As Financial Services processes continue to become digitised, one could almost be forgiven for expecting that more consumers would, therefore, complete the on-boarding process. Yet, drop-out rates are mounting as modern consumers demand easier online applications. This increase is spurred, in part, by how mobile technologies have raised consumer expectations, as users expect simplicity in design and experience.
Image Credit:Michel Paz
Application Abandonment Increased 35% In Two Years
This year, 52% of those surveyed in Germany, the Netherlands, the UK, and Sweden, abandoned their banking applications, an increase of 35% over the past two years alone. Why are application dropout rates increasing? Among other things, survey respondents reported that on-boarding processes were time-consuming and frustrating.
Today’s consumers are abandoning applications in a large part due to poor on-boarding experiences. In fact, 72% of European consumers want an all-digital on-boarding process. In the UK, 24% of applicants abandon their applications because of analog or manual processes, like visiting a branch or sending in paperwork via mail. In Sweden, one-in-five discontinued their application because they found the on-boarding language too confusing.
Similarly, in Germany nearly one-third of respondents reported that on-boarding took too long, asked too many questions, and required a visit to a branch – each of which are, in and of themselves, good reasons to abandon an application and find a digital-only challenger brand.
This data points to a growing crisis within the FinServ industry. Challenger banks and other financial service organisations offering friendly, simple, and fully digital on-boarding processes are increasingly likely to steal customers away from more traditional operations.
Established Companies Can No Longer Rely Solely on Consumer Trust
However, it doesn’t have to be the case that well-known players lose their competitive advantage. The crucial question becomes how do financial companies streamline their processes without jeopardising security and introducing more risk?
“As the market becomes more competitive, financial institutions are under increasing pressure to attract and retain more customers but at lower costs. It’s a huge challenge and the old analog process for on-boarding has proved cumbersome and outdated. There is enormous scope for digital identities to reduce inefficiencies as well as ease compliance with KYC. But building those identities is a complex task and financial institutions need to create interoperability between regions in a fragmented European landscape.” - Gunner Nordseth, CEO at Signicat
Today’s consumer values quick, simple user experiences that are completely online. Convenient and efficient on-boarding systems will beat trust every time, but it is still critical to success to maintain adequate risk management procedures.
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Risk Management Doesn’t Have to Slow Down the Process
More than a third of survey respondents reported that they abandoned their applications because of the length of time required to complete. Of course, there is no compromise in adequately complying with Know Your Consumer (KYC) and Anti-Money Laundering (AML). For some, a streamlined digitalised process may seem to be in direct conflict with preventing fraud. After all, risk managers must maintain authentication and identification standards. Yet this is not what we found.
Maintaining a poor application process with too many difficult-to-answer questions is actually increasing risk. When they come across a frustrating on-boarding, low-risk consumers with good credit who are likely to repay their loans, can easily take their business elsewhere. After all, they are the ideal customer for competing brands.
Could a Terrible User Experience Lead to Increased Risk?
Yes, as high-risk consumers with poor credit are more willing to jump through challenging on-boarding because they have no other options. Challenger brands are less likely to accept risky customers.
The requirement of physical documentation is a great example of an unnecessary obstacle. In fact, 28% of UK consumers report abandoning their application due to brands requiring they mail personal information by post or submit in-person to a physical branch location.
Many FinServ organisations require PDF versions of documents that are not readily accessible to the average consumer. This forces potential customers to find the correct hard copies and take pictures with a smartphone, or search for a scanner outside of their home. Then, due to the varying quality of digital image files and users’ own tech savvy, banks and financial brands may require a different file type or increased resolution. These antiquated processes conspire against your on-boarding process, by making it more arduous for consumers to apply, leading to the aforementioned high drop-off rates.
Financial service providers need a new option to remain agile for today’s consumers while reducing risk and complying with KYC and AML.
As on-boarding abandonment skyrockets, banks and other financial services can no longer rely on trust to stay competitive with digital-only challengers. They must now offer a smooth, simple way to identify and verify applicants within a friendly, optimised process to meet the needs of modern-day consumers.
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