Opening

Once identity verification is successful, the bank proceeds to open an account for the customer.

5. Product Enrollment

Once the account is opened, the customer will be directed to the products page or catalogue of the bank. This online page or catalogue will list all the bank's offerings along with other related details. Customers proceed to enrol in their chosen product or service, whether it's a credit card or a savings account.

6. Funding

This phase involves funding the account, which can be executed through diverse channels like wire transfers, direct deposits, or mobile check deposits.

7. Finalisation

Customers review and confirm the details furnished during onboarding, including account information and product specifications.

8. Ongoing Support

After the onboarding process concludes, the bank continues offering customer support, addressing queries, resolving issues, and presenting tailored cross-selling opportunities.

10 Benefits of Digital Onboarding in Banking in 2024 

Digital onboarding in banking offers several benefits to both banks and customers. Below listed are ten benefits of digital onboarding in banking in 2024. 

1. Streamlines Administration

Digital banking onboarding offers an effective way for banks to streamline their administrative tasks. These processes, which encompass everything from form-filling to data verification, are rendered more efficient through the use of digital tools. 

Furthermore, the validation of information in real-time accelerates decision-making, expediting the approval of new accounts. The automation involved optimises resource utilisation and expedites the banking and fintech customer onboarding process.

2. Faster Onboarding

The adoption of digital onboarding in banking translates to a faster and more efficient customer onboarding experience for banks. Cumbersome and time-consuming steps are minimised, significantly reducing the time required to open accounts or enrol in products. 

With advanced identity verification technologies expediting the validation phase, customers can conveniently complete applications online. Automating many of these steps reduces human intervention, making the account opening process swift and hassle-free. Furthermore, funding options such as mobile check deposits further enhance the speed and convenience of the onboarding process.

3. Personalised Cross-sell Offers

Digital onboarding in banking plays a pivotal role in personalising cross-sell offers. Banks can craft tailored recommendations by scrutinising customer data amassed during the onboarding process. This data, encompassing details of a customer's financial behaviour, preferences, and product choices, serves as the foundation for these personalised offerings. 

Through the utilisation of advanced algorithms and predictive analytics, banks can pinpoint additional products or services that are in alignment with the customer's specific needs. This approach ensures that cross-sell offers are highly relevant and timely and significantly boosts the likelihood of customer acceptance. 

4. Improves Efficiency

Efficiency within the banking sector receives a substantial boost from digital onboarding methods. Bank digital onboarding eliminates the need for cumbersome paperwork, and the utilisation of technology such as biometrics expedites identity verification. 

This streamlined and highly accurate process minimises errors and reduces delays, enabling real-time account creation. Additionally, the availability of digital onboarding 24/7 empowers customers to initiate their banking relationships at their own convenience, further enhancing overall efficiency.

5. Reduces Costs

Cost reduction is another significant advantage that digital onboarding affords banks. Traditional manual onboarding processes come with expenses related to printing and mailing documents. However, digital identity verification reduces costs associated with physical document handling. This is backed by McKinsey's saying that e-KYC can cut down about 90% of operational costs. 

Moreover, streamlining online processes significantly reduces the time required for customer onboarding. This, in turn, leads to substantial operational cost savings for banks. 

6. Enhances Security

Bank digital onboarding can help banks enhance security by using strong identity verification technologies, such as facial recognition and biometric authentication. Secure encryption protocols safeguard customer data during the process, mitigating the threat of data breaches. Additionally, automated fraud detection systems can flag suspicious activities in real-time, bolstering security further.

7. Compliance with Regulations

In order to ensure that banks abide with strict regulatory standards like Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, bank digital onboarding is essential. Digital records simplify auditing and reporting processes, reducing the risk of non-compliance. 

By streamlining these procedures and maintaining a comprehensive electronic trail of transactions, digital onboarding ensures that banks adhere to regulatory standards efficiently and consistently.

8. Increases Customer Acquisition

Digital onboarding in banking significantly expedites the process of acquiring new customers. It enables potential customers to apply for services online, effectively eliminating the need for physical visits. Swift identity verification and account setup enhance the overall customer experience. 

Additionally, the availability of comprehensive information and support during the process instils confidence in customers. Reduced friction and quicker turnaround times make more customers inclined to engage with the bank's offerings, ultimately resulting in higher acquisition rates.

9. Improves Customer Retention

Digital onboarding in private banking as well as public banks proves invaluable in enhancing customer retention. It simplifies the account setup process, reduces friction, and provides customers with quick access to services. 

Furthermore, digital onboarding facilitates personalised interactions, enabling banks to tailor their services to individual needs and foster stronger customer relationships. The speed and efficiency of digital onboarding contribute to higher satisfaction levels, making customers less likely to switch to competitors.

10. Improves Customer Experience

The Digital Banking Maturity 2020 study by Deloitte claims that digital onboarding in banking has increased registrations by about 30 times. Digital onboarding simplifies the entire customer journey, offering a seamless and user-friendly experience that aligns with modern expectations. Cumbersome paperwork and physical visits are eliminated, making the process faster and more convenient. 

Robust identity verification ensures security, while online access to product information empowers customers. The automated features of digital onboarding minimise errors, and ongoing support enhances overall satisfaction. This approach fosters customer trust and loyalty, ultimately creating a positive and lasting impression.

5 Challenges in Digital Onboarding in Banking Along with Their Possible Solutions 

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According to the 2018 McKinsey survey, about 55-80% of people prefer digital and branchless banks. While digital onboarding in banking is becoming the newest need of the hour, there are some challenges which banks need to overcome to ensure a seamless experience delivered to their customers.

