Customer Onboarding in Fintech: A Detailed Guide on Fintech Onboarding Including Best Practices & Role of AI in 2024

Published by

Yugansh Arora

October 8, 2023

Customer onboarding in fintech is an essential component of the financial services industry. In a field where trust, reliability, and security are paramount, a seamless and efficient customer onboarding process is a powerful competitive advantage. Customer onboarding in FinTech goes beyond basic account setup: It includes verifying the customer's identity, collecting their personal and financial information, and educating them about the company's products and services.

According to a 2023 survey by Boston Consulting Group (BCG), 68% of consumers have abandoned a financial application during the onboarding process. This highlights the importance of creating a customer onboarding experience that is simple, intuitive, and engaging.

In this article, we will delve deeper into the key elements of a successful fintech customer onboarding in the fintech process and explore its significance in fostering lasting customer relationships and the growth of fintech companies. We will discuss strategies for fintech companies to deliver exceptional customer onboarding and highlight real-world examples of fintech companies that have excelled in this area.

Understanding Customer Onboarding in Fintech

Customer onboarding in Fintech is like a meticulously designed process, where the steps taken by financial technology companies play a pivotal role in acquiring and engaging new customers. It involves seamlessly guiding users through the process of setting up their accounts, verifying identities, and integrating them into the platform's ecosystem. This delicate artistry requires a deep understanding of customer needs and pain points to design intuitive user interfaces that simplify complex procedures.

From creating personalized experiences to ensuring regulatory compliance, every aspect of customer onboarding in Fintech must be carefully orchestrated to instill trust and confidence in users. By prioritizing simplicity and security while embracing technological advancements like AI-powered identity verification or biometric authentication, these innovative companies are reshaping traditional banking into conversational banking norms for an increasingly digital world.

Remote customer onboarding in fintech — Source

‍What is Customer Onboarding in Fintech?

FinTech onboarding, short for financial technology onboarding, is the initial process through which users become familiar with and start using a FinTech platform or service. It's essentially the welcome mat to a world of digital finance. The onboarding experience typically involves the user signing up, providing necessary information, setting up accounts, and gaining an understanding of the platform's features and functionalities. This step is vital in ensuring a smooth transition for users into the FinTech ecosystem. Imagine it as the warm handshake that greets customers into a digital financial realm, setting the tone for their entire journey.

Benefits of Digitised & Smooth Customer Onboarding in Fintech

A well-designed fintech onboarding process can provide a number of benefits for both fintech companies and their customers.

For fintech companies, a successful onboarding process can:

Increase customer acquisition: A smooth and efficient onboarding process can encourage more customers to sign up for a fintech product or service. According to a 2023 survey by FinTech Global, 72% of consumers have abandoned a financial application during the onboarding process. This highlights the importance of creating a fintech customer experience that is simple, intuitive, and engaging.
Improve customer satisfaction: A positive onboarding experience can help to build customer trust and loyalty. A report by the Bank for International Settlements found that 65% of consumers are more likely to recommend a fintech company to others if they have a positive onboarding experience.
Reduce customer churn: A well-designed onboarding process can help to reduce the number of customers who abandon a fintech product or service before they have a chance to use it.
Increase revenue: A successful onboarding process can help to increase revenue by encouraging customers to start using a fintech product or service sooner.

Benefits of Investing In Better Fintech Onboarding — Source

For customers, a successful fintech onboarding process can:

Provide a convenient way to get started: A well-designed onboarding process should be easy to understand and complete, even for customers with no prior experience with fintech products or services. As per a study by Deloitte, 65% of fintech customers expect to complete the onboarding process in under 10 minutes.
Educate customers about the product or service: The onboarding process should provide customers with the information they need to start using the fintech product or service effectively. According to Celent, Fintech customers who receive educational onboarding materials are more likely to use the product or service to its full potential.
Build trust with the fintech company: A positive onboarding experience can help to build customer trust in the fintech company and its products and services.

10 Best Practices for Customer Onboarding in Fintech in 2024

App Onboarding Fintech_fintech customer onboarding — Source

1. Personalizing Customer Onboarding in Fintech

A survey by The Financial Brand found that 64% of consumers are more likely to use a fintech product or service if they have a personalized onboarding experience.

Tailor the onboarding process to the individual customer's needs and goals.
Use data and analytics to understand the customer's financial situation and risk tolerance.
Offer the customer the opportunity to customize their onboarding experience.

