Digital Client Onboarding in Banking

Mar 19, 2021
Digital Lending & Leasing | 9 min READ
What is Client Onboarding in Banking?
Creating a lasting first impression in banking starts with a stellar client onboarding journey. Onboarding is the process of banks embarking on a new relationship with their clients. It has several steps to gather essential information on the client and perform regulatory, legal, and credit-related due diligence with identity checks.
Atul Bansal
Atul Bansal

Global Delivery Leader



Tej Sarup
Tej Sarup

Former Practice Head

AI & Big Data


Onboarding begins the moment a potential client gets connected with the marketing or sales team. The bank processes the request and initiates the KYC verification process by collecting relevant information and performing background checks to validate data.
Once the documentation and regulatory requirements are taken care of, the bank sets up an account and provides the access credentials to its clients.
Onboarding is an excellent opportunity for banks to provide an outstanding experience to their clients, cementing their loyalty. McKinsey reports that banks can increase their profits by 40%, provided they introduce digitization in their onboarding processes. However, traditional banks are yet to catch up with this trend, resulting in arduous, time-consuming, and costly onboarding processes.
Let’s explore some top challenges that make the traditional client onboarding experience in banks so onerous.
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Challenges with the Traditional Client Onboarding Process in Banking
The complexity of the process with multiple cross-functional teams involved
A typical client onboarding process in the financial services industry involves multiple cross-functional teams (sales, marketing, legal, operations, strategy, and technology):
  • Sales and marketing teams handle client acquisition
  • The front office processes onboarding requests
  • The KYC team processes client documentation and performs regulatory due diligence while the credit team undertakes the credit risk assessment
  • The back-office operations team undertakes account setup
Because of the sheer number of stakeholders involved, there’s a lack of ownership of the onboarding process. These diverse teams don’t collaborate efficiently to provide a seamless and frictionless customer experience.
Delays in time, low costs of switching, and availability of alternative lending channels
According to McKinsey, the entire customer onboarding process from the initial consultation to the final go-live (i.e., when the account is active) takes anywhere between 43-64 days (or more).
Banks spend 50-75% of the costs associated with the onboarding process on approvals — KYC, credit checks, legal agreement, and the back and forth between the various teams involved. As a result, the relationship between banks and clients isn’t off to an impressive start.
As a result, clients have no qualms about switching banks when presented with the prospect of an alternative channel that puts the customer at the center. A growing number of fintech startups, neobanks, and e-commerce platforms have cast their hats into the ring. Unlike traditional banks, these businesses are skilled at enhancing customer experience and hold the gold standard for customer satisfaction. Loan originations continue to get hampered because of these challenges, and digital does offer a way out – read more here on this topic.
Customer data format – structured, unstructured data
Since several banks rely on manual processes and paperwork to perform for KYC, the data collected is in different formats - a mix of structured, semi-structured, and unstructured data. Extracting value from such messy and disorganized data is an extremely cumbersome task. Additionally, if the bank doesn’t maintain a central repository of all client-related data (without inconsistencies), one can’t rely on such data to extract strategic insights.
With several departments handling different aspects of the onboarding process, a sizeable portion of client data lives in silos. In several cases, information is missing, duplicated, or conflicting because of a lack of standardization and homogenization.
Legacy systems - inept to handle emerging needs
As mentioned earlier, banks capture client data in various formats from a plethora of distinct sources. Legacy systems supporting back-office operations aren’t capable of efficiently and effectively processing and organizing such data. This leads to expensive and complicated customizations and significantly reduces the speed at which banks acquire new clients.
Reviewing the impact on the workforce
Volatile regulatory environment
Keeping up with ever-changing, more stringent regulations is a massive undertaking. For banks, ensuring that every regulatory change is accounted for involves rolling up their sleeves and wading through a sea of regional and global regulations - FATCA, FCA, GLEIS, among others.
Breach of regulations leads to hefty fines hitting the bottom-line, causing irreparable damage to a bank’s reputation. In 2019, Standard Chartered was fined $1.1 billion for AML (Anti-Money Laundering) breach, and Citigroup was fined €43.9 million for regulatory reporting failures.
Manual interventions – compliance checks, documentation, paperwork
Aite Group reports that commercial banks take anywhere between 20-90 days to onboard new clients because of manual, paper-driven processes for compliance and identity checks such as physical forms and document submission, in-person verification, and manual setup.
Roughly a third of all financial institutions still rely on paperwork for opening bank accounts. When faced with such delays, frustrated clients switch to greener pastures — neobanks, digital-first banks, and other fintech firms.
Six top challenges in traditional client onboarding
Six top challenges in traditional client onboarding
Future of Digital Client Onboarding in Banking
Rather than playing catch-up with rising digital challengers, traditional banks can gain an edge by embracing digital technologies and building an onboarding journey focused on delivering the ultimate user experience to new clients.
