Imagine this: the government has imposed a nationwide lockdown due to the COVID-19 pandemic. However, you need to open a new bank account urgently. You download a popular bank’s mobile banking application and follow their onboarding process. After a long journey of form-filling, document uploads, and multiple keystrokes, you finally manage to hit the submit button. You think the process is complete, only to be told that the information you provided is not good enough to validate your identity. You are required to complete a series of additional steps for identity verification. Would you keep trying, or would you find a bank with a more painless process?
If you would abandon the process and look for another bank, you are not alone.
Application Abandonment – Causes and Effects
Digital onboarding abandonment is one of the biggest hurdles faced by banks in registering new customers through online channels. According to a recent study by Signicat, the percentage of European consumers who abandoned a digital banking application surged from 38% in 2019 to 63% in 2020. In other words, nearly two-thirds of potential consumers drop out even before they can access the service!
Digital onboarding is the first stage of establishing a relationship with a new customer, and hence banks cannot afford a sub-optimal customer experience. One of the significant reasons for application abandonment is the time taken to complete an online application. According to this study by Built for Mars on online account opening at banks in the UK, it takes anywhere between 70 and 120 clicks to open an online account at a traditional bank. The Signicat report cites “the amount of personal information requested for” and “the time taken to fill the forms” as the two top reasons for application abandonment.
Lack of automation leads to cumbersome manual data entry. Apart from slowing down the process, this also results in higher data entry errors, which delays the onboarding time. Such an experience is counter-intuitive for today’s digital-savvy consumer who has a short attention span and expects customer experiences to be on par with those of popular e-commerce and social media apps. The outcome is high levels of abandonment before the completion of the onboarding process.
Another primary reason for application abandonment is inadequate identity verification processes. During the onboarding process, banks require customers to provide their legal identifiers, which banks then match with supporting documents to comply with KYC (Know Your Customer) & AML (Anti-Money Laundering). Inaccurate data and inconsistency across data sources (both public and private) prompt banks to trigger manual reviews to ensure compliance and guard against fraudulent registrations caused by identity takeover. This causes a break in the process and leads to customers abandoning their applications.
Identity Pre-fill and Customer Verification Can Greatly Enhance the Onboarding Experience
When it comes to digital onboarding, every second counts!
To improve the velocity and efficiency of digital onboarding, banks must simplify the experience, making it delightful for the customer while ensuring that the risk of identity takeover is well mitigated. The following principles must broadly be adhered to in order to find the perfect balance between these two crucial factors:
- Reduce the number of forms and fields to fill: Solicit only information required to open the account.
- Pre-fill identity information: Fetch PII data (with the consumer’s consent, of course) from trusted sources to pre-fill onboarding forms. This will reduce manual errors and also speed up the process, and avoid manual reviews.
- Use phone-centric intelligence to verify identity: Verified and trusted phone data is one of the most dependable information sources about a consumer.
Legacy data sources provide static data. Due to the stale nature of data, fraudsters often use it to create synthetic identities. Modern platforms for data sourcing have replaced the national identity numbers with a better identifier—the consumer’s phone number. The utility of a user’s phone number and its linkage to several other authoritative data sources—both public and private—has made it a vital key in resolving trusted PII data. One specific case of a Tier 1 issuer pre-filling identity data based on phone intelligence was shown to deliver the following benefits*:
- 15% increase in signups, on average
- Reduction in the number of keystrokes in online onboarding by 80%
- $200 MM increase in annual revenue
Mitigating identity fraud at the entry point without engaging in manual reviews is a critical success factor for seamless onboarding. Identity verification and authentication based on phone-centric identity instantly eliminates fraud such as SIM swaps, burner phones, and synthetic identities. Forward-thinking banks and other financial institutions have been adopting the “PRO” model of identity authentication and verification based on the following three checks to align with NIST SP 800-63 identity guidelines:
- Possession: Passively prove possession of the phone
- Reputation: Assess the real-time reputation of the phone (tenure and behavior)
- Ownership: Prove ownership of the phone line
Pre-fill solutions that employ the PRO methodology can eliminate synthetic identity fraud.
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Conclusion
The COVID-19 pandemic has accelerated the move to digital across industries, including financial services. J.D. Power reports that 30% of consumers have increased their mobile banking app usage, and 35% are using online banking more than before the coronavirus outbreak. As digital activity volume in financial services increases, banks are compelled to combat application abandonment and reduce identity fraud. A well-implemented onboarding solution that leverages identity pre-fill delivers the following benefits:
- Higher pass rates, less abandonment, and an increase in new revenue
- Better straight-through processing, thereby reducing the cost of operations
- Less identity fraud and manual reviews
*Based on actual results from Tier 1 financial institutions that use identity pre-fill.
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