Digital Onboarding: Why You Should Be Implementing This Process

Digital onboarding makes integrating new accounts into databases a streamlined process. Automate identity verification and essential compliance checks effortlessly.
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Julia Ront, Founder and CEO of Vespia

May 6, 2024

One of the biggest strides technology has made for financial institutions is its capacity to digitize transactions. Today, customers can open accounts and conduct transactions online without the hassle of waiting in person.

Society has embraced going digital, and more individuals prefer the convenience of online onboarding and transaction processes for banking than going in person. A 2021 survey conducted by Lightico found that 72.7% of customers prefer digital processes and 80% are less likely to complete any interaction if they had to switch offline.

With the growing demand for transactions to go fully online, it's become clear that digital onboarding is another process financial institutions must embed into their workflow.

Read on to discover how digital onboarding works and how it can benefit your business and the banking industry as a whole.

What is digital onboarding?

Digital onboarding is about welcoming new customers to your business using new technology. This eliminates the need for physical interactions and paper-based processes.

The digital onboarding process ensures new customers can access your products and services and integrate them seamlessly into your database. For financial institutions, it's also a way to work in the Know Your Customer (KYC) and Know Your Business (KYB) processes. This means verifying customers' identities and the legitimacy of their documents.

Digital onboarding vs. traditional onboarding

Banks can choose between digital and traditional onboarding when welcoming their newest clients. Each has its advantages. Let's take a closer look.

Digital onboarding

Digital onboarding automates tedious processes such as document verification, conducting KYB and KYC checks, and more. With new digital onboarding tools, businesses can utilize online forms, mobile apps, and web platforms as avenues for individuals and entities to sign up and easily submit customer identity verification requirements.

Digital onboarding processes are ultimately remote onboarding experiences that rely on digital technologies. They can be a good way to avoid document forgery. Optical Character Recognition (OCR), for instance, is used for document scanning. Biometric data with fingerprint and facial recognition are also used for identity verification.

Traditional onboarding

Traditional onboarding offers a more personal approach and requires customers to be physically present for the onboarding process. This means transactions are done in person, where individuals come to fill out paperwork and submit hard copies of documents for verification.

Document verification and other compliance checks are paper-based with physical documents and conducted manually, sometimes with the help of digital tools, for utmost accuracy. This means they are less reliant on digital technologies and less prone to online attacks or hacking.

Choosing a digital onboarding experience over manual onboarding

Digital onboarding represents a significant evolution in customer onboarding driven by advanced technology. Unlike on-site client onboarding, it's now more accessible to go through the long process of kickstarting an account with a mobile device.

The traditional onboarding process still has its place for the customer onboarding process for more complex banking needs and customers who prefer face-to-face interactions.

There are also instances of utilizing a hybrid onboarding process, which blends digital with traditional processes. This is often used for more complex products like mortgages and investments that require further consultation before submitting any documentation.

How digital onboarding works

The digital onboarding process consolidates the vital onboarding requirements into a comprehensive workflow to efficiently enroll new customers into banking services. The goal is to make the different tasks easy, breezy, and accessible while adhering to regulatory requirements.

Digital onboarding typically involves these steps.

1. Application submission

Customers can start the process by downloading the bank's mobile app or accessing their website. This is where the initial setup starts.

As they sign up, the customer provides basic information like name, address, phone number, and email. Then, a form must be filled out with essential information to specify further details, including employment and financial history.

2. Document submission and verification

Every financial institution is subject to KYB, KYC, and AML requirements. This makes document collection a crucial step in the digital onboarding process. They can contribute to risk management when screening businesses and individuals, which can also help your business determine politically exposed persons (PEPs) and other high-risk clients.

New customers will need to submit digital copies of necessary documents. These documents include:

  • Identification cards
  • Financial statements
  • Proof of address

Online tools like OCR and biometric verification are used to ensure the legitimacy and authenticity of the submitted documents. This quickly and accurately determines the applicant's identity.

3. Compliance checks

Organizations can go through a variety of compliance checks throughout the onboarding process. These should factor in AML, counter-terrorism financing (CTF), and additional risk assessments.

Fortunately, digital onboarding solutions run on AI and machine learning technology, which utilizes algorithms to automate these checks. This significantly reduces the time required to meet compliance requirements, making the process seamless and more efficient.

4. Account creation and access

The customer's account is successfully created as soon as verification and compliance checks are accomplished without any issues. They are then granted real-time access to online banking services.

Some actions they can perform on the bank's digital platforms include setting up online banking credentials, downloading and using the mobile app, and initiating their first few transactions.

5. Digital contract signing

Sometimes, additional documents or onboarding materials are required for contract signing. Customers should be able to sign digitally, using secure digital signature technologies that easily comply with legal standards. Ultimately, this eliminates any further need for physical paperwork as the files are recorded in the bank's database.

6. Welcome kit and educational resources

Most financial institutions provide clients a welcome kit sent via email, if not directly on the app. This welcome kit serves as a set of instructions on navigating and using the services and contact support efficiently.

Additionally, educational resources are shared to ensure new users or customers are aware and stay vigilant of fraud attacks, suspicious activities, or messages that may attempt to steal their identity.

The benefits of digital onboarding

Accessibility and efficiency are the biggest benefits of implementing a digital onboarding process. As the world continues to embrace technology, the opportunity to entice more customers to choose your business over competitors can lie in how accessible and beneficial they are for your customers.

Here are some of the many benefits you gain from going digital.

Efficiency and speed

Digital onboarding significantly reduces the time required to open a new account. What might have been days or weeks can now take only a few minutes of your customer's time.

From a business perspective, you'll be able to automate many procedures. From data entry to verification checks and, most importantly, compliance procedures. Any labor-intensive work needed is eliminated so that you can process applications faster.

Convenience

Customers can complete the process from anywhere, at any time, without visiting a branch.

In terms of accessibility, digital onboarding offers customers the convenience of opening an account without spending all that time making the commute to the bank. This is especially beneficial for individuals who have limited means or disabilities. In effect, you'll have a bigger opportunity to get more clients to choose your brand.

Enhanced customer experience

As the younger generation gravitates to a more digitally accessible banking method, there is a better chance of appealing to their satisfaction in the customer experience. With the onboarding process going digital, customers can enjoy a smooth, user-friendly workflow that can affect how they see your brand and subsequently cultivate stronger brand loyalty.

Reduced costs

Digital processes can help reduce the need for more physical branches and manual processing. This means any costs associated with keeping a location up and running are saved and can then be used to enhance other digital services or products. Additionally, employees can focus more on other valuable tasks that can drive the business closer to success.

Security and compliance

Businesses can benefit from using sophisticated technology for encryption, blockchain, and secure servers to protect customers' personal and financial data better. Biometric verification and OCR work as an added security layer to avoid unauthorized data access.

Plus, automated systems can keep your regulatory requirements in check. Systems can easily be updated to comply with new regulations instead of operating on a fully manual process.

Choosing to go digital

Adapting to an increasingly digital world with consumers preferring more online solutions means financial organizations need to provide more accessible online solutions for customers. Digital onboarding is one way banks can offer a seamless experience for the busy individual in today's age.

There are many benefits to choosing to go digital. These include streamlining tedious existing processes, offering better services, and staying compliant as regulatory requirements evolve.

You don't have to worry about ensuring your onboarding process runs smoothly with Vespia. We offer solutions that conduct AI-driven compliance checks, thorough KYB processes, and the proper risk assessments to keep your business and clients safe.

Schedule a demo and see how to enhance your onboarding process with Vespia.

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