2. Simplifying the Application Process during Onboarding

Reduce the number of steps in the customer onboarding process in fintech & banking.
Eliminate unnecessary paperwork and documentation.
Use technology to automate tasks such as identity verification and document collection.

3. Emphasizing Security and Compliance

Use the latest security technologies to protect customer data.
Be transparent about how you collect and use customer data.
Comply with all applicable financial regulations.

4. Prompt & Faster Onboarding

Get the customer started using your product or service as quickly as possible.
Avoid sending too many emails or notifications during the onboarding process.
Offer customers the opportunity to skip the onboarding process and start using your product or service immediately.

5. Providing Customers with Clear Instructions During Onboarding

Provide customers with clear and concise instructions on how to complete the onboarding process.
Use visuals and interactive elements to make the onboarding process more engaging.
Offer customers support throughout the onboarding process.

6. Making the Onboarding Process Compatible with Multiple Devices

A 2023 survey by Deloitte found that 63% of fintech customers expect to be able to complete the onboarding process on their mobile device.

Make sure your onboarding process is compatible with multiple devices, including smartphones, tablets, and computers.
Offer customers the option to start the onboarding process on one device and complete it on another device.

7. Well-Organized and Secure Onboarding Process

Organize the onboarding process into logical steps.
Use clear and concise language.
Secure all data collected during the onboarding process.

8. Regulatory KYC & AML Screening

Conduct KYC and AML checks on all customers to comply with regulatory requirements.
Use technology to automate the KYC and AML screening process.

9. Providing Basic Features Without Signing Up

Allow customers to access basic features of your product or service without signing up.
This gives customers a chance to try out your product or service before they commit to signing up.

10. Designing an Omni-channel Experience

A 2022 survey by Deloitte found that 61% of fintech customers expect to be able to start the onboarding process on one channel and complete it on another channel.

Allow customers onboarding in fintech process to start on one channel and complete it on another channel.
Offer customers multiple ways to get support during the onboarding process, such as email, phone, and chat.

The Role of AI in Customer Onboarding in Fintech

In the ever-evolving realm of financial technology, providing a seamless and efficient onboarding experience for customers is paramount. Embracing cutting-edge technologies like artificial intelligence (AI) has significantly transformed the onboarding process within the fintech sector. This section explores the pivotal role that AI plays in enhancing and automating customer onboarding in fintech.

Process Automation with AI Chatbots in USA

Enhanced Interaction: AI-powered chatbots facilitate interactive and personalized communication, guiding customers through the onboarding steps effortlessly.
24/7 Accessibility: Chatbots ensure round-the-clock assistance, expediting the onboarding process by promptly addressing customer queries and concerns.
Efficiency and Speed: Automating routine tasks streamlines the onboarding workflow, reducing manual effort and expediting customer acquisition.
According to a report by Neurotech Africa, banks using AI chatbots for onboarding save $0.50-$0.70 per interaction versus traditional methods.

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Data Extraction from Documents with OCR

Swift Data Extraction: Optical Character Recognition (OCR) technology accelerates the extraction of essential information from documents, expediting the onboarding process.
Accuracy and Precision: OCR ensures high accuracy in extracting data, minimizing errors and enhancing the reliability of customer information collected during onboarding.
Seamless Integration: Integrated OCR capabilities seamlessly fit into the onboarding workflow, enhancing efficiency without disrupting the customer experience.
As per the survey conducted by Deloitte, OCR tech saves organizations an average $4 million annually.

AI-Powered OCR Software_fintech client onboarding — Source

‍Real-Time Compliance Check with Biometrics

Instant Verification: Biometric authentication enables real-time verification, expediting the compliance process during customer onboarding.
Enhanced Security: Biometrics provide a high level of security by validating customer identity through unique physiological or behavioral characteristics.
Compliance Adherence: Real-time compliance checks ensure adherence to regulatory requirements, building trust and confidence in the onboarding process.

Challenges in Customer Onboarding in Fintech in USA

Onboarding new customers is an essential part of any business, but it can be especially challenging for fintech companies. Fintech companies face a number of unique challenges when it comes to customer onboarding, including:

Regulatory compliance

Fintech companies are subject to a wide range of regulations, including those related to anti-money laundering (AML) and know-your-customer (KYC) requirements. These regulations can make customer onboarding complex and time-consuming.
In 2023, the Financial Conduct Authority (FCA) in the UK fined Revolut £20.2 million for failing to adequately comply with anti-money laundering (AML) regulations. The FCA found that Revolut had failed to properly screen customers for risk and had failed to monitor customer transactions for suspicious activity.