According to a Deloitte study, banks can save up to $100 million every three years from digital technologies in client onboarding. They also reduce the time taken to a fraction of the current timeframe.
Let’s go through some promising technologies for faster, smoother, and low-risk client onboarding in banking.
Artificial intelligence in client onboarding
From virtual digital assistants for faster query resolution to digital signature and verification, artificial intelligence offers endless possibilities for banks to reimagine their onboarding journeys. According to McKinsey, AI can add $1 trillion of incremental value for global banks.
Artificial intelligence makes it easier and faster to mine terabytes of data. It offers insights that can help banks pre-emptively tackle bottlenecks in the onboarding journey and enhance the entire banking experience. For more on how artificial intelligence in transforming credit risk assessment, read this blog.
Robotic process automation in client onboarding
Gartner reports that robotic process automation (RPA) can save finance departments up to 250,000 hours of rework resulting from human errors in a year. In terms of costs, that’s $878,000 for an organization with 40 full-time staff in the financial department. The potential that RPA holds for banks is immense — from registration to account setup, RPA can play an essential role in helping banks setting up automated customer onboarding.
RPA, coupled with cognitive technologies like OCR (optical character recognition) mentioned below, can be especially useful with all compliance and identity checks. For instance, clients can upload the required documentation using a portal. Banks can employ RPA to scan documents, spot, and report any inconsistencies immediately.
Optical character recognition in client onboarding
OCR (optical character recognition) is a technology that can gather information from a document. Using OCR, banks can scan identification credentials such as passports and driver’s licenses remotely, with no manual intervention.
OCR can also extract data from physical forms or applications, making end-to-end digitization of the entire onboarding process a reality.
Computer vision in client onboarding
Computer vision aims to teach machines how to see, process, and interpret visuals (images and video). It’s a game-changer for the traditionally slow KYC processes, as customers can open accounts with selfies and video calls. Several banks use computer vision for their KYC verification, eliminating the need for any human intervention.
Natural Language processing in client onboarding
Natural Language Processing (NLP) involves training machines to understand human communication from text and speech and respond in kind. Banking giant JP Morgan Chase uses COIN, an NLP software, to help its legal team search and review legal documents. The software saves the legal team 360,000 hours of document search tasks every year.
Meanwhile, Bank of America uses Erica, a virtual assistant, to help its customers check account balance, manage payments, and track spending habits, among others.
Big Data and advanced analytics in client onboarding
Big data and advanced analytics help segment customers and craft personalized experiences that leave a lasting impression. Using advanced analytics, banks can remediate missing data in the onboarding processes and fix them right away.
It can also speed up identifying opportunities for cross-selling other banking products and services using the data collected during client onboarding.
Biometrics in client onboarding
Onboarding warrants a visit to the local bank branch in most countries — not feasible amidst a deadly and highly contagious pandemic. Contactless biometric technologies with voice recognition, face ID, and iris scanning capabilities are a viable alternative to in-person verification.
Besides reducing operational efficiencies, biometrics can save banks a considerable amount of time and money, fast-tracking the client onboarding process.
Seven technologies that will define the future of digital client onboarding in banking
Seven technologies that will define the future of digital client onboarding in banking
What Should Banks Do Now to Streamline Client On boarding?
AI/ML, NLP, OCR, Big data and analytics are the technologies to mature in the fullness of time. In order to leverage the technology pre-eminently businesses will have to transpire new business use cases in which the above technologies go hand in hand.
Encircling the Scope of On-boarding
Adopting digital technologies can astoundingly help banks to streamline their customer onboarding processes by eliminating gridlock and offering a seamless experience to the customers when the scope of the activity is aligned with the business goals.
Approach to the digital transformation starts with assessing the key business processes and bridging out the crevice optimally. Utility payoff matrix needs to be well determined before enlivening the business scenarios.
Outlining outcome of each customer interaction
The success of the digitization journey is directly proportional to the degree of customer satisfaction in turn imposing businesses to define KPIs for each process in the client onboarding journey along with the outcome. With the incremental advent of digitization across the organizations, minimum viable product (MVP) is constantly in flux. To plan the outcome and KPIs businesses should be visionary in their approach.
Making onboarding about the customer
Fundamentally the end user is raison-d’être of the client on boarding journey. The end user demographics are assorted with the millennial and gen Z entering the workforce and client base. The previous generations are getting acquainted to the pace of digitization although handholding has to be done at the beginning of introducing new technology. Providing seamless journey across all the touchpoints is the essence of the digitization in the client on boarding as well as significant point of differentiation.
Digital transformation requires a handsome initial investments however the returns on investments are fivefold. Increasing effectiveness of the business through constructive digitization of the processes is not only the need of the hour but the prudent approach to withstand the competition.
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