Customers are the lifeblood of every business. However, some customers are more beneficial than others. Having more customers is only positive for your company’s bottom line if you can deepen relationships with high-quality ones and transition bad ones away. Developing your customer acceptance system doesn’t only work to create a stronger discovery process in which to personalize your customer's experience, but it will also serve as an effective information collection point to satisfy critical compliance requirements.
Acquiring new customers in the largest demographics, the Millennials, and Gen Zers, will require digital solutions, especially mobile ones. According to the Gen Z And Millennial Perspectives On Emerging Trends In Banking And Finance whitepaper, the following issues will need to be addressed:
- Generational differences in banking habits. Only 47% of Gen Z respondents claimed to have an account with a traditional bank, credit union, neobank or technology company.
- Attitudes toward financial apps. More than 80% of Gen Zers and Millennials are using a money-transfer app.
- Customer-support preferences. 53% of Gen Z respondents and 42% of Millennials wanted to be able to find their answers online, whereas only 27% of baby boomers preferred this channel.
“Millennials and Gen Zs are set to become the most important customer group for most banks and credit unions over the next decade, as nearly $70 trillion in wealth transfers to them from their parents. But, as our research shows, what worked for Mom and Dad will not be enough to win and keep this younger demographic as a customer,” said Jake Tyler, CEO at Finn AI.
Organizations will need to deliver personalized customer experiences with strong customer acceptance processes not just to prevent fraud and grow revenue but even to stay competitive.
Why a High-Quality Customer Acceptance Process Is Critical to Your Growth
Your onboarding process has a direct impact on your revenue growth. According to McKinsey & Company research, “for every one-point increase in customer onboarding satisfaction on a 10-point Net Promoter Score (NPS) scale, there was a 3% increase in customer revenue. The fiscal implications of this can add up quickly: If a company onboarded $500 million worth of new customers last year and improved its onboarding satisfaction score from a five to a six, that would equate to an additional $15 million per year. A five- to eight-point improvement would translate to an additional $45 million per year!”
False Positives and Rejection Rates
There’s a costly difference between not rejecting enough customers and rejecting too many. Aite-Novarica estimates that the e-commerce industry will experience false-positive losses of $443 billion by 2021, far more than the projected fraud losses of $6.4 billion. A false positive occurs when a real customer is red-flagged for extra scrutiny because there’s an identifier match with a name on the sanctions list or the list of politically exposed persons. According to the Global Treasurer, for a typical financial institution monitoring Know Your Customer requirements, typically 75% to 85% of alerts are false positives, with up to 25% reviewed by level-two senior analysts. Working through each alert is time-consuming and complex, and at an average cost of about $27 each time, it cumulatively creates a hefty bill when a bank or organization has thousands or millions of customers to screen. Transitioning to a more efficient and effective process would translate to very real gains for your organization.
The regulatory motivation is clearly there, with the main drivers being Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance requirements. And the penalties for non-compliance can be very steep. From the financial crisis to the end of 2019, financial institutions racked up fines worth $36 billion globally for non-compliance with AML, KYC, and sanctions regulations, according to Business Insider. In 2020 alone, financial institutions around the world were fined nearly $11 billion for not complying with KYC and AML requirements.
Seek solutions that reduce false-positive rates. A solid customer onboarding process sets a solid tone for your customers and your organization to thrive.
KYC and AML were designed to help prevent fraud, corruption, financing of terrorism, and other illegal activities. However, risk assessments identifying vulnerabilities that could put your organization at risk also generally require collecting not-insignificant amounts of information from your potential customers. To complicate matters still, customers have increasingly shorter attention spans, so the speed of account opening also matters. According to American Banker, 40% of consumers abandon onboarding processes when opening a new bank account. Further, 40% would also be more loyal to their bank if they were provided more personalized services.
Demand that you own your customer data. When only you have the decryption keys, the customer information you’re safeguarding is protected. Here are some additional key steps to consider in your digital onboarding process:
- End-to-end encryption to ensure integrity and confidentiality
- Cryptographic security in compliance with industry security standards
- Static mobile application protection (i.e., encryption, obfuscation) and file integrity for application code
Fully digitizing your onboarding process yields key advantages. It can improve your users’ experience with faster account openings or due-diligence periods, and it can significantly lower costs through automation.
Implementing no-code solutions can dramatically reduce costs because they can be installed by any user of any programming skill level. This implies that the platform is also faster to build and launch. The real work is behind the scenes in the framework of the application. In contrast, a standard solution requiring an IT team to build a purpose-built application may take three to six months or more — at significant expense. Here are additional key advantages of no-code platforms.
- Staff and resource flexibility. One of the beauties of using no-code solutions is that they can be implemented by your IT department or other team members since any developer with basic skills can deploy them without specialist help.
- Speed. No-code solutions are generally much faster to deploy because programmers aren’t required to hand-code each line.
- Flexibility and agility. No-code solutions can change faster and more easily to enhance functionalities, saving precious time and money. The knock-on effect is that the faster process helps your organization provide better customer experiences.
- Overall costs. No-code solutions, almost by definition, don’t require the same level of maintenance by your team as traditional hand-coded work. They allow your company to optimize processes and reduce staff requirements.
Small-Business Enterprise-Level Solutions
First impressions matter. For example, during the collection of KYC and AML data, your organization has an opportunity to deepen the relationship beyond what traditional and larger competitors do. If you make the compliance process seamless and comfortable, customers will recognize that you understand the importance of their customer journey. According to Deloitte, up to 38% of customers consider user experience the most important factor in choosing a bank. Consider the following guidelines when designing your customer acceptance process:
- Upgrade the customer experience with intuitive navigation.
- Avoid rerouting to physical channels (mobile and web channels are preferred by Millennials and Gen Zers).
- Provide online identity verification options.
- Avoid annoying multiple/duplicate data inputs on repeating questions (implement an autofill feature).
- Provide instant access to the product or account after the customer acceptance process is finished.
With the right custom-fit technology solution, small businesses can truly compete with megabanks or mega-cap counterparts. Strong customer acceptance systems with a trusted, strategic partner like Instnt can not only increase your revenue and lower costs, but deepen lasting customer relationships. Request a demo today to see how Instnt can help your small business boost customer sign ups.