October 4, 2022

Mike Tuchen, CEO, Onfido.

As the world emerges from the global fight against Covid-19, industries are beginning to define what a return to “normal” will look like.

For some, it’s a matter of who will return to the office and who will continue remotely. For the financial services industry, it’s a question of how to embrace the new “digital by default” landscape.

While other consumer-facing industries have long realized the importance of a seamless digital experience—in many cases, forced by technology leaders like Amazon or Google to move online—financial services have been slower to adopt digital tools. The early perception that the risk of fraud was greater and that the ability to upsell new services was significantly reduced without personal interaction delayed widespread adoption. Additionally, most banks had no way to digitally verify someone’s digital identity without personal experience.

In the run-up to 2020’s Covid-related shutdowns, traditional financial services have typically operated on a digital-on-demand model. Banking tools were accessible through apps and online, but most companies’ instinct was to continue funneling customers into physical branches because it was easier to perform in-depth or complex banking tasks in person and easier to build trust with their customers.

The pandemic acted as a catalyst, both for banks and for customer demand. A McKinsey study reported that the shutdown accelerated seven years of digitization into just two years. else S&P study found that 6 in 10 customers were visiting brick-and-mortar banks less than before, with no plans to return.

As the world reopens and banks continue to examine these fundamental questions about how consumers interact with their services, now is the time for executives to use this digital dynamic to understand how they can “build” their services on Amazon.

The customer is king

If Amazon can teach the financial services industry anything, it’s that when it comes to an online experience, the customer is king. Without a salesperson there to initiate a transaction, the digital experience needs to be seamless so the customer can do it all themselves. It’s a lesson Amazon learned two decades ago, but one that the traditional financial services industry is just now grappling with.

Ten years ago, no one would dream of doing something like shopping for a mattress online. Even the idea of ​​buying a pair of sunglasses online without first making sure they looked good on your face seemed risky. But Amazon has taken shopping in a new direction. Instead of driving to the furniture store, trying on a dozen mattresses, and then having the chosen mattress delivered a few days later, customers have grown accustomed to the four-click process: add product to cart, checkout, confirm shipment, purchase.

Instead, the financial services industry forces customers to jump through dozens of hoops to access simple banking tools. To set up an online bank account, prospective customers must answer an endless series of questions that attempt to verify their identity. Finateq found that some major banks require over 120 clicks to open a bank account!

Combined with our recent consumer researchwhich found that 60% of consumers reported abandoning an online registration because the process took too long, the process was too confusing or they were concerned about the security of their data, banks that enable a poor digital experience are unlikely to win many fans.

An optimized, frictionless customer experience is critical and, importantly, possible.

Instead of forcing customers to ask dozens of questions trying to satisfy anti-money laundering (AML) and know-your-customer (KYC) requirements, banks can streamline their digital identity systems in a safe and effective manner. A digital first bank we work with has done this and is now onboarding new customers in just 24 clicks, a fifth of the time it takes their competitors. That speed equates to more customers on-boarding and less onboarding.

How did they do it? Facing the same regulatory environment and fraud concerns as their competitors, they changed their product dynamic to focus on their customers — both the services provided and the experience. Adopted digital tools that enabled customers to seamlessly verify their digital identity, resulting in a 12% increase in customer on-boarding, all while meeting stricter KYC regulations and creating a smoother process for customers .

They modernized the onboarding process meeting both the customer experience and expectations with the latest KYC and AML technologies. It’s a model that can be replicated by other financial services companies—with capacity that will only increase, especially as digital identity tools like wallets and IDs become more widespread.

Banks can play an active role in setting the standards for these identifiers, but only if they embrace the values ​​of convenience and security at the heart of these offerings. To set the standard, banks must be at the forefront of the digital identity revolution. Every company needs to know exactly how many steps it takes to get their customers on board and exactly where they start to run into problems. Without these key insights into who they are joining and how, banks are leaving the door open for more entrepreneurial and digitally savvy competitors to enter.

Executives must be obsessed with their customers and must be open to completely rethinking their digital experiences. With modern technologies, integration flows can be mapped to provide clear paths of where and how integration is delayed.

In the post-pandemic world, digital-on-demand is no longer good enough. The new world is digital by default. To truly lead, financial services firms must prioritize frictionless digital experiences that give users the freedom and power to access their tools however they see fit. Seamless digital experiences are a prerequisite for success in this world, just as thousands of convenient branches were in the old world.

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