KYC (Know Your Customer) regulations dictate a large part of the customer onboarding process for all banks. From the bank’s point of view, onboarding is absolutely critical to get right as it is the riskiest part of the entire relationship, where a customer can effectively be lost before they have even opened an account. Therefore, how a bank deals with the thorny issue of KYC will dictate whether or not it can successfully attract customers in the short term.
However, to think of KYC purely as a compliance issue for banks is somewhat short-sighted. The simple fact is that a smoother onboarding process should be just a part of a strategy from banks to become much more customer-centric. The ease with which most people can go about many aspects of their lives thanks to digital services – using their smartphones as tickets for the train, having access to millions of songs and movies at the click of a mouse – has set high expectations for banking services.
While using Uber, Netflix and the like is a seamless experience, highly personalised and taking just a few clicks to get what you want, applying for a bank account is quite the opposite. A lot of information is required from the potential customer, the bank has to perform its KYC checks to verify identity, qualification and so on, all before an account can be activated. A recent report from Signicat found that four in 10 consumers had abandoned an application for a banking account. Around 39% of these abandonments were due to the length of time taken.
So while onboarding processes are not in tune with the 21st Century world, banks that are serious about becoming more customer-centric need to look to new technologies that can help to speed things up. With most banking interactions taking place online, it is only logical that applications should be possible digitally as well, through not only desktop PCs and laptops, but smartphones as well.
In technological terms, the most interesting possibilities for banks looking to streamline their KYC processes revolve around biometrics – facial recognition and fingerprints, for example. With many newer smartphones having both high-specification cameras and fingerprint readers, the ability to verify that someone is who they say they are – without having to meet them face-to-face – is greater than ever before. These techniques are also quicker than traditional point-of-sale identity verification techniques, and require no staff training, making them much more efficient and cost effective for banks.
Looking at the process of how an application could be made through a smartphone, a potential customer could use the camera to recognise an identity document – such as a passport. The NFC (Near Field Communication) reader can then recognise the chip in an electronic passport. Moving back to the camera, this can be used for facial recognition, checking that the person making the application is the same one as pictured in the passport. The camera can also capture movements such as blinking and head tilting, in order to check that the person is actually alive. After this, additional documents – a utility bill, driving licence or birth certificate, for instance – can be captured by the camera.
Introducing these technologies is not without challenges, though. Many banks still only have basic digital services available to customers online, with even fewer having fully-functional mobile apps. How then, can they make the leap to introducing facial recognition and document scanning via the camera of a customer’s smartphone?
It is well documented that many larger banks are stifled by legacy IT architecture, making the creation of new, cutting-edge digital services difficult. Those that have mobile apps may have entirely different teams managing the app and their other online banking services. Bureaucracy and red tape could also be slowing down the creation of new services – while the marketing department might be well aware of the need for customer-friendly propositions, IT chiefs are more interested in their current struggle to manage and maintain existing services.
Banks need to find a way to unify their digital services, enabling better cohesion between all departments and putting customers at the centre of their thinking. When it comes to customer onboarding, banks should look to create a process that is standardised for whatever device or channel they are using. If the same steps can be replicated for the smartphone, a PC, telephone and in-branch sign ups then the overall process will be clearer for the customer and more efficient for the bank. It will also enable cross-channel applications where a customer might start the process on their smartphone but complete it on their PC or in branch.
By taking this omni-channel approach, staff are able to easily help a potential customer who is having difficulties with the process no matter what device they are using and which stage they are at. It can also alert the bank to where the bottlenecks and drop-off points are in the onboarding process so they can fix them.
Another advantage of basing the whole onboarding experience on a cross-channel digital platform is that new technologies and features such as biometrics for KYC requirements can easily be integrated and plugged into the existing process. This means that banks can bypass the need to get the IT department involved when they need to react quickly to changes in regulation and further streamline their service.
There is a necessity for banks to address their customers’ need for a real time, effective process that enables them to engage with the bank in the way they choose, and across multi-channels, to initiate requests. Banks need to realise the importance of being able to obtain the customer’s information at the first step of the customer journey and the customer lifecycle, regardless of the channel used.
These innovations need to be part of a wider strategy to become more customer-centric – thinking less about what services and features it is possible for you to provide to customers, and more about what your customers actually need. Once you have established what these needs are – whether they revolve around digital service or not – then you can figure out how you match those needs. In the long term, the banks that solve this puzzle will be the ones that win out.