The customer relationship with a neobank starts with a great onboarding experience. Get it right and customers are pumped and primed to access even more products and services. They may even tell a few friends how easy and convenient it was. Get it wrong? There’s another neobank with a better onboarding process.
Online customers are notoriously fickle. They abandon while onboarding for a number of reasons. Among them is the amount of time it takes to complete an online application. It’s not just traditional banks that must be concerned with the onboarding process. Neobanks and challenger banks need to get this right. Tech-savvy customers have high expectations for a great online experience.
There are many benefits to both the customer and to the neobank when there is a superior customer onboarding process in place. Here are six of the most salient.
1. Improves Customer Experience
The best onboarding processes are fast, convenient, and intuitive, delivering an outstanding customer experience. Since neobanks don’t have physical branches, customer service comes down to the online experience. Every interaction has to leave an impression, particularly the initial onboarding. If the impression is good, the customer will be more likely to give the neobank a larger share of the wallet which ultimately increases the customer’s lifetime value.
This means that the front-end interface must be well-designed and easy to use. Customers should be able to navigate the application and find exactly what they need. Digital onboarding must feel as comfortable as sitting across from a friendly and helpful financial services representative.
2. Minimizes Onboarding Time
Take simple processes and make them easy… and they will come. That’s what a superior onboarding process should accomplish. Today’s time-stretched consumers appreciate the convenience of opening a bank account in a mobile app. Unfortunately, poorly designed online applications can take too much time. The advantage of digital-native banking applications is that they are digital-first and are bound by compliance rules.
But that doesn’t always mean that processes are fully optimized. One study found that it takes between 70 and 120 clicks to open an online account in a traditional bank. It’s certainly less for neobanks. But remember Amazon’s 1-Click buying process, which was patented until 2017. Of course, it’s not a viable model for banking. But Amazon understands what every customer knows: every click counts.
3. Increases Ease of Use and Effective UX
Simplified data entry means one and done. Neobanks can reduce the risk of customer abandonment during the onboarding process by not asking for the same information twice. Customers key in the minimal amount of data; the process pre-fills as many onboarding forms as possible. This not only reduces the number of errors but also speeds up the process and delights the customer. Neobanks can increase the number of new customers they bring onboard and lower the acquisition costs.
4. Reduces Costs
Although neobanks don’t have physical locations to maintain, the road to profitability has been steep, nevertheless. For one, as neobanks mature, they increasingly become more like the incumbents they seek to disrupt. Incumbents have accelerated their digital plans. Plus, there are increasing regulatory pressures on neobanks as well as competitive pressures from big tech companies. As neobanks pursue more sustainable business models, they must increase top-line revenue and decrease the cost of customer acquisition and ongoing operations.
Superior onboarding processes reduce the neobank’s operating costs in the following ways:
- Facilitates due diligence and anti-money laundering processes
- Verifies the customer identity to satisfy KYC and other compliance regulations
- Improves the efficiency and effectiveness of service
- Increases conversion and the number of good customers who onboard by up to 40 percent, thereby reducing the cost of acquisition
- Accelerates the workflow, ensuring that the information is properly parsed
- Minimizes the errors from human intervention
- Reduces the potential for fraud losses
5. Reduces Risk of Fraud
With no transaction history, application fraud can be difficult to catch. That’s why neobanks must have leading-edge onboarding processes in place to catch suspicious activity. It’s more than just identity proofing. There are other techniques that can be part of onboarding. For example, device proofing creates a unique device identifier, known as a device fingerprint. Although there is no historical data to compare the device fingerprint to, it can be compared to statistical averages for fraudulent behavior. There are other risk management procedures that use artificial intelligence to detect the presence of bots and predictive analytics to spot suspicious activity.
6. Simplifies ID Verification for Compliance
Online account onboarding necessarily requires stringent verification procedures. Verification that does not rely on human interaction is the most reliable. People are biased and easily overlook important cues when it comes to the repetitive task of identity verification. That’s not the case with the best onboarding processes and their deep learning algorithms. Superior onboarding uses several methods of identity verification in combination, including:
- Facial recognition and other biometrics
- Multi-factor authentication
- Digital signatures
- Document verification
Selfies and a picture of a government-issued ID are insufficient unless accompanied by additional security measures such as an electronic background check. Streaming video identification is even better. It makes use of artificial intelligence and machine learning to ensure that customers are who they claim to be. The customer allows the app to use the device’s camera and microphone and show their ID and face to the camera. The customer’s phone number and email are compared against known records.
Time for Change
In the past, neobanks have had an advantage over traditional banks. Customers could open a new bank account online through the convenience of a mobile app. As a result of the pandemic and the rapid acceleration of digital banking, that’s changing. There are more online banking options than ever before. Today, digital onboarding is an expectation among tech-savvy banking customers.
Unfortunately, digital onboarding processes are lagging. According to the Digital Banking Report, mobile app abandonment rates run as high as 40 percent when the onboarding process exceeds five minutes. Moreover, as big techs like Amazon, Facebook and Alibaba encroach upon banking territory, neobanks must up their game with best-in-class onboarding processes. A comprehensive and holistic approach is needed.
What if you could grow faster while reducing your costs? Instnt is the secure onboarding solution that can help neobanks increase top-line revenue growth by bringing on more good customers. We simplify AML and privacy regulation compliance with zero fraud losses to help you focus on expansion and mission-critical work. Learn more today!