Why first impressions at customer onboarding are key to building trust
Research has confirmed that not only do humans base a significant amount of their short and long-term judgments on their first impressions, but they form those judgments very quickly. In fact, a series of experiments by psychologists from Princeton University found that traits such as trustworthiness were decided on in the first 1/10th of a second. If there’s one thing companies in all industries know—particularly banks and FIs—it’s the power of trust. Trust in their product or service, in the security of customer data and in a superior experience.
Streamlined onboarding is key
Prioritizing an optimal onboarding experience with minimal friction for new and existing customers is imperative—63% of customers take into account the onboarding process when deciding on whether to invest in a service and/or product. If they consider a process to be too slow, customers are likely to go elsewhere.
In an age of brand personification, advanced technology and what is now a digital-first landscape, consumers have more expectations than ever from the companies they choose to use, especially when it comes to onboarding. Studies have found that people make their first impression of a company website in as little as 50 milliseconds (or 0.05 seconds). Therefore, aside from a few early analytics, a business may have very little idea as to what has driven potential customers away. So if customers do choose to invest in a company’s service or product, a streamlined onboarding experience will be a critical aspect of converting potential customers into loyal ones.
The first concrete proof many businesses have about customer behavior is during the onboarding process; more specifically, through the drop-off rate. Dissatisfaction and drop-offs aren’t only related to the length of a transaction, the overall customer experience is also key. In 2020, a study found that 84% of customers considered the overall customer experience with a company as important as the products and services the company provided. According to McKinsey, a lot also rides on the ease with which the onboarding process is completed, particularly for financial services. After examining various customer onboarding journeys for banks and FIs—those that were completely online; those that started online and finished in a branch; those that were completely in branch; and those that started in a branch and finished online—they found that overall digital-first journeys led to much higher customer satisfaction rates, scoring 10% to 20% more than traditional journeys. The study also found that every 10th percentage-point gained in customer satisfaction enabled a revenue increase of 2% to 3%.
Manual review increases onboarding time
While the use of electronic identify verification is being utilized by many financial institutions, manual reviews are still commonly used for customers across the board. Even when started digitally, many FIs will require applicants to go offline and gather very specific, material documentation, often then asking them to either send precious original copies or go through the hassle and expense of having them certified. However, many thin-file, new to country, unbanked or underbanked individuals may not have the required documents in the first place.
Once customers do submit the required documentation, the actual manual review process can range from hours to months depending on the institution and how manual its client onboarding process is. On the flip side, people in today’s world typically don’t like to be unnecessarily inconvenienced with these types of processes for more than a quarter of an hour (usually less). So, FIs without automated onboarding are more likely to find their customers abandoning them for competitors with less friction. Also, onboarding that is primarily manual or paper-based can be quite costly for a bank or FI beyond dissatisfied customers leaving, it takes time and money to train employees to be effective review analysts and the cost of manual review per customer can reach double-digit figures. And of course, human error can result in counterfeit documentation going undetected.
Why automation is imperative
Many consumers are unaware of the regulatory requirements that sit behind these checks, instead associating the difficulties and inconveniences they face purely with individual businesses—particularly if other companies are offering automated, electronic onboarding that can be completed in minutes or in some cases, even seconds. Manual processes can feel cumbersome, confusing and intrusive; and despite industry efforts to improve consumer trust, this lack of understanding means that the mass population still has low levels of trust in financial institutions. However, companies across all industries are realizing the importance of digitizing and automating their customer due diligence processes for improving the onboarding experience for both the customers and the companies themselves.
As the threat of money laundering and financial crime grows on a global scale, the push for stronger Anti-Money Laundering (AML) regulations is growing. Companies will need the right identity proofing solution that includes document authentication and automated Know Your Customer (KYC) to ensure compliance. And, by becoming more proactive in implementing digital customer onboarding, companies will improve the speed and convenience for new and existing customers, reduce business costs and strengthen fraud prevention efforts.
Learn more about the importance of digital onboarding in our Build Trust & Improve Customer Onboarding with Automated KYC eBook.