First impressions matter: Why banks must modernize client onboarding

Insights

• A majority of millennials, Generation Z, and Generation X are on their mobile devices and reluctant to fill paper-based forms.
• Many wealth management divisions in banks still rely on outdated, paper-based processes that are cumbersome, time-consuming, and often ineffective. This costs wealth management businesses money and the opportunity to build long-term relationships.
• A straightforward and user-friendly onboarding process can serve as a competitive advantage for banks. And personalization is key; effective CRM systems can transform relationships into revenue by attracting and retaining clients through personalized services that address individual goals and lifestyles.
• To make customer onboarding work, banks must streamline processes, enhance user experience, and leverage automation. A few best practices guide banks on effective ways to get their customer onboarding right and build effective personalized services.

Onboarding is still traditional in a modern era

Client onboarding is a critical process in the financial services industry, serving as the first point of contact between service providers and their clients. This initial interaction is not merely procedural, it sets the tone for the entire client relationship. Research indicates that 65% of customers believe institutions should make it easier when finding financial products tailored to their needs. However, many wealth management divisions in banks still rely on outdated, paper-based processes that are cumbersome, time-consuming, and often ineffective. As the industry shifts toward digitalization, the need for a streamlined onboarding experience has never been more urgent.

Archaic onboarding systems frustrate customers and cost banks money

A majority of millennials, Generation Z, and Generation X are on their mobile devices and reluctant to fill paper-based forms. Yet, customer onboarding still involves drudgery: Completing paperwork, requiring a customer to visit a branch, filling out complex forms, and providing physical identification documents. This is inefficient and frustrating for customers. One study shows that over 67% of banks have lost potential clients due to slow and inefficient client onboarding and Know Your Customer (KYC) procedures. This costs wealth management businesses money and the opportunity to build long-term relationships. Offline onboarding can cost banks up to twice as much as that done through digital onboarding.

Banks must bear costs associated with duplicated efforts and a lack of adaptability in their customer relationship management (CRM) systems that are often siloed. CRM systems that are not adaptable across business functions result in duplicated records being maintained, requiring more storage space, processing power, and manual intervention to correct errors. They also result in increased costs of campaigns when the same customer is targeted through multiple communications. Incorrect or siloed data can cost an enterprise up to 30% of its revenue. These CRM systems fail to provide this level of personalization that today’s customers expect. In fact, banks can reduce operational costs by up to 20% through better data integration and automation.

Banks with an efficient digital onboarding process can collect data effectively and utilize it for actionable insights. McKinsey found that banks with fully digital onboarding processes experienced a 20% rise in customer acquisitions and a 15% reduction in associated costs. Yet this requires a clearly defined target model for onboarding processes that can stop banks from incurring higher costs and missing out lost opportunities to engage clients.

Data at onboarding can feed into personalized services

A straightforward and user-friendly onboarding process can serve as a competitive advantage for banks. And personalization is key; 72% of customers express a desire for simplified experiences tailored to their specific needs. Effective CRM systems can transform relationships into revenue by attracting and retaining clients through personalized services that address individual goals and lifestyles. Offering more personalization along with digital experiences can help large financial institutions (with assets of $100 billion) generate $300 million in revenue. However, implementing effective CRM solutions is fraught with challenges:

• Missing features: Many CRM systems lack adaptability across business functions, leading to essential features being overlooked. As a result the system isn’t integrated seamlessly with all relevant business verticals within the enterprise. This can lead to disjointed processes and a less-than-optimal client journey.
• Undefined target operating models: Without a clear target model, banks face duplication of efforts and rising costs. Poor data quality costs companies an average of $12.9 million annually and impacts labor productivity by up to 20%, as per Gartner. Digital onboarding requires a clear understanding of the desired client journey and the processes that support it. If a target operating model is not established, institutions might inadvertently create overlapping or redundant processes that complicate the onboarding experience. For instance, without a defined model, different business units might develop their own onboarding procedures, leading to inconsistencies and confusion for clients. By mapping out each step of the process and leveraging technology, banks can eliminate unnecessary steps, reduce manual interventions, and automate tasks. This efficiency not only speeds up onboarding but also lowers operational costs.
• Stakeholder involvement: Engaging the right stakeholders from various teams is crucial for drafting comprehensive business requirements that align with technical implementations.

Adopting a client-centric approach while implementing technology-driven solutions can help banks address these challenges. Technologies such as AI, machine learning, and data analytics help create personalized onboarding experiences that enhance client experience, build trust, and create long-lasting relationships.

Technology-enabled personalization can help banks obtain a 360-degree view of a customer’s data and engagement behavior across various channels and align services with customer interests and risk appetites. It allows banks to enable real-time interaction with their customers — catering to their on-demand requests with immediate responses. Data can be used contextually. For example, location or recent interactions can be used to tailor communications during specific hours in the day. Such personalization strategies can help banks boost sales. In one instance, an enterprise reported a 30% increase in sales through personalized onboarding approaches, while another observed 20% growth over three years by implementing similar strategies.

Getting onboarding right — best practices for effective onboarding

Transforming client onboarding is not easy. To make customer onboarding work, banks must streamline processes, enhance user experience, and leverage automation. These best practices guide banks on effective ways to get their customer onboarding right and build effective personalized services.

1. Simplify processes: Streamline forms and reduce steps required for account setup.
2. Enhance user experience: Create a consistent experience across multiple devices while maintaining high security. For example, customers should be able to start the onboarding process on their laptop and seamlessly continue on their mobile device. This experience should also be secure, incorporating multi-factor authentication and data encryption to protect sensitive information.
3. Automate repetitive tasks: Implement automation for due diligence processes to save time and minimize errors. This results in greater accuracy and compliance.
4. Establish continuous feedback mechanisms: Implement systems for ongoing client feedback to refine onboarding processes continually. Regularly soliciting feedback from clients about their onboarding experience allows banks to identify areas for improvement and ensure the process meets their evolving needs.
5. Involve key stakeholders: Engage teams within the organization to ensure understanding and implementation of client needs. While the front office is key, stakeholders from other areas like architectural teams are needed to ensure business requirements are drafted correctly with better understanding of technical implementation for a wide adoption.

As the financial services sector evolves, traditional client onboarding methods are becoming increasingly obsolete. By prioritizing personalization and efficiency through technology-driven solutions, banks can improve their client relationships while gaining a competitive edge in an ever-changing market landscape. The cost of failing to modernize is steep; banks risk losing out on valuable clients while incurring unnecessary expenses in marketing efforts that yield little return on investment. Investing in modern technologies will not only streamline onboarding but also pave the way for sustainable growth in the future.