Digital Onboarding vs Traditional Onboarding in Banking: Top 10 Differences in 2024

Onboarding, irrespective of whether it's customer or employee onboarding, is a crucial aspect of every business. With advancements in technology, businesses are optimising their key operations and processes. 

Stats reflect about 83% of banks focusing on cost optimisation during onboarding. Moreover, about 38% of customers leave the account creation process midway if it's too long. 

In general, businesses follow two onboarding methods or processes: traditional and digital. Both of these have their own benefits and shortcomings. But, in the race of digital onboarding vs traditional onboarding, who will win?

Read along with the blog post to explore both onboarding methods in detail. Digital onboarding vs traditional onboarding: we will also explore the underlying differences between the two.

What Is Traditional Onboarding in Banking? 

Traditional customer onboarding in banking is the process of welcoming new customers or clients and getting them acclimated to the institution's services and products. It's like the bank's warm handshake, and it's a well-established ritual.

First, it begins with a face-to-face interaction. A customer visits a bank branch or meets with a representative, where they're welcomed and provided with an account application form.

Next comes the form-filling phase. The customer meticulously provides personal details, financial information, and any necessary documents. This step ensures the bank gathers all the required data.

Afterwards, document verification takes place. The bank reviews the provided documents and verifies the customer's identity. This helps in safeguarding against fraud.

Once the documents are validated, the customer receives their account details. They're handed a passbook or chequebook and educated about the bank's services and policies.

Finally, a follow-up may occur to address any queries and ensure the customer's seamless integration into the bank's services.

This classic onboarding process exemplifies the traditional approach to initiating a banking relationship, focusing on personal interaction and comprehensive documentation.

7 Benefits of Traditional Onboarding in Banking 

Traditional onboarding in banking is characterised by its personalised approach, involves several essential steps and offers a range of benefits for both financial institutions and customers. It is particularly advantageous for customers seeking a human touch and a secure, comprehensive banking experience. Below are the 7 benefits of traditional onboarding in banking.

1. Personalised Guidance 

One of the foremost benefits is the personal touch. A customer stepping into a bank can receive face-to-face guidance throughout the onboarding process. For example, a new customer might have questions about the various types of accounts available. A bank representative can offer tailored advice, helping customers choose the best account that suits their needs.

2. Document Verification

Traditional onboarding involves meticulous document verification, which greatly enhances security. This step ensures that all customer-provided documents are valid, reducing the risk of fraudulent activities.

3. Building Trust

Banks can establish trust early by meeting customers in person and guiding them through the onboarding process. This trust often results in long-term relationships. An example would be a bank representative patiently explaining account terms to a new customer, building confidence in the bank's services.

4. Comprehensive Information

Customers receive a wealth of information about the bank's services and policies during traditional onboarding. For instance, customers are informed about withdrawal limits, fees, and the bank's mobile app, ensuring they are well-informed from the start.

5. Tangible Account Access

In traditional onboarding, customers typically receive tangible items like passbooks, chequebooks, or debit cards immediately, providing instant access to their accounts. This tangible element can be reassuring for customers.

6. Efficient Issue Resolution

Should any issues arise during onboarding, customers can address them on the spot. Whether it's clarifying doubts or resolving discrepancies, this real-time support can save time and frustration.

7. Tailored Cross-Selling

Banks can better understand a customer's financial needs during the in-person onboarding process. This enables them to offer suitable additional products or services. For instance, if a customer expresses an interest in saving for retirement, the bank can introduce them to relevant investment options.

7 Challenges of Traditional Onboarding 

Traditional onboarding in the banking sector has its merits, but it's not without its fair share of challenges. Below listed are 7 challenges of traditional onboarding.

1. Time-Consuming Process

Traditional onboarding can be lengthy, involving numerous forms, document verification, and face-to-face interactions. This protracted timeline can be a roadblock for customers looking for quick and convenient banking solutions.

