With the promulgation of the LCB-FT regulations, financial sector establishments (banks, insurance companies, fintechs, etc.) are now obliged to verify the identity of their customers at the time of their onboarding, in other words, at the first stage of their subscription to an offer or purchase of a financial product (loan, bank account, etc.). With the rise of digitalization, this procedure has become more efficient and safer.
So, from the customer’s point of view, digitalization offers a smoother, faster experience. They can now complete their electronic subscription in just a few minutes, without having to visit a branch or provide a multitude of paperwork.
For companies, this digitalization means they can receive and control personal data in real time. This means they can be updated and shared live, making it easier for consumers to know who they are, and contributing to the safety and protection of their information. Digitization can also help them better comply with current local and international regulations, while reducing their costs and carbon footprint. For example, according to a study by Accenture, financial organizations’ use of digital technology to analyze their customer base has already led to a 60% drop in associated costs (” The Digital Transformation of Customer Onboarding “, Accenture.com, 2019).
So how can you take advantage of the benefits of digitizing this process? What devices are available to minimize fraud while increasing your sales?
Definition of the KYC process for customer onboarding
What is customer onboarding?
Onboarding is the process of acquiring or subscribing new prospects for a company, guaranteeing them quick and easy access to their products and services. For a bank, for example, these are the steps to follow when opening a bank account. Its optimization is fundamental to smoothing the UX and guaranteeing the transformation of each user.
What is a KYC process?
KYC, which stands for Know Your Customer, is a mechanism that enables professional establishments, particularly those in the financial sector (banks, insurance companies, etc.), to verify theidentity of prospects before selling them a product or service – in other words, before they are onboarded. It is used to combat various types of fraud and money laundering. It is generally combined with tools to authenticate the personal details provided by the end customer and check their solvency.
What's the link between KYC and customer onboarding?
To comply with current KYC regulations, companies in the financial sector must verify the identity of their future consumers before finalizing their onboarding, such as purchasing a product or subscribing to a financial service (loan, account opening…). This not only ensures that they are who they say they are, by authenticating the information provided, but also minimizes the risk of fraud for the company. Onboarding is therefore the first part of the KYC procedure.
What are the different types of customer onboarding?
Traditional customer onboarding
The traditional solution is mainly used by credit institutions and other financial organizations that have to comply with strict LCB-FT regulations. This is done in person, in a bank branch for example. Subscribing to a financial service then takes place face-to-face, with documentary and identity checks carried out by an administrative agent. It offers the opportunity to get closer to individuals and better manage potential threats. However, this method is often costly, slow and impractical for today’s increasingly connected consumers.
Digital customer onboarding
The digital version is done remotely, usually over the Internet. It can include explanatory videos to guide users step by step, but above all solutions enabling documents to be digitized and consumers to be verified and identified remotely in a 100% autonomous way. Often much faster and less costly than the traditional version, it also guarantees companies a higher conversion rate thanks to more accurate and complete data collection. However, it requires the implementation of additional protection measures to combat cyber-attacks and spoofing attempts.
Hybrid customer onboarding
The hybrid version combines the benefits of traditional and digital methods. It offers companies a more flexible and personalized approach that can be adapted to different scenarios and different types of individuals. It generally uses file scanning and remote identification techniques in conjunction with manual procedures and face-to-face meetings. It enables professional establishments to benefit from the advantages of both methods, while maintaining a high level of safety and correspondence.
What are the steps involved in online customer onboarding: the case of a bank account opening?
Financial institutions, and especially banks, have every interest in optimizing their distance entry. Once correctly implemented, it enables them to better comply with LCB-FT regulations, while offering a smoother, more intuitive user experience.
Step 1 : Create an account application
The first step is to create an account application. This can be done on the internet using a form or a chatbot. In this form, the prospect must first provide personal and contact details, such as name, address and telephone number. Once completed, he must submit it and wait for confirmation from the company.
Step 2 : Check customer information
Once the application has been submitted, the company checks the data collected. This step is essential to ensure that the person requesting the account is who they claim to be. Companies may use means such as Netheos’ photo or video Facematch to verify its identity. They may also collect additional information, such as your financial situation and credit history.
Step 3: Validate the evidence provided by the customer
Finally, the professional establishment must authenticate and validate supporting documents such as bank or credit statements. It can also check whether the customer is registered with a rating agency and/or a background check agency. Once these conditions have been validated, the applicant can be added to the company’s database and gain access to its services and products. Once a long-distance relationship has been established, establishments can manage the data within their CRM. With a constant concern to improve their services by optimizing the UX, but also with a view to reducing costs and increasing sales, certain technologies using Artificial Intelligence, such as those offered by Netheos, can help them analyze and then perfect the entire path leading to account opening.
How has the digitalization of customer onboarding facilitated the KYC process?
Public and private institutions alike, and banking establishments in particular, are facing growing challenges linked to the increase in fraud and strict compliance obligations in the face of current LCB-FT regulations, particularly with regard to KYC. In fact, this process is essential to verify who our prospects are and to ensure that they are not involved in illegal activities. However, the service is time-consuming and complex, and financial institutions are regularly faced with delays, high costs and a lack of accuracy and quality of information.
Digitizing the process has enabled financial institutions to significantly reduce the time and costs associated with getting to know the prospect. Thanks to the use of new technologies such as AI, theUX is improved and analysis is more efficient and safer.
Improved accuracy and quality of information
With the use of digital technologies such as remote identity verification via photo or video Facematch, and automated checking of supporting documents, financial institutions can quickly and accurately verify who their customers are. Information is collected and validated in real time, ensuring that details are accurate and up-to-date.
