A fast, efficient customer onboarding process is what every customer wants. If they don’t get it, they will likely look elsewhere. But financial services businesses have to conduct know your customer (KYC) and anti-money laundering (AML) checks as part of the onboarding process. This can take time.
So what if you could reduce the time it takes to onboard customers by making the process more efficient, while saving on costs and remaining secure and compliant? Well, you can. And remember, if you improve the processes that support and grow your top line you will see revenue faster and enjoy higher customer retention rates.
In this article, we explain what happens during customer onboarding in financial services – and how to make your customer onboarding more efficient.
What happens during customer onboarding?
Financial services businesses need to complete identity verification to identify and lower the risk of illegal activity. Penalties for not doing so can be costly. Customer due diligence (CDD) needs to be carried out as part of onboarding to establish the identity of potential customers and beneficial owners and the nature of any business relationship.
It can either be simplified due diligence (SDD) or enhanced due diligence (EDD) depending on the risk of money laundering or other white collar crime. SDD may be appropriate if the entity is publicly owned or the individual is from a low-risk country.
High-risk factors where EDD needs to be carried out include politically-exposed people (PEP) and their family members or known close associates, customers from higher-risk countries, customers who provide false information, and large, complicated, suspicious or unusual transactions.
Financial services businesses must gain an understanding of a customer’s reputation, know where their wealth and source of funds are from and – in very high-risk cases – gain independent internal and external intelligence reports.
Verifying identity
Financial services businesses must verify the name, address and date of birth of a ‘natural’ person (an individual). They must also check the registration number, principal place of business, ownership and management of a ‘legal’ person (a company). They also need to ascertain the law to which a company is subject and its constitution.
Businesses should check people against official watch lists, such as financial and trade sanctions lists, lists of high-risk third countries or those that require EDD. If a business is not satisfied with the results of due diligence, they must not take them on as a customer or carry out transactions on their behalf.
Establishing ID with the customer identification programme
Businesses must be as sure as possible that customers are who they say they are by verifying their identity or the identity of the company they are dealing with. A requirement in the US, a customer identification programme (CIP) is a risk-adjusted procedure with the minimum requirements being personally identifiable information, such as the customer’s name, date of birth, address and the identification number.
Higher-risk customers or transactions include large transactions, poorer quality information or suspicious characteristics, or the high-risk location of the customer or transaction origination or end. Financial organisations can review ID documents and compare details with reporting agencies and public databases, or both.
How to make your customer onboarding more efficient
The customer onboarding process can take days, weeks or even months, especially if done manually. Both CDD and the CIP are time-consuming processes if done manually. However, new technology such as secure digital platforms can help financial services businesses to both accelerate and reduce steps in the process.
Optical character recognition (OCR) allows you to extract data from ID documents and live or still selfies can be compared with ID documents to assure identities. Customers can be quickly verified against live global networks of corporate registers. Applicants can search for and onboard themselves with forms that are pre-filled from data on registers.
Financial services businesses should review the customer experience on a regular basis, checking legal requirements, language and application flow, and improving ease of use where necessary.
You should also consider step-up applications where increasing amounts of information are requested from the customer over time, instead of demanding everything straight away.
Peak efficiency: one technology platform to power your customer onboarding process
A technology platform is the ideal solution for automating many of the customer due diligence processes and creating a secure and auditable space where service providers and customers can interact.
Bonafidee’s ID verification, KYC and anti-fraud tools enables businesses and individuals to engage online in a safe, compliant and fully evidenced way. Get in touch with the team to find out more about digital signature and customer verification solutions or download our guide.