2. Manual Data Entry

The reliance on paper forms and manual data entry can lead to errors and inefficiencies. Mistakes in customer data can result in compliance issues and unhappy customers.

3. Security Concerns

Gathering and storing sensitive customer data in physical form can raise security concerns. Banks need robust measures to safeguard this information from breaches.

4. Limited Accessibility

Traditional onboarding predominantly takes place in physical branches, which may not be easily accessible to everyone. This can exclude potential customers who prefer digital interactions.

5. High Operational Costs

The need for in-person interactions and paperwork can be expensive for banks. It requires dedicated staff and infrastructure, driving up operational costs.

6. Regulatory Compliance 

Meeting regulatory requirements is essential, but it can be complex and time-consuming. Banks must stay up-to-date with evolving compliance standards.

7. Customer Frustration

Lengthy onboarding processes and repetitive data collection can lead to customer frustration. This frustration can result in the abandonment of the onboarding process or the loss of potential clients.

What Is Digital Client Onboarding in Banking? 

Digital banking onboarding refers to remotely engaging new customers with a company or enrolling users in a service. This is typically facilitated through their mobile devices. 

Departing from the traditional on-site, in-person approach, digital onboarding has evolved as the norm in our digitised era. Its primary objective is to authenticate a customer's identity remotely, ensuring alignment with their claimed identity. This pivotal process initiates the crucial relationship between a client and a business, demanding efficiency, security, and user-friendly navigation.

Digital onboarding in banking is versatile and can be executed from virtually any location and across most smart devices. 

Not just this, digital onboarding in banking has revolutionised cross-selling. By leveraging customer data, banks can tailor offerings to individual needs. 

Personalised product recommendations during the onboarding process boost customer engagement and increase the likelihood of cross-selling success. This seamless approach enhances the overall banking experience while driving revenue growth. This is clearly reflected in the Digital Banking Report, which reflects that 42% of banks rely on digital channels and onboarding for better cross-selling.

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7 Benefits of Digital Onboarding in Banking 

Digital onboarding in banking transforms the onboarding process into an efficient and impactful experience. Let's take a look at the advantages of digital onboarding in banking in detail. 

1. Accurate Storage of Onboarding Documents

Ensuring precision and security, digital onboarding systematically stores all onboarding documents, thus ensuring precision and security. It mitigates the risk of human error and streamlines compliance.

2. Improved Customer Retention

The positive impact of digital onboarding extends to customer experience. It increases the likelihood of customer loyalty and continued engagement with a company's services and products.

3. Improved Onboarding

Digital onboarding empowers new customers with access to a spectrum of business data. This includes registered company information, organisational structure, director details, and even credit scores. 

4. Improved Efficiency

Digital onboarding surpasses traditional methods by allowing new customers to proceed at their own pace and on their own schedule. This expedites the onboarding process and spares managers the task of navigating through endless paperwork. 

5. Reduced Costs

Compared to traditional approaches, digital onboarding is notably cost-effective. It obviates the need for in-person courses, training sessions, or meetings, concurrently minimising employees' time on onboarding tasks.

6. Consistency

Digital onboarding establishes a uniform introduction to the company, ensuring that all new customers receive identical information and experience, fostering a cohesive onboarding experience.

7. Enhanced Security

Upholding industry standards and regulations, digital onboarding in banking stands as a secure mechanism, guaranteeing a high data protection and compliance standard.

5 Challenges of Digital Onboarding in Banking 

About 85% of customers complete a product application in traditional onboarding. On the contrary, the stats drop down to 13% in the case of digital onboarding.

While the advantages of digital onboarding are evident, there exist several challenges that banks must navigate for a successful onboarding experience. Here are some of the most prevalent challenges associated with digital onboarding. 

1. Lack of Understanding about the Product or Service 

One significant hurdle is the lack of customer understanding about the product or service they're signing up for. Banks should provide clear and concise information about the benefits and features of their digital offerings to help users make informed decisions.

