KYC and Customer Onboarding for Fintechs

As more competitors enter the market, fintechs that want to stay ahead are focusing on digital transformation initiatives to improve the know your customer (KYC) and customer onboarding experiences of customers who are increasingly tech-savvy and driven by high-quality digital journeys. 

Why Customer Onboarding Matters

For financial institutions — fintechs in particular — customer onboarding is one of the most critical processes to get right. As it is often a customer’s first impression of doing business with an organization, a seamless and effective client onboarding experience in financial services sets the tone for the future and can have a huge impact on whether a customer chooses to commit to a long-term relationship with service providers. 

Delivering a stellar customer onboarding experience might sound simple on paper, but with mounting compliance requirements in the Know Your Customer (KYC) journey and an overarching pressure to reduce operational costs, it’s all too easy for compliance leaders to inadvertently detract from the quality of this experience in the name of ensuring all the right boxes are ticked.  

KYC ties in tightly with customer onboarding for fintechs and compliance leaders need to ensure they’re going above and beyond with both to stay competitive.  

What is KYC?  

KYC is a 3-step process that enables businesses to verify the identity and assess the suitability of their customers while also understanding the associated risks when doing business with them.  

KYC involves checking a customer’s information against several data points to ensure that they are who they claim to be. When there’s an abundance of data that are available (e.g., name, address, tax ID, credit report, etc.) KYC checks become more accurate and reliable because it becomes easier to spot inconsistencies and prevent volatile customers from accessing your services.  

In the context of customer onboarding, financial institutions are required by law to verify the identities of their customers in order to comply with anti-money laundering (AML) laws and other regulatory requirements. KYC onboarding is therefore a must for every fintech and has to be carried out for all new and existing customers.  

For more information, check out our Guide to the KYC Journey. 

Converting Prospects While Conducting KYC  

Creating a seamless and efficient digital onboarding process is critical for any fintech. This needs to be managed in a way that doesn’t infringe on the organization’s KYC processes and goals—and vice-versa.  

The KYC onboarding process can largely be separated into three areas: 

1. Customer identification 

2. Verification of credentials 

3. Post-verification activities and monitoring aka perpetual KYC 

While KYC onboarding can be a time-consuming process, it’s crucial for ensuring that an organization doesn’t become exposed to financial crime and other illegitimate activities. It also helps to build trust among customers.  

This, of course, must be balanced against the need to reduce customer abandonment; a KYC onboarding process is of little use if customers are jumping ship before they’ve completed it. Customer onboarding abandonment rates are climbing ever higher, a report surveying 4000 banking consumers revealed that on average there was a 63% abandonment for digital banks in 2020, reaching highs of 70%.  

Overcoming Abandonment During Customer Onboarding 

KYC abandonment is a massive headache for compliance leaders. Despite being a vital process that must be executed according to regulatory requirements, many fintechs struggle to strike the right balance between gathering all the right information and keeping things simple.  

This inevitably leads to frustration among customers who want to get everything out of the way quickly so that they can begin benefitting from a fintech’s services. The main reasons that customers abort KYC checks include: 

• Complicated checks 

• Long KYC journeys 

• Lack of on-hand KYC documents 

• Too much personal information required  

Overcoming abandonment is therefore simply a case of ensuring that your KYC onboarding process is clear, simple, and fast.  

1. Make customer onboarding clear 

The first step to reducing KYC customer onboarding for fintechs is to make the process clear. Customers are likely to abandon the process if they don’t understand what they need to do.  

A good way to do this is to provide customers with a pre-onboarding checklist that includes all the documents and information that are required for the KYC process. You should also provide the option for customers to submit alternative forms of documentation in lieu of another (e.g., a driving license instead of a passport) where they are acceptable.  

Now that you’ve got a checklist, you should provide customers with detailed step-by-step instructions for completing each stage of the KYC process. This can help customers understand what’s required at each stage of the process and reduce the likelihood of errors and abandonment. Keep instructions clear and make support easily accessible, whether that be through a chatbot, live chat, or phone line.  

2. Make KYC onboarding simple 

KYC procedures can be overwhelming, particularly for first-time users, so you should aim to keep things simple. You can do this by: 

• Using simple language: Avoid technical or legal terminology because this might confuse your customers. Instead, use plain, simple, and understandable language. 

• Implement multiple steps: Break up the KYC process into multiple steps to prevent everything from being stuffed onto one page and potentially overwhelming your customers. 

• Be natural: Group KYC onboarding steps together in a way that’s logical and natural. For instance, personal information, organizational information, and financial information should all form part of their own groups in separate steps.  

Anything that makes your KYC onboarding process simpler to complete will help to curb abandonment and feed into the next step. 

3. Make KYC onboarding fast 

Once you’ve got the overall structure for your KYC onboarding process, look to see if you can cut the completion time down. Where can you chop and change things to make the process faster from start to finish?  

• Use short forms: Break longer forms up into multiple parts that take seconds to answer rather than minutes. Cutting the process into bitesize chunks can help to eliminate stress and move things along quickly while giving the customer the option to come back later and pick up from where they left off—an option that might not be available if everything is part of a single form. 

• Enable cross-device functionality: If you’ve got a customer who started the process on a desktop but realized that they need to move to mobile in order to take a picture, you need to make this possible by enabling the process to be saved and accessible again from elsewhere. If they’re forced to restart the process from scratch, you run a huge risk of prompting them to abandon it.  

• Provide other options: It’s important for a KYC process to be accessible to all. As such, provide options to complete it online, in person, on paper, or, where appropriate, over the phone. Customers who have convenient options are more likely to follow the process through to completion.  

By cutting the time required to complete the KYC onboarding process, compliance teams can reduce the likelihood of customers abandoning the process due to it being an inconvenience or taking too much time away from other pressing matters. 

Find out how Fenergo can transform your fintech’s KYC experience here.  Check out our blog for more tips on achieving a successful customer onboarding experience.