A WHITE PAPER FROM FINEXTRA IN ASSOCIATION WITH HID JULY 2020
ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 01 INTRODUCTION ...... 03 02 WHY IS ONBOARDING SO DIFFICULT? ...... 05 03 WHAT CAN TRADITIONAL BANKS LEARN FROM THE SUCCESSFUL NEOBANKS? ...... 07 04 WHAT CAN NEOBANKS LEARN FROM TRADITIONAL BANKS? ...... 08 05 WHAT’S NEXT ...... 09 06 CONCLUSION ...... 11 07 ABOUT ...... 12 3 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 01 INTRODUCTION processes still need to be supported, along with along processes digital still be supported, channels. to need done a great job of slick sign-up screens and processes that appeal to their their processes to and screens appeal that sign-up slick of job a great done speed and of promise their on millennialcore deliver and target market they the fact are a by offering has smoothed path been Their convenience. universal banking no obligations. have and products of small or range single user their makefine effortsto tune to continually had they have even But rates. friction abandonment processes and reduce experience and to to a desire temper to bases have with customer established Incumbents large everything digitalpush processes and lines along simplify product their to serve customer and existing a society-wide with protect customers to the need in-branch and digital So paper-based natives. include only doesn’t base that In the past five years,significantly banks In the past five sizesinvested of allshapes have and in streamlining processes their as the regulatory that so Know checks such can while be met (AML) Laundering Anti (KYC) and Money Customer Your interactions postal of in-branch and the number possible, minimising, where on Depending suitability. product and identity establishing required for online this 100% process can product, and be done segment the market even for dominates device now that – a channel via ideally and a mobile bases. customer bankstraditional with older established, banks, digital also start-up challenger Many known as neobanks, have whether it’s a new-to-bank customer at risk of abandoning the process if risk abandoning of at customer a new-to-bank it’s whether a bad whom for an expectations, their existing or meet customer doesn’t it provider. another switching to consider to experience can them lead A easy. too not be as the process But want to easy asCustomers possible. security and identity certain to friction comes of is expected it amount when checks, reassuring financial prospective their that service them provider financialnew a services for up Signing takes security seriously. data their and as a username email providing and address. be as simple shouldn’t product visits branch forms and always require reams it paperwork, of should nor But signed in triplicate. Best practice in customer onboarding and account opening is a tricky opening account and onboarding Best in customer practice lifecycle, part important the most arguably the customer of It’s act. balancing
According to 2019 research from AT Kearney, neobank customer bases customer neobank Kearney, AT research from to 2019 According while 2011, since million 15 grown than by more have across Europe By customers. of two 2023, a decrease seen have million banks retail 20 customers—about to million 85 up have could neobanks Europe’s of 14. age the over population of the percent and onboarding systems underpinning customer onboarding regardless onboarding customer underpinning systems onboarding and of channel. Banks, and both new the start, isDigital just onboarding however. onboarding at identity of the integration improve to are looking established, approach a risk-based adopt and credentials, authentication with ongoing the balance can that lifecycle adjust securityto the customer throughout customers. for convenience and between protection That said, many traditional banks now do have common product definitions definitions product common have banks traditional do many said, That now
4 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 5 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS
Just as important as the identity verification technology itself is the the is itself technology identity important the as as verification Just why and interface explains that app or web the within used language is information that order The step. each to take needs user the how collected important is too. 02 WHY IS ONBOARDING SO DIFFICULT? disruptors and digital channel transformation taking place in other industries. taking digital and in transformation other channel disruptors place and internal and external systems integration requirements for banks. for requirements external and internal and integration systems retail bank abandon consumers British of Finextra 40% that reported In 2016, service. than or 1 More product a new for applying process when onboarding time over taken just and the length of to due were abandonments of in 3 (39%) is required. information personal much because too were a third (34%) are there banks retail and financial yearsservices later, in allFour players gainsgreat in reducing made have – that traditional and – new markets has an progress organisation whatever But rates. friction abandonment and digital new be learned organisations, from peer to is always more there made, branch manager or loan officer and provision of identification, payslips and payslips identification, of provision and officer loan or manager branch As the norm. digital were emerged, channels documents government other still processes were opening based on account and time onboarding a long for the kinds digital to of that this channels dynamic, mapping with inconsistent preference. growingwere in customer experience, a architecture systems Internal also the customer dictated often banking core product siloed systems, ageing by was that exacerbated problem acquisitions. and through mergers accumulated systems duplicate lines and – particularly regulation stringent this, more towards the trend Compounding AML complexity to KYC and more rulesrelated drove 2000s the early - since Banks have had onboarding processes for as long as they have existed. When existed. as When they have as long processes for onboarding Banks had have meetings with face-to-face channel, a the only were interactions branch
