Today, nearly every aspect of our lives has been impacted by technology, and banking is no exception. Bank customers no longer need to go to a branch to carry out most types of transactions. Even depositing a check can be done using a mobile phone for many financial institutions.
However, despite all of the technological advances, traditional banks are having difficulty keeping up with consumer expectations to be able to open new accounts using a fully online process. Instead, much of the customer onboarding process continues to be done manually. Why is this still the case?
Digital Account Opening on the Rise
Studies carried out in the U.S. also show a rising trend in the demand for opening accounts digitally. A report found that while fewer than 20 percent of top U.S. banks offer the ability to open an account that is mobile-friendly, the number of new accounts opened using a mobile device like a smartphone or tablet rose more than 50 percent in 2014. However, the proportion of new checking accounts opened using mobile was still below 20 percent.
Over the next few years, the number of checking accounts opened in the U.S. by mobile is expected to grow sharply. From 2015 to 2020, the in-branch applications has been predicted to drop nearly 60 percent while online and mobile applications will increase by 34 and 150 percent respectively.
The Complexities of Onboarding
In a report released in March 2016, Signicat revealed some interesting statistics that indicate a clear sense of dissatisfaction from online banking customers. The company surveyed 2,000 bank account holders in the UK, asking them about onboarding experiences.
Among the participants in the study, 40 percent of them had given up on the online onboarding process when they had applied for an account. The most common reasons given for abandoning were lengthy delays (39 percent) and being asked to give too much personal information (34 percent).
A large part of the challenge with current onboarding processes lies with the complexity of the know your customer (KYC) due diligence process. Although the online portion of the onboarding process took an average of less than 20 minutes, the customer typically still needs to go in person either to a bank branch or a post office in order to present a physical government-issued document as proof of identity. This could add several days to the wait before an account is opened and available to use.
Taking the Digital Path
Encouragingly, 55 percent of those surveyed said that if the application process could be completed entirely online, they would be more likely to apply for an account. In addition, 52 percent said that they consider purchasing additional services if they were not required to present a physical identity document.
It is clear from these numbers that incumbent banks should give serious consideration to using digital solutions for their KYC process. Signicat points out in its report that the biggest obstacle preventing the account application process from being completely online is identity verification.
To their credit, traditional banks are investing more resources into digital banking, both online and mobile. These financial institutions need to address consumer demand for a fully digital customer experience in order to ensure that they stay relevant in a very competitive market.
“Traditional financial institutions are transitioning as consumers expect more of their services to be fully accessible online,” said Jon Jones, President at Trulioo. “By making the account application process completely digital through the use of online identity verification, banks can decrease the number of abandoned account applications, increase the amount of repeat business, and offer a best-in-class customer experience.”