4 Approaches To Improve Customer Onboarding in the Lending Industry


Instnt | 4 Approaches To Improve Customer Onboarding in the Lending Industry

The lending industry is increasingly turning to digital. If you don’t have a digital app or your technology is lagging, you’re missing out. Younger generations are a large part of the borrowing pool, also. As consumers reach the age where their credit scores increase and they are able to take out loans, they expect to be able to do it on a mobile app or laptop, like almost every other transaction. 

This borrowing trend is not likely to subside. For lenders, it’s a more efficient and cost-effective way to originate and service loans. And for customers? They appreciate the speed and the convenience. Given the emerging preference for banking online, customers will increasingly turn to mobile apps to meet their borrowing needs. 

Problems with Traditional Lending

Lending the old-school way requires lots of paperwork. Although many lenders have digitized parts of the process, they may not have achieved true end-to-end digitalization. Loan origination is an especially challenging area for digitalization since financial institutions are dealing with rigid legacy systems, labor-intensive decision making, and compliance and regulatory issues. Further, the number of resources needed to complete a digital transformation can be a significant barrier. 

However, financial institutions understand the business imperative for digital transformation. And shareholders want to see results now. Moreover, both groups understand the market-driven demand for the ease that mobile applications provide.

Some 76 percent of customers have used their bank’s mobile app during the pandemic year for everyday banking tasks. The trend is expected to continue. In fact, a 2021 FICO Consumer Digital Banking study found that customers are going online in record numbers for their banking needs. Compared to the pre-pandemic years, the numbers have surged. Some 41 percent of Americans and Canadians are likely to open a financial account online. Most of these applicants have little tolerance for a poor customer experience, and 25 percent will abandon the process if they have to go outside of the digital channel to complete the application. This means that your consumer digital onboarding process has to be buttoned up. 

Once consumers experience the convenience of a digital banking app, the bar is raised. Why shouldn’t they be able to apply for a loan from the living room sofa? As customers move to digital services, there are technologies that you ought to leverage as part of your digital strategy. 

Here are four ways to improve the customer onboarding process in the lending industry to optimize customer experience, reduce fraud and bolster the bottom line. 

  1. Proper ID Verification

    In recent years, borrowing has become one of the methods used for money laundering. Consequently, lenders are subject to more frequent regulatory checks and must be more diligent than ever. In addition to stringent Customer Due Diligence (CDD) with Know Your Customer (KYC) compliance and Enhanced Due Diligence protocols, lenders must be able to detect criminal entities before they ever become customers. This means during onboarding. The best way to mitigate this risk is to deploy software that uses predictive analytics powered by artificial intelligence. 

  2. Machine Learning


    Machine learning solutions can help lenders reduce the risk while onboarding customers. The best digital onboarding solutions use ML to replace rules-based automation. The limitation of the latter is that in the ever-evolving world of banking regulations change is inevitable. This means that IT must invest considerable time and resources in rewriting the rules. Humans, no matter how skilled they may be, don’t scale the way computers do. That’s where machine learning comes in. Using these techniques, lenders can significantly lower onboarding risks. ML algorithms can accurately predict fraudulent activities, as well as determine who may be a credit risk for the lender. 

  3. Facial Recognition

    Online facial recognition speeds up the onboarding process. It uses biometric software to map the user’s face, storing the features as mathematical data known as a faceprint. Facial recognition helps to streamline lengthy conventional methods of KYC. It requires the customer to take a selfie and then upload a government-issued ID. Machine learning algorithms match the face in the picture with the one on the ID. This can help accelerate onboarding and allow customers to log in to their accounts securely in the future.

  4. Chatbots and Digital Assistants

Love ‘em or hate ‘em, the best reason for including chatbots is that they get the job done fast. During digital loan initiation, the most important thing is to complete the application process. Peter Wannemacher, a Senior Analyst at Forrester, reports that loan abandonment rates online are as high as 97.5 percent

Virtual assistants can help speed the process, allowing customers to stop, if needed, and pick back up where they left off. Also, chatbots collect data — the right kind of data — that can provide personalized advice or be routed to other applications that may provide future services. A chatbot or digital assistant can also respond to customer queries and hand them over to a human agent if needed. Bots are inexpensive compared to people and are conveniently available 24/7.

Customer Analytics and Big Data

Financial players have always collected a ton of information. The challenge is to turn that data into insights that help differentiate one lender from the others in the world of lending alternatives. Data helps lenders understand how to provide customers with the products and services they want most. Predictive analytics uses data and ML algorithms to forecast what’s likely to happen in the future and to provide advice and services on a just-in-time basis. The right data can help reduce fraud, analyze customers’ borrowing needs, understand how they use banking services, predict what questions they will ask, and even what products they’ll need next. In order to get the most out of data, lenders use data analytics that can mine the data and provide good insights.

It Starts with Digital Customer Onboarding

Which lenders will benefit from the digital banking movement? Certainly, the advantage goes to those who offer innovative technologies that allow customers to apply for loans online using a mobile phone. It all starts with digital customer onboarding. The best solution for onboarding new loan customers reduces operating costs while providing banks and other financial institutions the ability to respond to customer needs with personalized products and services. 

If your financial institution is ready to onboard up to 40 percent more good customers, check out Instnt. Instnt is a fully managed digital customer onboarding solution that will get your digital lending platform up and running fast. You no longer need to manage a technology stack or worry about compliance regulations and fraud losses. Instnt uses AI and predictive analytics to validate users so that you can onboard new customers easily and reliably. Request a demo today!


About the Author

Instnt Inc. is an AI managed customer acceptance platform founded and operated by serial entrepreneur Sunil Madhu, founder, and former CEO of Socure. Instnt is on a mission to bring frictionless inclusion and continuous identity assurance experiences for businesses and their customers through proprietary artificial intelligence technology, open standards, and a collaborative effort in the identity governance industry. Instnt powers various financial institutions, lenders, fintechs, banks, and credit unions across North America. For more information, please visit www.instnt.org