03 WHAT CAN TRADITIONAL TRADITIONAL CAN WHAT THE LEARNBANKS FROM NEOBANKS? SUCCESSFUL targeting the younger demographics. And this is an area demographics. the in which targeting the younger particularly been neobanks have strong. right marketing strategyright marketing are also critical. acquisition, as growth their customer But new-to-bank by is driven purely For promise. exceed the marketing or process meet has to the onboarding the successful neobanks, this has the case. been recover And as economies digital people’s from benefit stand to they should pandemic, from the Covid19 during this established period. habits banks bases traditional – particularly with customer larger For established growth organic new- Butthere still on focus isneeds to difficult. be a players, importantly more - attracting but switchers, acquisition to-bank customer That prediction was made before the Covid19 pandemic. And digital-only while pandemic. the Covid19 before was made prediction That in areas many popular society periods, of during lockdown proven have channels resulting and financialslowed impact uncertaintyhave to the economic seem research According to switching acquisition. activityaccount customer new and growth their saw Starling N26 and Revolut, Monzo, Priori inby April Data, 2020 markets. in native their 36% and between by drop 18% rate digital overall success and factors the only experience onboarding are not The bases in their significant customer achieved the neobanks have behind that the and rates interest Timing competitive entrymarkets. the market, of to these new players to gain banking their to raise and the licences, required capital, players these new digital channels. bankinga core customer-facing and system implement (founded with in the US, Simple established the earliest neobanks were of Some the rate But examples. the leading among in 2011) (founded Moven and in 2009) than in Europe. slower has much been in the US adoption of bases across customer neobank research Kearney, from AT 2019 According to retail while banks than grown have 2011, 15 millionmore since by have Europe have neobanks could Europe’s 2023, By two a decrease of million customers. seen 14. of the age over the population of percent 20 million customers—about 85 to up Regulators in countries around the world have moved at different speeds to different at moved have the in world countries around Regulators And has taken it time market. for the deposit to entrants new for the way pave
6 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 7 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS infrastructure to reduce costs and increase agility. They also have the benefit of infrastructure the benefit also They have costs increase agility. and reduce to decisions. pricing and products their back to balance sheets scale stronger and customer to open the slick interface inplace. the first interface the slick open to customer costs a third neobanks bank serve a traditional the around costIt a to of of cases in as and some little as a sixth the cost. Neobanks can of customer, alter can it institutions, take often older weeks. For or days of in a matter products the neobanks enabled This cost agility base has, in theory, months. lower and gain with to rates incumbents attractive and price interest on compete to share. customer initiatives banks cost-saving to strangers are no longer-standing But cloud-based also embracing increasingly been have and themselves, Also, sometimes the pure convenience of the mobile device at the fingertips the device fingertips at the mobile of convenience the pure Also, sometimes that a time place and start process at could a sign-up means a customer that transport. By public as the task, on such completing for really suitable isn’t the bank has the opportunity upfront, method contact kindcapturing of some to alert, the customer via remind text email to message or app later to to be able to likely more the a time process they’re – hopefully at complete private. take and in a selfie access documents reduce to these journeys optimising user job a good done Neobanks have in But through the digital customers door. got they’ve once rates abandonment the gets that fees lower or rate a better interest of the promise casesmost it’s The comparison can be based on an image of the physical document with document the physical can of an comparison be based image on The in countries with passports, biometrics Or, learning the match. test to machine can An be taken. NFC approach scan the passport advanced of data a more is screenimage or photo detect if a to technology a selfie and light with flashing a real can of face initial instead establish be used to identity. presented being itself languageis the technology verification as as important the identity Just needs the user how explains that and interface why used within app or the web is too. is important collected information that order The take step. to each abandonment. path to is a sure upfront Making difficult too the process appear Traditional banks mature in digital their are that quite transformation Traditional and are and doing, done the neobanks have what of taken notice strategy have ways. of in a number responded have own their digital-only planned or created banking have Some groups the used by the approaches of taken some just Others have apps. and brands in the key own their them of digital One channels. neobanks replicated and with various Working is checks. digital identity things adopted theyhave checks using enabled insoftware this they have operating space companies having and the licence as passport driver’s IDs such or government-issued images. device to compare mobile on or their takeuser selfie a video The natural thing is to link the identification part of the digital onboarding onboarding part digital of the identification the to link is thing natural The that By doing credential. of the distribution the authentication- to the to end. end from can offerbanks experience a seamless user 04 WHAT CAN NEOBANKS LEARN CAN NEOBANKS WHAT FROM TRADITIONAL BANKS? legacy technology, and they