What are the real benefits of digital onboarding?

We generally only tend to think about the most immediate benefits of digital onboarding: increasing the acquisition of new customers, reducing online fraud and complying with existing legislation, such as AML, KYC and PSD2.

However, conducting a more thorough analysis, we can see that the scope of the benefits of a fully digital onboarding process that is fast and friction-free, reaches far beyond initially getting the customer on board.

1. The value of the onboarding in conversion

Firstly, digital onboarding lends us greater control throughout the entire process: We can see where users are lost, and conduct tests and make improvements relatively quickly, which is not the case in an offline environment, where we can only analyse the entry of new customers and the end result (regardless of whether they have opened an account).

But, why does digital onboarding bring in more customers than physically gaining customers? There are three main reasons:

  • Effort: If the process cannot be completed digitally and in a single session, the user has to allot more time and effort to the same result.

  • Purchase attempt: When the user begins the process he or she is ready to open the account. If they have to wait, they may reconsider opening one with the competition.

  • Opportunity: Most banks have opening hours that coincide with working hours, and users do not want to waste time on the weekend if the bank opens on Saturday.

As a guide, in a financial institution at the cutting edge of digital services, online conversion increases between 10% and 15% during the first year, thanks to an improved user interface, speed, re-targeting of incomplete onboarding and a fully automated process.

2. The value of digital commitment

Opening an account online is only the first step. A customer is more profitable the more products they take out, such as mortgages or loans. And in this sense, users who are digitally more committed take out more products at the same bank.

Average number of products with a customer’s main bank according to the level of digital commitment

Thus, digital banking not only increases the initial conversion, but it increases the share of wallet in consumer spending.

Furthermore, this commitment is transformed into greater trust, which is key to digital relations between the company and the customer. If a financial institution has a strong digital presence it can interact more often with its customers, and go from being a bank of convenience to a trusted advisor, increasing its ability to provide additional services or products and increase the average profitability per customer.

3. The cost of onboarding

Although, as we have seen, a customer’s profitability increases over time and, above all, aligned with the products or services he or she takes out, onboarding remains the most crucial factor, since gaining customers is the first step to enable them to purchase these additional products or services.

On the other hand, gaining customers who open a new account has an average cost of $300 (operational costs, IT, cards, marketing, etc.), thus, the customer does not begin to be profitable until they take out other products or services.

However, if you fully digitise onboarding, the costs associated with this process are significantly reduced. For example, at banks like ING, which popularised digital onboarding, the cost of gaining a customer is approximately $100.

4. The value of implementation

A crucial decision when implementing digital projects rests on whether to do so internally or to outsource to an external provider. Many banks have an IT department that could carry out the project, but the execution time would be longer due to lack of experience. An outsourced solution is often faster and easier to implement.

Although it does not seem an excessively significant factor, a six-month delay in implementation translates to millions in lost profits. Furthermore, in already-marketed solutions the functionality and flow of the process are already prepared and tested, so the bank offers a better experience from the outset.

In short, fully digital onboarding not only has immediate advantages, but it entails profits and greater profitability in the medium and long term.