How Is AI Transforming Customer Onboarding In Financial Institutions?

‘First Impressions Are The Last Impressions’, and for banks and financial institutions, a seamless customer onboarding journey can be a deciding factor in making an impactful first impression. In the banking sector, customer onboarding is more than just opening accounts or lending money, it involves the introduction of products and services to customers, documentation, identity verification, KYC completion, and much more. 

Over the years, customer onboarding has remained a cumbersome task with tiring form-filling processes, boring and static interaction between banking personnel and customers, and delayed document verifications, leading to soaring drop-off rates and unstabilized revenue. Thus, it is high time banks and financial institutions consider adopting AI in customer onboarding for collaborative and personalized experiences. 

This article discusses the current state of customer onboarding and its limitations and highlights how incorporating AI in customer onboarding can bring benefits like faster processes, reduced drop-off rates, stronger customer relationships, and ultimately increased revenue.

Current State Of Customer Onboarding In Banking

Customer onboarding in banking and financial institutions is an important process involving the integration of a customer’s profile into the bank’s database and ensuring their lawfulness. This includes compliances and regulations, like KYC (know your customer), AML (anti-money laundering) checks, and ID and document verification.

However, the current onboarding in banking is a slow and tiring process with manual reviews and physical document checks, often leading to errors and unwanted delays.

• Lengthy Procedures: The existing customer onboarding process comprises difficult and lengthy procedures, tons of paperwork and manual verification.  

• Long & Static Forms: Customer Onboarding in banking involves long, static form-filling with nearly no real-time assistance, making the process challenging and tiring. 

• Delay In Verification: Due to manual verifications and inefficient regulation checks, the current banking onboarding processes can go beyond 30 days. 

• Lack Of Personalization: At a time, banks and financial institutions serve millions of customers, lacking a personalized touch for each customer. 

• Inefficient and Unscalable Methods: Banks and FIs have adopted some measures, like dedicated CSMs (customer success managers), SMS triggering, and email notifications to reduce customer drop-offs, but they are unscalable and inefficient in comparison to what is needed.

Challenges In The Current Onboarding Process In Banking

As a result of manual processes and outdated technologies, the current customer onboarding process in the banking sector is filled with challenges and limitations. Some of the major challenges in the existing banking onboarding process are: 

• Increasing Drop-off rates: According to a Deloitte report, around 38% of customers drop off midway during onboarding due to slow and disorganized processes. This is concerning for officials, like CSMs, product managers, and heads of customer success, as onboarding customers is their main target.

• Revenue Loss: As per the research by Infosys, due to slow and inefficient customer onboarding processes, banks and FIs could suffer revenue losses of $22.75 billion annually.

• Poor Customer Relationships: On top of all the challenges, poor relationships with customers can hamper your bank’s growth and reputation. An Infosys report states that over 35% of bank customers are moving to competitors due to poor onboarding experiences. 

How Can AI Transform Customer Onboarding?

‍

As seen above, the traditional customer onboarding processes involve numerous challenges and limitations, that lead to significant revenue loss and lengthening of the sales cycle. However, by leveraging artificial intelligence (AI) and machine learning (ML), banks and financial institutions can develop efficient and interactive customer onboarding solutions, such as video KYC, document verification models, conversational forms, and AI chatbots. 

Some of the key applications of AI in customer onboarding include:

• Video KYC & Digital Signatures: Earlier, banks used to rely on physical KYC and signatures for customer verification, causing delays in the onboarding journey. But, with the introduction of AI/ML, OCR (optical character recognition), and computer vision technologies, customers can complete KYC from anywhere. This has benefitted both, the customers and banks by making the onboarding journey more feasible. 

• Automated Processes: Before the implementation of AI in customer onboarding, a major part of the onboarding process comprised manual data entry, paperwork, and administrative tasks, leaving less time for meaningful tasks and customer interaction. However, after the adoption of AI, banks can focus more on meaningful activities, like addressing pain points and building better products. 

• Seamless ID Verification: ID collection and verification was another tiring task earlier. Customers had to present different documents and IDs in physical formats to prove their legitimacy. However, with AI-powered technologies like OCR and computer vision, customers can get verified within minutes by submitting their IDs virtually. 

• Conversational Forms: Customer onboarding often involves long, static and boring forms with no doubt assistance. But, with the help of generative AI and machine learning, banks and FIs can offer conversational forms. These forms convert the entire onboarding process into a conversation, allowing customers to ask doubts during the process. This enhances the customer experience and hence, boosts the conversion rate and revenue for the banks. 

• AI Chatbots: Another great application of generative AI in customer onboarding is AI chatbots and virtual assistants. The AI virtual assistants are operational 24/7 and provide instant responses to inquiries during the onboarding process, eliminating the need for long wait hours of the human agents. 

• Personalized User Experiences: Personalization in banking services has remained a critical issue. However, with capabilities like generative AI, natural language processing, and predictive analysis, banks and financial institutions have started offering personalized services and products to end-users. As a result, financial institutions are experiencing increased customer satisfaction, reduced drop-offs, and boosted revenue. 

Challenges And Considerations With AI-Powered Customer Onboarding

While incorporating AI into customer onboarding can be enormously beneficial, it also involves several challenges that need to be considered when selecting a third-party AI platform. 

• Regulatory Compliance: When adopting AI for customer onboarding, complying with regulations like KYC and AML and data protection standards like GDPR (Europe), ISO 27001, NSIT Privacy Framework, and more is critical for an AI model.

• Data Security: Banks and financial institutions deal with massive amounts of confidential data daily. Thus, data security is one of the primary concerns for banks when integrating AI in customer onboarding or any other internal function. As a result, they need to adopt robust security methods, like encryption, biometric authentication, and fraud detection models.

• Integration with Core Systems: One of the major challenges most banks and FIs face today is the integration of AI/ML technologies into their existing computers and systems. Integration of AI into legacy systems is a technically complex process and requires trained AI professionals for its successful execution. 

• Bias in AI Models: AI models and algorithms are trained with huge datasets and resources to deliver desired results. But, in case of bias in datasets, which occurs due to incomplete sampling or collection of data from unauthentic sources, the resulting model can also develop bias, which may lead to false or misjudged results. 

Final Words

Integration of AI in customer onboarding can optimize the process to a significant extent and allow customers to interact with banks and financial institutions seamlessly. Unlike existent onboarding processes, which comprise boring, static form-filling, manual background checks, and a scope for errors and unnecessary delays, AI-powered customer onboarding enables faster processing and reduces drop-off rates significantly. Moreover, with AI customer onboarding, banks can provide personalized services and products to customers and build deeper relationships. 

So, if you’re keen on integrating AI into your customer onboarding journey, try Alltius. Alltius is a genAI platform created after decades of research at Carnegie Mellon and Wharton. Alltius’s smart onboarding solutions have helped leading Asian banks reduce their time to product information by 95% and close sales and support queries up to 100X faster. Moreover, intelligent AI assistants by Alltius have helped leading banks and financial institutes save up to $50k monthly.