1. Process Abandonment

Customer abandonment during the onboarding process has increased from 38% in 2019 to 63% in 2020. One significant challenge in digital banking onboarding is customers abandoning the process due to information gaps or lengthy procedures. 

To mitigate this, banks should prioritise providing clear, concise information to guide customers throughout the onboarding journey. Additionally, streamlining the process to enhance speed and efficiency is essential.

2. High False Positive Rates

Banks often grapple with high false positive rates when verifying customer identities, especially for non-resident IDs. To address this concern, banks can deploy advanced KYC automation software that conducts thorough checks based on document types. This minimises the need for manual verification, reducing false positives.

3. Poor User Experience

Cumbersome, paper-based onboarding processes can drive customers toward digital-first alternatives, offering swifter and smoother experiences. To enhance user experience, banks can leverage conversational AI-driven technologies like chatbots to simplify the process, benefitting both customers and staff. Implementing digital solutions that remove friction from onboarding, such as eSignature collection and streamlined ID verification, is crucial.

4. Workflow Integration

Integrating the onboarding process seamlessly with existing workflows can be a hurdle for banks. To tackle this challenge, banks can opt for digital banking account opening software that requires fewer personnel and is entirely electronic. Utilising out-of-the-box solutions can optimise the customer workflow and boost application volumes.

5. Unstable Legacy Systems

Legacy systems pose challenges when updating client onboarding processes. To overcome this, banks can embrace cloud computing services offering internet-based solutions and big data access. Additionally, employing on-premise solutions can enhance compliance and minimise issues related to customer data processing.

7 Best Practices for Digital Onboarding in Banking

 Forbes says that in the near future, about 30% of banks in the US will start implementing and incorporating digital systems to streamline their onboarding operations and processes. Digital onboarding in the banking sector is evolving rapidly, and adopting best practices is crucial for a seamless and secure customer experience. 

Here are seven key strategies to ensure success in digital onboarding in banking. 

1. Develop a Customer-Centric Onboarding Process

Creating a customer-centric onboarding process is paramount. Banks should prioritise an experience that is not only efficient but also user-friendly and easy to understand. The process should cater to the needs and preferences of customers, making their journey as smooth as possible.

2. Ensure Consistency

Consistency is key when it comes to digital onboarding. Banks must ensure that the process is uniform across all channels, whether it's through a mobile app, website, or in-branch interaction. This consistency builds trust and prevents confusion among customers.

3. Implement Strong Verification and Identity Check-Ins

Security is a top concern during onboarding. Banks should employ robust identity verification technologies like facial recognition and biometric authentication. These technologies enhance accuracy and efficiency in confirming the customer's identity, reducing the risk of fraud.

4. Focus on Clarity

Clarity in communication is vital. Banks should provide clear, concise, and easy-to-understand instructions throughout onboarding. This includes transparent explanations of each step, what information is required, and why it's necessary. Clarity minimises customer confusion and errors.

5. Strive for Efficiency

Efficiency is at the core of a successful digital onboarding process. Banks should aim to streamline the process, eliminating unnecessary manual work for both customers and banking staff. An efficient process not only saves time but also reduces operational costs.

6. Incorporate Automation

Automation is a game-changer in digital onboarding. Banks should leverage automation to handle repetitive tasks and validations. This reduces human errors, speeds up turnaround times, and ensures a seamless experience. Automation also frees up staff to focus on more complex customer interactions.

7. Keep Security a Top Priority

Security should always be a top priority. Banks must implement stringent security measures to safeguard all personally identifiable information (PII). Encryption protocols, automated fraud detection systems, and continuous monitoring are essential to protect customer data and maintain trust.

Conclusion 

Today, about 60% of banking customers in the US rely on banking apps to make financial transactions. Digital onboarding in banking is increasingly becoming popular between customers and financial institutions such as banks. Banks can redefine customer onboarding with streamlined processes, KYC automation, and user-centric design. It's a journey toward not just efficiency but also customer satisfaction.

If you're looking forward to digitising your client onboarding process in banks, you will need an interactive conversational AI to engage with your customers. In that case, here's what App0 has to offer you. Our advanced AI-powered messaging platform harmonises communication across various channels, offering a transformative opportunity to elevate operational efficiency and nurture meaningful connections. With App0, you can build conversational support software and AI chatbots for customer onboarding quickly within no time.

App0 is a no-code, conversational AI platform that automates critical elements of customer communication during origination in banks, financial institutions, and fintech. App0 is used by leading financial services companies to power their customer onboarding with AI.
It is a next-gen communication platform powered by machine learning (ML) & large language models (LLM), that allows you to embed communication features directly into your product, with simple no-code integrations that don’t require additional developer bandwidth.

Here are some specific examples of how App0 is being used by financial services companies:

• Equipment and asset finance: App0 is being used by equipment and asset finance companies to bring conversational AI to the equipment leasing process. This has helped these companies reduce the time it takes to close deals, boost deal conversions and improve their customer satisfaction.
• Automotive finance: App0 is being used by automotive finance companies to automate the loan application and approval process. This has helped these companies to increase their loan origination volume.
• Consumer banking: App0 is being used by consumer banks to automate and digitise the end-to-end consumer lending origination process, reducing the time between the start of a loan application to the time it takes to fund the loan. This has helped these banks to reduce time wasted in back and forth with customers.

If you are a financial institution looking to power your digital customer service, customer onboarding, or underwriting processes with AI, App0 is a solution that you should consider. Request for a demo today.

Digital Onboarding in Banking: FAQs