Financial services seem to be everywhere these days — depositing a check via a bank’s mobile app on a phone, paying contactless at a store, or paying a friend back via an app for spotting you when you were out of cash.
All of these different methods, of course, require that the user have an account, which naturally means the company will need to onboard the user to the platform. Besides entering personal details and choosing account preferences, onboarding also requires verification of identity and assets. Certain trends have taken shape with respect to onboarding for various banking and fintech apps — let’s have a look at a few of these.
1. Photo I.D. & Verification
This is perhaps one of the more complex processes to verify that a new user is indeed who they say they are. In the onboarding process for a bank or fintech app that offers loans or extends credit, identity verification during the onboarding process is a critical stopgap against fraud. Banks without brick and mortar branches have no way of verifying the identity of a customer other than digitally, so strong measures are needed.
In a typical customer onboarding process, a new client will need to not only take a photo of a valid government-issued photo ID, but also take a current photo using a smartphone or tablet camera. Photo recognition software would verify that the two images are similar, and thus authenticate the new client. Fintechs and other banking institutions are now enhancing customer onboarding with Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance to verify identities and prevent fraud.
2. Biometrics
Face, iris, fingerprint, voice — these are unique human characteristics which can be used to authenticate a user in order to gain access to a system.
Fintech apps have also been known to use biometric technologies in order to verify an identity. A user can enroll in the biometrics app on their phone, which the banking or fintech app might use to verify identity, or the app may have its own enrollment capabilities.
For strongest authentication, whether during onboarding or regular usage, banking and fintech apps usually require multi-factor authentication (MFA), in which the user will need to provide a password and one other modality (biometrics, temporary PIN) in order to gain access.
3. Linking to Existing Bank Accounts
During onboarding to a new banking or fintech app, the customer needs to fund the account. This is usually achieved by linking an existing bank account or credit card with the new account. Years ago, to authenticate account ownership, the new bank or app would make two small deposits and the user had to enter the amounts, as a way to validate identity and account ownership.
However, there now exist third-party services that connect apps to accounts. For the new account to be funded, generally, the user needs to enter a bank name, account number, and account password, and this service, via an API, will make the connection to authenticate that the user is the owner of the other accounts. This enables funds to flow between the accounts if needed.
Security is still important, as some of the user’s bank and credit card information is stored in the new account. While any friction in connecting accounts and funding the new one could cause the new customer to simply withdraw from continuing the account set-up process, if a strong digital customer onboarding user experience is present, the new customer will proceed to onboarding completion and enjoy the experience of using the new app.
4. Autonomous Finance
Autonomous finance uses automation technologies like artificial intelligence (AI) to deliver experiences personalized for each customer. These experiences could be as sophisticated as asset selection for a retirement or investment portfolio based on predefined goals, or something simple like screen overlays displaying ads for mortgages with an attractive rate already calculated for that customer’s credit and risk profile.
Such personalized, data-driven banking can present the most appropriate options for a customer, without wasting time on products with little chance of a conversion. During the onboarding process, a customer’s financial goals and past savings habits can be captured, so that the institution’s machine learning algorithms can get to work shaping right-fit products for the customer.
5. Decentralized Identity
Decentralized identity is a model in which users own their own identity and bring that identity with them as they log in and utilize apps, websites, and digital services. Decentralized identity’s core concept is that one’s ID is self-owned and not owned by any single company, such as an employer, financial institution, or even a third-party technology provider.
These self-owned digital identities are stored in a ledger, using blockchain technologies. As with Bitcoin and other cryptocurrencies, a hack of the blockchain would be difficult, if not impossible, and so decentralized identities have a lower risk of getting stolen than if they were to be stored on a server owned by a company. As a result, decentralized identity adds stronger security, privacy, and validation as users access digital services.
The Need for Managed Customer Onboarding
Instnt is the first fully managed digital customer onboarding solution for businesses with up to $100MM annually in fraud loss insurance. With codeless integration on websites or apps, Instnt can reduce your fintech rejection rates by 50% without friction or fraud, grow top-line revenue and lower operational costs by 30%. See how it works!