are providing some expertise they and are some providing with cope to this technology, legacy partnerships with close mentality and start-up their Combined complexity. in to innovate continue should organisations withthese fintechs, other customer-centric banking. As the neobanks expand their initially simple range of account and loan loan and account As of range the neobanks expand initially their simple to as user the present must they choices offerings, they are increasing the those processes capture tailor to to need process. They part the onboarding of example for – customers products and the to the related information different for savings account will processesjoint account to a a youth require different with cope And to they also regulatory increasing have couple. a 30-year-old as they expand ranges. their requirements recruitand to financialleaders many managed Luckily the neobanks have technology practitioners with lots of experience inside larger traditional opportunity by a greenfield banking attractedunhindered to groups, are having to change. To maintain growth their they more are To beginningare add change. having to to cross- include services, and to strategies marketing their products change and acquisitions. than customer up-sellsell and opportunities new rather just banks start challenger withGenerally, savings with and current accounts andare tools, personal financial management some cards. offer They debit account banking become open to of are beginning takesome to advantage be small to unsecured area loans has tended next product The aggregators. new as Australia, countries, such the relatively in overdrafts. some and But space. the mortgage are moving fast into challengers While many incumbent institutions have been playing catch-up as regards the catch-up playing been have institutions While incumbent many quality themselves neobanks, the neos digital by of experience provided user
8 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 9 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 05 WHAT’S NEXT? the photo that is on the document ID, that very face recognition biometric biometric very that recognition face ID, the document is that on the photo authentication. customer for option be used ascould one point where they can authenticate to go and check their account or transact. or account their check and go to they can where authenticate point also it increases the experience, but user a consistent of This is an extension are that credentials tightly linked to issuing By authentication security. of level distributing the bank can not they’re that ensure identity, of the establishment the real is person. that not someone to the credential Banks during also the identity collected data could use the actual biometric a in typical example, identity for So, authenticator. possible one as verification and requires ID that mobile scanning document a on workflow verification with face the customer’s match to in order recognition liveness and face then both neobanks and incumbents. And that is why the idea of rapidly issuing rapidly of the idea And is that why both neobanks incumbents. and for appeal has some a virtual shopping online immediate card for card debit can if the be security resolved. these organisations considerations authenticators issuing for just breaking experience flow the user generally, But causes jarring accessing the digital for product tokens as card or such readers So the natural thing link is to the identification the customer. for inconvenience the onboarding, isthat part the authentication the digital to of onboarding banks that seamless can a doing By the credential. offer of distribution the - from the they beginning create end when to experience from end user a particular the to for the bank up or for account, digital identity customer’s including virtualincluding identity cards, the established tightly integrating and ongoing secure to a customer’s in place put systems with the authentication with the bank.interactions successfully a seamless have experience, users who onboarded user For or credentials receive wait to to they that have be told digitally shouldn’t later will that credentials temporary authenticator their register to them allow authentication. strong do to in order card in PIN the post and debit a things as waiting for – such some For for delays are after – there similar an creating account unavoidable separately Once digital onboarding and identity verification are conquered by a bank,by a are conquered verification digital identity and Once onboarding products, online more of instant provisioning at look arethe next to steps generating identity-based products and services. More they importantly, stay of trust in and arbiters role as relevant central their can maintain economy. digital transforming the If banks get digital identity right, they stand benefits they identity to realise in right, digital get banks If losses reduced sales onboarding, processesstreamlined customer and revenue new for regulatory potential the and fraud from and fines, from within the customer’s file, the bank’s own external data and from bank’s file, the third from within the customer’s the most force to always have mean that banksparties models don’t create to the bank of interaction the context on Depending authentication. stringent the typeand the risk and with request, associated security a scale of of them, processes be applied. could interaction scenarios – some active such as the facial scan – and some as the facial scan such active some – and scenarios – some interaction subsequent and onboarding at is that gathered data other based on passive, by be determined is called should for And authenticator which interactions. viewing a bank balance make. Perhaps wants to the customer interaction what known to installed being thana phone on requires the app more nothing might money of transferring But a significant amount the customer. to belong example. for a PIN, and require a biometric authentication in risk-based can behavioural that and data be included Passive decisions include transaction patterns, known location and devices, and data wider alongside can These request. be applied timing the interaction of And there may be different authenticators used in different customer customer used in different authenticators be different And may there