Counter-Financing Terrorism (CFT) and Anti-Money Laundering (AML) compliance

Fintech companies are required to comply with CFT and AML regulations to help prevent money laundering and other financial crimes. These regulations require fintech companies to collect and verify customer information, and to monitor customer transactions for suspicious activity. This can add additional complexity and cost to the customer onboarding process.
In 2020, the Financial Crimes Enforcement Network (FinCEN) in the US fined Binance Holdings Limited $5.5 million for failing to comply with AML regulations. FinCEN found that Binance had failed to adequately implement a customer identification program and had failed to monitor customer transactions for suspicious activity.

Cost

Customer onboarding can be an expensive process, especially for fintech companies that need to implement complex security and compliance measures. The cost of customer onboarding can vary depending on the size and complexity of the fintech company, as well as the specific requirements of the industry in which it operates.
In 2022, a study by Accenture found that the average cost of customer onboarding for a fintech company is $100. The study also found that the cost of customer onboarding can vary significantly depending on the size and complexity of the fintech company

Manual processing

Many fintech companies still rely on manual processing for customer onboarding. This can lead to errors and delays, and can also make it difficult to scale the onboarding process as the company grows.
In 2022, a survey by McKinsey & Company found that 60% of fintech companies still rely on manual processing for customer onboarding. The survey also found that manual processing can lead to errors and delays, and can also make it difficult to scale the onboarding process as the company grows.

Security

Fintech companies need to take robust security measures to protect customer data from cyberattacks. This can add additional complexity and cost to the customer onboarding process.
In 2021, the US Securities and Exchange Commission (SEC) charged Coinbase Global, Inc. with failing to register its cryptocurrency lending program as a security. The SEC also found that Coinbase had made false and misleading statements to investors about the program.

Trends in Customer Onboarding in Fintech in 2024

Fintech companies are constantly innovating to improve the customer onboarding process. Some of the key trends in fintech onboarding include:

Customer Journey Mapping

Customer journey mapping is a process of understanding the customer experience at every stage of the onboarding process. Fintech companies are using customer journey mapping to identify and address potential pain points and to improve the overall customer experience. A recent survey by McKinsey & Company found that 70% of fintech companies are using customer journey mapping to improve the customer experience.

Digital Wallets Implementation

Digital wallets are becoming increasingly popular, and fintech companies are implementing digital wallets to make the customer onboarding process easier and more convenient. Digital wallets allow customers to store their financial information in a secure and convenient place, and they can also be used to make online payments. A recent report by Juniper Research found that the global digital wallet market is expected to reach $7.7 trillion by 2027.

Cloud-based Onboarding Solutions

Cloud-based onboarding solutions offer a number of benefits for fintech companies, including scalability, flexibility, and cost savings. Cloud-based onboarding solutions can be easily scaled up or down as needed, and they can be accessed from anywhere with an internet connection. The demand for cloud-based onboarding solutions is increasing in the fintech industry. A recent report by Allied Market Research found that the global cloud-based onboarding market in fintech is expected to reach $196.2 billion by 2031.

API-Based Onboarding Solutions

API-based onboarding solutions allow fintech companies to integrate their onboarding process with other systems, such as their CRM system or their payment processing system. This can help to automate the onboarding process and to make it more efficient. The adoption of API-based onboarding solutions is increasing in the fintech industry. A recent report by Boston Consulting Group (BCG) found that the global API-based onboarding market in fintech is expected to reach $1.5 trillion by 2030.

Conclusion

In this comprehensive guide on Customer Onboarding in Fintech, the journey navigated through key elements defining a successful onboarding process within the dynamic realm of financial technology. Commencing with a foundational understanding of fintech onboarding, the exploration delved into the current year, 2024, accentuating the 10 Best Practices steering the industry toward an optimized onboarding experience. The central theme that emerged was leveraging AI, showcasing its transformative role in streamlining and tailoring the onboarding journey for individual customers.

However, amidst this progress, challenges in FinTech Onboarding were confronted, ranging from compliance intricacies and cost constraints to security imperatives. Addressing these hurdles is crucial to ensure a seamless and secure onboarding process. Lastly, a glimpse into the near future revealed emerging Trends in Fintech Onboarding, where technology and evolving consumer behaviors are set to reshape how fintech companies approach customer onboarding. In essence, this guide illuminates the path for fintech firms, urging them to adapt, innovate, and prioritize the customer experience to thrive in this rapidly evolving landscape.

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