Combining KYC and customer experience: how to optimize customer onboarding

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KYC / Online KYC is strongly correlated with customer onboarding. Here are our recommendations for smooth processes in this area.

What company doesn't want to make the customer onboarding process easier and smoother? Customer onboarding, a major issue for any company operating in B2C, is defined by the initial steps involved in how a user begins their journey as a customer. It is about making their experience as seamless and painless as possible. If not, the customer will leave and probably never return.

KYC and onboarding: the challenge for the financial sector

In parallel with customer onboarding, the KYC compliance process (KYC for Know Your Customer) must comply with the laws and rules incumbent on financial institutions, issued by the competent authorities(in terms of financial crime: fraud, tax fraud and the fight against money laundering and the financing of terrorism for Tracfin, obligations of vigilance, enhanced vigilance and monitoring of financial transactions / suspected unusual transactions or atypical transactions).  

The challenge is great : limit fraudThe challenge is to strengthen the security and checks related to the customer while welcoming them in the right way (optimal experience). The KYC process must of course be secure and compliant with regulations, the customer welcomed in the best possible way and in compliance with the General Data Protection Regulation (GDPR).

In fact, the entry into the customer relationship aims to be efficient, but not hasty: by speeding up procedures or bypassing checkpoints to win a customer, you risk massive penalties and fines for non-compliance.

The KYC process must also be accurate and compliant, but not invasive to the customer. Following customer identity verification protocols to the letter without regard to the target can be fatal. At each stage, the customer may decide to stop everything and eventually join a competitor who can perform these operations more quickly and with less hassle.

Current trends also justify this need for compliance and advanced customer knowledge for the banking sector: increasing adoption of e-commerce, virtual currencies (crypto-currencies) and international transactions; increasing fines for regulatory non-compliance; increasing sophistication of cross-border organised crime, as the fight against money laundering and the financing of terrorism AML/CFT is not an illusion.

The customer comes first

In the end, only the customer counts. For a long-term vision, the entry into the relationship is of major importance. The aim is to avoid friction and to build customer loyalty. It should be quick and smooth.

According to a PwC study, 73% of consumers say that customer experience is an important factor in their purchasing decision. Also, more than 90% of customers believe that the companies they buy from "could do better" when it comes to onboarding new users. Finally, almost a third of customers would stop doing business with a brand they liked after one bad experience.

However,as regulatory demands increase in number and complexity, the pressure on the client should be kept to a minimum. Assessing risks, yes. Losing a prospect or a customer, no. If we take the image of a physical shop, letting a (future) customer into an airlock, with a security guard searching him, questioning him before finally letting him into the shop, we can imagine that the experience is reduced or even very unpleasant for the customer. A delicate way of welcoming them.

On the other hand, this process consumes time and resources (material and human, therefore financial) for the shop.

Onboarding a new customer provides an invaluable opportunity for any bank or financial institution to demonstrate its effectiveness and commitment to the customer, but very often the onboarding process presents challenges that create a bad first impression.

Finding new ways to improve the customer experience is therefore vital for financial and banking institutions, and in today's digitally transformed world, digital is helping us with innovative solutions.

Online KYC and remote entry

The pandemic, with its attendant restrictions, confinements and other social distancing, has forced financial players to " sharpen their game" in terms of online digitisation / KYC.

Entering into a relationship at a distance is no longer a digital coquetry, but a vital obligation, reinforcing the KYC system. From now on, KYC will be as much online KYC or e-KYC as possible. This means that everything must be able to be done without the physical presence of a client or paper proof. Video, for example, is now increasingly used as a tool for entering into a relationship and for verifying identity in the context of online KYC.

Digital offers many benefits, including reduced costs combined with improved compliance, not to mention increased efficiency. Above all, these digital solutions offer a smoother and faster customer experience, although some people still need to meet with an advisor without screens.

In any case, the consumer today expects seamless and efficient integration and an omnichannel experience. The induced digitalisation of online KYC reduces touch points and frustration levels and increases speed of execution, ultimately improving the customer journey.

As needs continue to evolve, every customer is now looking for new ways to interact with their service providers. Financial market players that are at the forefront of new technologies, can adapt quickly and/or surround themselves with FinTech startups, are most likely to attract and retain customers in the digital age.

However, in a global European context, it is above all a question of complying with the directives imposing strict rules on KYC and financial security. According to a report by the ACPR-AMF Fintech Forum, aimed at establishing a diagnosis and possible solutions to make remote identity verification more fluid, "electronic means of identification that obtain a substantial level of "eIDAS" qualification could complement the measures accepted as equivalent to face-to-face", in reference to the European eIDAS regulation on digital identity.

In other words, it is not that simple, because it is all very standardised and involves high development costs and legal constraints.

What solutions are there to reconcile KYC and customer experience?

Automated document verification, data encryption, electronic signature, Open API... solutions exist to drastically improve customer onboarding.

However, these are often based on an objective and result of conformity, but not of certification or authenticity. Moreover, automation only works for standardised documents (ID cards, passports, etc.). For other media, it is a source of errors or even impossible. In this case, manual reading is required.

Investing heavily in building up KYC compliance teams is too often the only alternative. However, this desire to gain speed through human control in the Know Your Customer process certainly introduces heavy expenditure without the guarantee of revenue growth.

Blockchain is the new gold for the banking sector

Only a few years ago, blockchain was just another dubious technology linked to crypto-currencies. Today, it is reshuffling the cards in the sector and is becoming an essential solution for banking and financial institutions.

Thanks - among other things - to the principle of digital fingerprint comparison made possible by the blockchain, non-forgery and authenticity are guaranteed.

The benefits of blockchain also include reduced costs, improved compliance, enhanced customer experience and greater trust. Indeed, the speed of execution is unparalleled and the outcome is binary: either the document is compliant and authentic or it is not.

A concrete use of the power of blockchain would be a credit application by an individual to a bank. Thanks to the secure Zero Knowledge Proof protocol, banks and credit institutions would be able to know whether the customer is creditworthy, without having access to personal information such as age or income. They could then grant a loan or not. This method respects the confidentiality of private data while ensuring its veracity.

Blockchain technology adapted to the financial system thus removes many limitations. It improves the efficiency of KYC and the customer experience.Customer onboarding is thus greatly optimised. 

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