Mike Tutson, Chief Executive Officer, Ofido.
As the world emerges from the global fight against Covid-19, industries are beginning to determine what a return to “normal” will look like.
For some, it’s a question of who will return to the office and who will continue to work remotely. For the financial services industry, it’s a question of how to embrace the new “digital-by-default” landscape.
While other consumer-facing industries have long recognized the importance of seamless digital experiences—in many cases, technology leaders such as Amazon or Google have forced them to move online—financial services have been slower to adopt digital tools. Early perceptions of a greater risk of fraud and a severely reduced ability to up-sell new services without face-to-face interaction have delayed widespread adoption. Additionally, most banks cannot digitally verify someone’s digital identity without in-person experience.
Before the Covid-related shutdown in 2020, traditional financial services typically operated on a digital on-demand model. Banking tools can be accessed through apps and online, but the instinct of most companies is to continue to drive customers to brick-and-mortar branches because it’s easier to perform any deep or complex banking in person, and it’s easier to build trust with customers.
The pandemic has acted as a catalyst for both bank and customer demand.one McKinsey Research The shutdown accelerated seven years of digitization to just two years, reports say; other Standard & Poor’s Research Discovered that 6 out of 10 customers visit brick-and-mortar banks less than before and have no plans to return.
As the world reopens and banks continue to ponder these fundamental questions about how consumers interact with their services, it’s time for executives to harness this digital momentum to understand how they can “Amazonize” their services.
Customer is King
If Amazon can teach the financial services industry anything, it’s that when it comes to the online experience, the customer is king. Without a salesperson to guide the deal, the digital experience must be seamless so customers can do it all themselves. This is a lesson Amazon learned 20 years ago, but the traditional financial services industry is only just beginning to address it.
Ten years ago, no one would have dreamed of doing something like buying a mattress online. Even the idea of buying a pair of sunglasses online without first making sure they look good on your face sounds risky. But Amazon helped push the market in new directions. Rather than drive to a furniture store, test a dozen mattresses, and then deliver their choice a few days later, customers are used to a four-click process: add item to cart, checkout, confirm shipment, purchase.
By contrast, the financial services industry forces customers to skip dozens of hoops when trying to use simple banking tools. To open a bank account online, potential customers need to answer a series of questions that attempt to verify their identity. Finateq Found that some big bank accounts need more than 120 clicks!
plus our recent consumer surveyFinding that 60% of consumers say they abandon online registration because the process is too long, confusing or concerned about the security of their data, banks that allow poor digital experiences are unlikely to win many fans.
A streamlined, frictionless customer experience is critical — and importantly, possible.
Rather than forcing customers to submit dozens of questions trying to meet anti-money laundering (AML) and know-your-customer (KYC) requirements, banks can simplify their digital ID systems in a way that is both secure and efficient. A digital-first bank we work with has done just that, and they can now attract new customers in just 24 clicks, a fifth of the time it takes for their competitors. This speed means more customers onboarding and fewer onboarding losses.
How do they do it? Faced with the same regulatory environment and fraud issues as their competitors, they have changed the dynamics of their offerings to focus on the customer — both in the service offered and the experience. They have adopted digital tools that enable customers to seamlessly verify their digital identities, resulting in a 12% increase in customer onboarding, while meeting the strictest KYC regulations and creating a smoother process for customers.
They have modernized the onboarding process by using the latest KYC and AML technologies to meet customer experience and expectations. It’s a model that can be replicated by other financial services companies — capacity will only grow, especially as digital identity tools like wallets and ID cards become more commonplace.
Banks can play an active role in setting standards for these IDs, but only if they embrace the ease-of-use and security values at the core of these products. To set standards, banks need to be at the forefront of the digital identity revolution. Every company should know exactly how many steps their customers need to take to join, and exactly where they start having problems. Without a basic knowledge of who they onboard and how, banks leave the door open to more enterprising and digital-savvy competitors.
Executives need to be fascinated by their customers, and they must be open to completely reimagining their digital experiences. With modern technology, the onboarding process can be mapped out to provide a clear path on where and how onboarding is blocked.
In a post-pandemic world, digital on-demand is no longer good enough. The new world is digital by default. To truly lead the way, financial services firms need to prioritize frictionless digital experiences that give users the freedom and power to access their tools, however best suits them. A seamless digital experience is necessary for success in this world, just as the old world had thousands of convenient branches.