In addition, these services may be delegated to external service providers or partners such as Netheos. This transfer of responsibility makes it possible to collect and check the information provided by Internet users when they make contact, in a more secure, compliant and automated way, while ensuring that the data is complete and reliable.
More efficient document and process management
Digitizing customer onboarding enables financial institutions to manage customer files more efficiently. They can send and receive files in real time, reducing the time and costs associated with evidence management.
Digitization also makes it possible to automate the repetitive tasks involved in the KYC procedure. What’s more, companies can add and parameterize control and validation stages at each stage of the process, to ensure that it runs smoothly and that users are authentic and creditworthy. This means they can move from one level of the course to the next more quickly and with fewer errors.
Reduce the costs associated with the KYC procedure
By integrating a digital solution into their relationship entry process, financial institutions can significantly reduce the time and costs associated with this procedure. Automating repetitive tasks reduces the time needed to check and validate customer data. This technological innovation also reduces human costs, leaving your administrative staff free to focus on higher-value tasks.
Improved LCB-FT compliance
In addition, the digitization of integration can help financial institutions to better comply with LCB-FT KYC requirements, by minimizing the risk of fraud and ensuring that their products and services comply with banking regulations. Thanks to the use of advanced technologies, professional establishments can monitor users ‘ activities in real time and identify potential threats.
Finally, even if the benefit is not directly linked to KYC, some digital means can improve lead conversion. They can check and validate their information directly from their device (phone, computer, etc.), from any location, at any time of day. So there’s no need to wait for a branch to open, or to print out all the supporting documents. This reduces churn and builds customer loyalty.
The main advantages and disadvantages of digitizing customer onboarding KYC processes
Benefits for users
- Improved UX: Digital know-your-customer solutions can make UX smoother and faster, thanks to automated and remote identification and authentication procedures.
- Reduced costs: They can also reduce costs for individuals, as they don’t have to go out of their way to provide additional paper evidence.
- Unlimited access:Finally, they’re designed to be used from any device, anywhere, anytime. For example, it is no longer necessary to wait for a bank branch to open an account. Users can do this from their cell phones, at home, even at 11pm.
Disadvantages for users
- Vulnerabilities: Digital contact offers can be vulnerable to cyber attacks. Users must ensure that their personal data is protected by appropriate measures.
- Regulations: They must comply with a large number of regulations and conformity standards. Consumers need to be aware of these requirements, and of their rights to privacy and data protection.
Benefits for companies
- Cost reduction: These solutions can help plants cut costs by eliminating manual steps and automating processes.
- Better risk management: Digitized versions can help professional organizations comply with LCB-FT regulations by using Artificial Intelligence technologies to identify and authenticate visitors.
- Improved CRM: Last but not least, they can help them strengthen the company-consumer bond by offering a smoother, more consistent experience.
Disadvantages for companies
- Initial costs: Implementing it within the IT system can entail significant initial costs. However, it’s worth noting that the reduction in human and material costs makes digitization highly profitable.
- Conversion rate: Digitizing a service can lead prospects to abandon their purchasing process if it’s too complex or time-consuming, especially if the company hasn’t sought to make it efficient by optimizing its UX.
How to set up an effective KYC customer onboarding process?
The use of this mechanism is essential for companies in the financial sector. Proper system implementation ensures compliance with current regulations and reduces fraud and money laundering.
Choosing the right type of customer onboarding
Establishments can choose from 3 versions. In order to offer a fluid and intuitive experience that is also secure and compliant, we recommend choosing the electronic version. Financial institutions can, however, opt for hybrid solutions that combine online and manual technological devices to ensure a more personalized contact experience.
Use technological tools to automate certain tasks
Once chosen, financial institutions must ensure that the appropriate technological resources are in place to automate the entire process as far as possible. These technologies, generally AI-powered, can include systems for identifying users and for checking and authenticating the supporting documents they provide. They can also help banks improve their conversion rates and offer a faster, safer experience.
Define procedures to manage anomalies
Finally, financial institutions must establish procedures to manage anomalies and dangers linked to KYC (Know Your Customer). This may include defining risk and tolerance thresholds for transactions, defining procedures for system implementation by third-party partners, or using advanced technologies to detect fraud and other potential threats. These procedures enable banks, for example, to guarantee compliance with LCB-FT regulations and the security of their prospects’ personal data when opening an online account.
Automating customer onboarding KYC processes with AI
AI-enabled KYC automation solutions offer companies the opportunity to improve their remote relationship entry. Automated verification of supporting documents and Facematch control by photo or video are two of the main benefits of this technology. The first enables companies to quickly and efficiently verify the personal details provided by their prospects. Data can be checked in a matter of seconds, considerably reducing the time and cost required for manual checks. The second allows establishments to verify the identity of consumers without ever having to meet them, guaranteeing the same benefits. Deploying AI-enabled automation of remote contact entry steps thus enables companies to reduce costs and processing times, while ensuring strict compliance with regulatory standards. What are the other benefits of using AI to make contact?
How to optimize the UX of your KYC customer onboarding?
Companies in the finance and insurance sectors have to comply with strict and restrictive customer identification obligations, making the onboarding process long and tedious. In this configuration, poor optimization will lower your conversion rates. But how can you combine user experience (UX) and regulatory compliance? To do so, it’s important to understand the different factors that influence their final decision. Virst, you need to analyze your entire customer journey in order to identify weak points, also known as “friction points”. This step is necessary to understand where and why your prospects decide to stop their subscription. Once you’ve identified these bottlenecks, it’s essential to ask yourself the right questions in order to make the necessary changes, focusing on the UX: “Why didn’t he click on that button?”, “Are the indications clear enough?”, etc. Understanding your personas by putting yourself in their shoes will enable you to make the stages of the journey as simple and intuitive as possible.
Find out more:
- KYC processes and regulatory compliance