10 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 11 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 06 CONCLUSION regulatory fines, and the potential for new revenue generating identity-based identity-based generating new revenue for regulatory potential fines, and the they can maintain central their services. and role importantly, products More in trust the transforming of digital relevant stay and as economy. arbiters in countries where the digital identity ecosystem the digital is stillin countries identity where evolving. on openness and successful in countries where bankEven collaboration high adoption, digital to identity factor hasdigital a contributing been identity granted. as trusted for banks take position prime their providers can’t will structure market and Regulation competition new can and change, have companies networked globally giants tech other and And the big emerge. digital identity. for market the global upend to potential serious If banks realise right, they digital stand to in streamlined get benefits identity and from fraud losses reduced onboarding, sales processes customer and of the more digitally advanced traditional banks handle greater choice and and digitally banks traditional choice advanced the more greater of handle service lifecycle. ongoing and activation through the onboarding, complexity Both types financial of institution are expanding onboarding digitaland their identity of integration tighter how servicing at are and looking capabilities, security the can pave and improve authentication ongoing and onboarding strike that the approaches authentication risk-based flexible more for way security. and convenience right balance between customer banks for to they will the opportunities available But consider also to need particularly in the economy, broadly more trusted providers become identity learn from the more successful neobanks about how to target the increasingly to successfullearn how from the more neobanks about new-to-bank justto It is important not win first digital customer. mobile they within existing alsokeep when to customers but group their customers, and service or making proposition by product a new bothneed the product process as frictionlessthe onboarding as possible. service and product their grow to as hand, neobanks look On the other theybase, significanthave a will customer achieved have once they offerings strategy with digital begin acquisition the “new-to-bank” to pure balancing bank traditional growthmore existing of cross-sell strategy upsell and of some how at look they can As choices, theymore begincustomers. offering As traditional banks expand the work that they’ve been doing at a growing at As doing been banks they’ve traditional that expand the work scale they can in full-group-wide digital to transformation, transformation
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FINEXTRA For moreFor information: Visit or call Founded in 1999, Finextra in Research all 1999, covers aspects financialtechnology of Founded organisations banks, involving vendor and institutions operation and innovation retailwithin and cards banking, and the wholesale worldwide. payments sectors fintech 30,000 over consists community of global unique Finextra’s banks inside financial and specialist working institutions, fintech professionals mainstream and service and organisations consulting providers, application in Finextra posting participate The actively community providers. technology they addition, In fintech. of the evolution on comments and opinions their Finextra to data and surveys information reports. and contribute This report is published by Finextra by Research.This report is published specialist leading financialtechnology Finextra Research is the world’s fintech 100,000 over source. Finextraoffers news information and (fintech) to visitors to items features TV and news, content
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12 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS 13 | ONBOARDING NEXT STEPS FOR NEW AND ESTABLISHED DIGITAL BANKS www.hidglobal.com HID requirements while going beyond just simple compliance. simple just beyond going while requirements employees 3,000 has over Global HID in Austin, Texas, Headquartered 100 morethan support officesthat international operates and worldwide brand. is an ASSA Group Global® HID countries. ABLOY moreFor information: Visit We enable organizations to protect digital identities in a connected world and world in a connected digital protect identities to organizations enable We trusted assess cyber transactions riskaccurately empowering deliver while to detect to organizations help solutions Our innovative smart decision-making. can threats in real people mitigate and time ensuringauthorized while only fraud experience. user compromising without information accesssecurely sensitive digitalfor offering and management lifecycle identity comprehensive HID’s based digital security cloud physical and PKIcertificates, mobile includes accesson-line to secure, convenient offers portfolio Our extensive solutions. growing meet to regulatory organizations helps and services applications and HID Global powers the trusted identities of the world’s people, places and things. and places people, the world’s of the trusted powers identities Global HID freely. travel and productively work transact to safely, people for possible make it We digital and access physical to convenient people give Our trusted solutions identity verifieddigitally. thingsand connect and tracked can that places be identified, Finextra Research Ltd All rights reserved. 1 Gresham Street London, No part of this publication may be reproduced EC2V 7BX or transmitted in any form or by any United Kingdom means, electronic or mechanical, including photocopy, recording or any information Telephone storage and retrieval system, without prior +44 (0)20 3100 3670 permission in writing from the publisher. Email [email protected] © Finextra Research Ltd 2020
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