We talked previously about disruption in retail banking. Incumbent banks need to recognise that their landscape is fundamentally changing and the only way to respond is to step up their game when it comes to customer experience. They need to focus on the way they interact with customers, making banking personalised and engaging.
From what we have seen, there is a huge opportunity to address one critical customer journey: the onboarding and verification process.
Customer onboarding: the state of play & what’s at stake
Onboarding – defn; The process by which a customer establishes a relationship with the bank and provides all of the necessary information for the bank to open an account
Verification – defn; The process by which a bank confirms that a person is who they say they are
Anyone who has tried to open a current account will know how painful the experience can be. Banks can only claim to be ‘omnichannel’ in the narrowest of ways. Customers trying to set up an account online often get redirected to a local branch and told to read the website to follow the steps of banks’ archaic onboarding processes. Every customer’s onboarding journey is different, but the experience of opening accounts with ‘traditional’ banks contain many common friction points – being re-routed to different channels, the need to provide physical identification, answering the same questions multiple times, and long delays to actually access the account… no wonder there is such apathy in switching!
If just one incumbent bank revolutionised their onboarding experience, the industry would become instantly more competitive, as customers would finally be motivated to switch. This could be the catalyst to improving customer experience – not just at the point of account opening, but across all financial products and services.
Customer onboarding: what does good look like?
One of the key principles of open innovation is to look to other industries for inspiration. Do you remember setting up your Facebook or Spotify account? The answer is probably no, because you were searching for friends to add and building a playlist within a matter of minutes of setting up your account. The account set up was a mere formality, one that was over in a matter of minutes. Banks need to fundamentally change their mentality when designing processes. It’s about the customer, not about cost and process efficiency. By applying truly customer-centric design methods along with rapid prototyping and frequent customer testing, a process can be made as easy as possible for the customer, reducing the effort required by them to sign up. Fidor Bank, for example, remove the need for the customer to provide a utility bill or other traditional proof of address by sending a letter with a unique code to the customer’s address. The customer can verify they have received it by quoting the code back – clearly digital doesn’t have to mean paperless in some cases!
Other trends include phased or staggered onboarding, where customers can part-complete the process in return for partial account functionality. For example, Airbnb allow you to partially onboard to explore their site, but you’re not able to book a stay until you’ve completed your profile information and verified your account. This is an approach that banks could consider, enabling partial functionality in return for partial completion of the onboarding process and only allowing full access when the full process is completed.
Customer onboarding & verification: a new way to play safe?
Social media may not necessarily hold all the answers for financial services. Our experience of a short round of customer testing with an insurance client quickly disproved the board’s belief that this would be the answer to their onboarding troubles, largely due to customers’ reluctance to link their Facebook account to their insurance policy. Instead, new banking products such as digital banks’ prepaid debit cards are undertaking Know Your Customer (KYC) checking by ‘piggybacking’ off established banks. By requiring you to upload credit onto the card from an account at a licensed bank, the risk has been absorbed by the digital bank on the basis you have been checked by the licensed bank. This approach is not sustainable for full functionality accounts but it does demonstrate a mindset where a calculated risk is taken to deliver a vastly superior experience for the customer.
A number of exciting FinTechs are fulfilling current KYC requirements – Onfido and Avoka are two examples of startups we’ve been impressed by. These mobile apps facilitate near-instant verification of government-issued documents (like a passport or driving licence) from around the world simply by taking a photo; compare this to the traditional method of having to trek to a bank branch with the relevant documentation to complete the verification process. Apart from the customer inconvenience, it is unreasonable to expect bank branch staff to be able to consistently and reliably identify fraudulent documents. Not all these FinTechs are quite as successful though. Jumio, a Silicon Valley startup offering a similar solution, filed for bankruptcy in March 2016 following government investigations into financial irregularities and stock sales by its former management team. However, they were acquired by Centana Growth Partners in May this year, so we expect to see more from them soon.
A further innovation is a move towards freeing proof of identity from the ties of offline sources like driving licences and passports – the real game-changer for verification would be establishing standardised, online identities. An example of this in fledgling form can be seen in the Gov.UK Verify initiative, which has already formed a partnership with a number of banks, services and startups. Other startups such as OneName and ShoCard are creating centralised services that allow companies to outsource verification activity using Blockchain technology.
Whilst there is clearly a distinction between the onboarding process and continuous verification, disruption opportunities remain. The debate about the use of biometrics in banking has been renewed recently by the pending launch of Atom Bank, who intend to use face and voice recognition for mobile logins. However, this is one area where traditional banks are making a concerted effort to keep pace with the competition. RBS and Natwest have used fingerprint biometrics as part of their mobile banking app for a while, and HSBC has recently launched voice recognition and fingerprint security enabled by technology provider Nuance. However, it is important to note that, the ultimate acceptance and adoption of both biometric technologies and digital identities comes down to trust, something that is built from the start as banks develop (or not in some cases!) empathetic relationships with their customers.
So, what’s holding the established banks back?
Rigid regulatory requirements and credit checking significantly constrain progress in the short-term. But the speed with which these processes can be completed highlight that, despite frequent allegations, this isn’t the biggest obstacle restraining retail banking innovation.
In our view there are two key factors holding traditional banks back – and both can be overcome. Firstly, complex legacy systems and technologies, weighed down by people-dependent processes are clearly cumbersome. The fancy front end that enables that ‘seamless’ customer experience falls flat as soon as you try and plug it into old machinery. Many are trying to overcome this by building new customer bases away from their core platform. Atom Bank have formed a partnership to develop a new technology platform on a scalable ‘pay-as-you-grow’ basis. Incumbent banks could learn a lot from observing how a digital bank can develop such a platform from a blank canvas.
The second major barrier to transforming the customer onboarding process is the conventional mindset within many leadership teams. The traditional pursuit of profit and process efficiency over customer experience is the ultimate obstacle in ‘thinking digitally’. We have recent experience working with two banking clients, supporting them to design onboarding processes using design thinking and rapid prototyping — the results have been transformational. Designing processes around the customer requires a fundamental shift in mindset. And it’s one that banks must make if they are to move forward quickly, or indeed progress at all.
Improving the customer onboarding experience is a major opportunity for banks to address. This first customer interaction sets the tone for the entire relationship between bank and customer: a move from the lengthy, paper-based, inconvenient process to a slick, genuinely omnichannel one would be a major customer experience game-changer, not to mention bringing significant process cost savings. Incumbent banks need to recognise that it’s all still to play for – they should look at adopting a mindset shift towards truly customer-centric design in their current onboarding process.
Getting the onboarding journey right won’t fix all of their problems, but it’s certainly a great place to start.