2. Lengthy Sign-up Process 

Many potential customers abandon the onboarding process due to its length and complexity. Streamlining the sign-up process by minimising the number of steps and requesting only essential information is crucial to prevent drop-offs.

3. Ineffective Communication with Users 

Communication breakdowns can lead to confusion and frustration. Establishing seamless channels for user support and feedback is vital to address concerns promptly.

4. Inadequate Training 

Users may struggle to effectively utilise digital banking services without proper training. Offering educational resources, tutorials, and customer support in banking can bridge this gap and enhance user satisfaction.

5. Technical Issues 

Technical glitches, such as app crashes or slow loading times, can frustrate users and lead to abandonment. Banks need to invest in robust technology and conduct thorough testing to eliminate such issues.

Digital Onboarding vs Traditional Onboarding in Banking: 10 Key Differences in 2024

In today's fast-paced, tech-driven world, onboarding processes have evolved significantly. Traditional onboarding methods, while time-tested, are now facing stiff competition from their digital counterparts. Digital onboarding vs traditional onboarding: what are the underlying differences between the two? Let's explore.

1. Interaction 

Digital onboarding leverages technology to facilitate remote engagement, often through video calls, chatbots, or self-guided tutorials. In contrast, traditional onboarding relies heavily on face-to-face interactions. 

2. Process 

Digital onboarding streamlines processes with automation, allowing for a more structured and efficient journey. Whereas traditional onboarding follows a linear, paper-heavy process.

3. Customer Engagement 

Digital onboarding excels in providing personalised and engaging experiences through interactive platforms. On the contrary, traditional onboarding may sometimes struggle to maintain high levels of engagement.

4. Ease of Use 

Digital onboarding offers a user-friendly experience, enabling customers to complete tasks at their own pace. Traditional onboarding, on the other hand, can be more cumbersome due to paperwork and manual tasks.

5. Security 

Digital onboarding prioritises data security with advanced encryption and authentication measures. Traditional onboarding, often reliant on physical documents, can be more susceptible to security breaches.

6. Accuracy  

Digital onboarding minimises human errors through automated data verification, reducing inaccuracies that can occur in traditional processes.

7. Efficiency 

The digital approach trumps traditional onboarding with faster processing times, as information can be swiftly validated, cutting down on delays and inefficiencies.

8. Flexibility 

Digital onboarding allows for adaptability, accommodating customers across different time zones and locations. Whereas, traditional onboarding may lack flexibility, especially in remote scenarios.

9. Time 

Digital onboarding is a time-saver. Customers can complete the process from the comfort of their own homes, eliminating the need for time-consuming visits to physical offices. On the other hand, traditional onboarding is time-consuming.  

10. Cost 

Onboarding an individual client traditionally takes about $150. In contrast, digital onboarding the same client takes about $30. While there is an initial investment in digital onboarding technology, it ultimately proves more cost-effective in the long run due to reduced paperwork and improved operational efficiency. 

Conclusion  

Digital onboarding and traditional onboarding are two distinct approaches for customer onboarding in banking. While both methods aim to acquaint individuals with their roles, there are fundamental differences. Digital onboarding leverages technology to streamline processes, offering flexibility and efficiency. In contrast, traditional onboarding relies on face-to-face interactions, fostering personal connections. 

If you're looking forward to enhancing customer onboarding with a conversational AI, look no further than App0. App0 is an AI-driven, no-code messaging platform that transforms text notifications into interactive conversations. It empowers healthcare service companies to expedite origination processes, decrease application drop-offs, and elevate customer experience through text engagement. 

In dealer/vendor-led programs, where phone and email dominate communication, App0 tackles challenges like collecting sensitive data and documents efficiently. Automating workflows with AI-driven messaging streamlines operations reduces agent workload, and enhances security and compliance.  

Request a demo today to learn more about conversational AI platforms that can help in enhancing customer onboarding in banking.

Digital Onboarding vs Traditional Onboarding: FAQs