What Is Onboarding in Banking?

Onboarding refers to the process of acquiring or subscribing new users. In order to be effective, the process must be engaging and convenient.
As such, financial institutions must have a significant amount of information and the tools to create a user-friendly process. This often includes options for digital account opening and other online services for digital banks and other financial institutions.

The onboarding process is the beginning of a direct and consensual relationship with an individual and your bank. This process can be complex in the financial industry and require transferring sensitive documents with personal and financial information.

Because of this, the process can quickly become cumbersome and result in abandonment. To avoid losing customers, banks often adopt a variety of onboarding services. These may include:

• On-site client onboarding: The traditional method for onboarding customers to financial institutions requires customers to be present at the commercial office to provide important documents and proof of identification.
• Hybrid onboarding: Many financial institutions provide access to essential documents online. With this option, a potential customer can download documents and fill them out before going to the physical branch to complete enrollment.
• Digital client onboarding: Also called online or remote, digital client onboarding utilizes onboarding software that allows the customer to complete the entire onboarding process remotely through online services.

What Are Digital Onboarding Solutions?

Digitally onboarding clients is an automated process that introduces new customers into the system and gives them access to the financial institution's products, services, and facilities. The process creates a fast and efficient way for customers to transfer information securely and remotely open an account.

A seamless digital onboarding process can help speed up the process by eliminating certain steps and omitting a trip to the bank's physical branch. As more consumers become familiar with digital onboarding, there is more demand for engaging and personalized online experiences. In fact, research shows that 71% of U.S. consumers are willing to open a bank account digitally.

The customer onboarding process for all financial institutions can be complex because these organizations must comply with Know Your Customer (KYC) regulations to prevent fraud, money laundering, terrorist financing, and other criminal activities. In the past, this often meant long wait times when opening a new account or applying for a loan.

A digital onboarding platform can often take advantage of electronic KYC (eKYC) services that speed up the process considerably. With eKYC services, customers can fulfill their documentation processes in real-time, and the system will immediately compare the submitted documents to government records to look for possible hits. This digital onboarding solution improves onboarding for both customers and banks.

What Is Included in the Onboarding Process?

All onboarding processes require an exchange of information between potential customers and the organization they wish to join. However, when institutions manage the storage and transfer of money, the onboarding process is likely to be more involved.

The customer onboarding process for banks and other financial institutions features important regulations for individuals and businesses expecting to open an account. Both in-person and digital onboarding processes are likely to include these stages:

• Discovery: When you contact a bank about opening an account, the bank will ask questions to assess your needs and fit with the organization. Questions may focus on which services you need, your financial history, or the business details of a commercial customer.
• Solution: With your information, a banking professional can provide details about the available services or accounts that are likely to meet your needs.
• Underwriting: This part of the process includes KYC regulations, and you'll be required to submit documents and proof of ID and undergo identity verification. Any forms that need to be filled out will likely be completed during this process.
• Opening the account: Once your account is approved, you'll be able to create an online profile and learn how to use the bank's services.

What Are the Advantages of Digital Onboarding for Credit Unions?

As consumers become accustomed to new conveniences provided by technology, they expect to experience the same seamless procedures when accessing essential services like banking. Financial management is crucially important across all lifestyles, and a digital transformation in credit unions makes it easier for customers to maintain control over their finances through mobile banking.

Digital onboarding provides customers with various ways to experience onboarding with less friction and a faster timeline. These are some of the most commonly recognized benefits of digital onboarding.

Faster Onboarding

Traditional credit union onboarding procedures usually require an extended process that requires a potential member to submit several documents for adequate proof of identity. Digital onboarding can allow a process that previously took weeks to be accomplished in only a few minutes. A digital onboarding platform supplies customers with a secure method to submit documents and verify their identity in real time, minimizing the wait for services.

Improved Security

With the implementation of eKYC software, credit unions can utilize a variety of identification processes in a short period of time. Digital identity verification eliminates the vulnerabilities presented by usernames and passwords. Other technologies can be used to recognize signs of fraud and other criminal activities.

Increased Conversions

Customer acquisition for banks is a complex process that can encounter many challenges. Credit union members need easy accessibility to their financial information and services that meet their needs. Increasingly, these customers also seek convenient processes that allow banking activities to fit into their busy lifestyles. By improving the customer experience, banks can improve conversion rates significantly.

Improved Customer Experience

Everything about digital onboarding has the potential to create a more convenient process for customers. Clients can access digital onboarding platforms from various digital channels that provide access during and after traditional banking hours.
Security measures are taken care of in real-time, reducing the time it takes to open an account. Without the requirement of visiting a physical branch, customers can learn about services and complete the onboarding process at a time that works with their schedule, creating a seamless experience that reduces friction and time commitments.

How Long Does Digital Onboarding Take?

Although traditional KYC processes could take weeks, digital processes can be completed in minutes. A fully digital onboarding procedure eliminates trips to the bank, allowing customers to skip waiting in line, manually filling out forms, and slow verification processes.

A digital platform that utilizes eKYC technology allows customers to upload the necessary information and provides ID verification in real-time. As a result of this technology, digital onboarding can often be completed in less than 10 minutes.

Challenges in Digital Onboarding

While digital onboarding provides various benefits for customers and financial institutions, challenges frequently arise. In fact, onboarding abandonment rates have reached a startling 68%.

To provide a successful digital onboarding experience, banks must balance meeting compliance regulations and creating a convenient customer experience. To reach such a balance, financial institutions must overcome these challenges.

Creating a Seamless Process

The goal of digital onboarding centers around creating a convenient process for customers. Yet, this can be difficult to achieve. Meeting the demand for fully virtual and contactless onboarding with secure data collection and no bottlenecks can get expensive and challenging for banks to maintain with in-house infrastructure and software.

Maintaining Security

The biggest risks to any digital banking process are unencrypted data, malware, and insecure third-party services. Fraudsters are most likely to prey on the poor privacy habits of users, making weak passwords and unsecured networks primary targets for attack. To maintain security, banks should consider authentication requirements to help customers avoid fraud.

Effective and Efficient Data Collection

Banks are required to collect certain information to maintain compliance with KYC regulations. However, you can quickly cross the line by requesting so much data that customers get annoyed.

Striking the right balance to request the required information is tough. Warning customers early in the process can help them avoid surprises that lead to abandonment before onboarding is complete.

The Right Digital Onboarding Solution Yields Benefits for Credit Unions and Their Members

As people move toward the digital world to manage their banking needs, efficient digital onboarding is an important part of the process. However, digital onboarding can introduce privacy risks and create unexpected challenges. As credit unions compete with other financial institutions to gain new members, the functionality and efficiency of your onboarding process will become a pivotal feature in your acquisition process.

Cotribute's Digital Acquisition platform makes the digital onboarding process convenient and efficient to meet the demands of modern consumers. Schedule a demo to learn more about the process and find out how to get started.

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