Banks and financial institutions are constantly performing a balancing act: they need to attract more customers to grow but unfortunately, they need to make sure that those new customers are the right customers who are going to drive value to the bottom line.
While every customer might not be delivering equal revenues, at issue is whether these new customers are who they say they are and are not opening accounts in order to carry out fraudulent activities.
Fraud is at an all-time high. According to Info Security magazine, banking fraud attempts soared by 159% from the final three months of 2020 into Q1 2021. Pointing to data collected from 12 billion global transactions between January-March 2021, the vast majority (93%) of banking fraud during the period, as always, was online.
The primary tactics cyber-criminals used to defraud banks and their customers include account takeover (42%), followed by new account fraud (23%), impersonation (21%), purchase scams (15%), and phishing (7%).
How To Grow Revenue with Customer Acceptance
Regardless of tactic or strategy, banks cannot lose focus on increasing revenue. They need to seek out the right customers — the process of customer acceptance — via robust customer onboarding solutions.
Avoid Rejecting the Right Applicants
For those who do continue the sign-up process, some are rejected due to inconsistent documentation or because the individual has been flagged as a potential fraud risk. Banks need these measures in place to halt bad actors before they can compromise the assets of the firm or of other users (i.e., account takeovers, as cited above).
Unfortunately, the downside of fraud prevention is the unintended consequence of rejecting good applicants — individuals who would otherwise be good customers, but for some reason, their profiles were rejected during the onboarding process. Reasons include blurry photos, inconsistent documentation (i.e., differing addresses or spelling of names), or thin-credit files — younger consumers with less credit experience than older consumers.
For example, a challenger bank was experiencing an extraordinarily high percentage of rejections — over 200,000 rejected applicants to about 140,000 accepted applicants, or a rejection rate of 60%.
While fraud might be rampant, as cited by Info Security magazine above, a 60% rejection rate informed the business that something was wrong. The current systems were clearly rejecting potentially good applicants and, further, preventing the bank from having these customers open accounts and start delivering revenue to the bank.
Instead of evaluating each of the 200,000 rejections to understand the reason for each, the bank decided to deploy Instnt’s fully managed customer acceptance process to improve its outcomes. After leveraging Instnt Accept™, the bank’s rejection rate dropped to 3%.
Improving the Customer Onboarding Process
Rather than it being viewed as a necessary evil, customer onboarding can form an integral part of the customer experience. Consumers have grown accustomed to signing up for new apps and services, and are generally familiar with the process: creating a username, entering a valid email, confirming the email, choosing a password, and the like.
For financial services, they are most likely aware that they will need to verify their identity, provide additional information and undergo steps in the account creation and onboarding process. However, if the process creates too many hassles or introduces too much friction, these new customers — especially if they are unfamiliar with a new firm’s brand — will simply exit the platform and discontinue the sign-up process.
This is not what financial institutions want, so an improved customer onboarding process is in order. New customers who exit the sign-up process will likely not send a message to support along the lines of, “I’m not signing up because your process was too long and confusing.” Instead, banks can lean on a provider like Instnt, with years of experience integrating customer onboarding into bank sign-up processes.
Integrating Customer Onboarding Technology
By integrating customer onboarding technology, banks can focus on improving operations, finding new customers, and strengthening relationships with their current ones.
Customer onboarding, which requires elements of KYC and AML, is constantly evolving due to the nature of the databases that check the veracity of the identities of new customers who are onboarding. Rather than build their own onboarding processes — or develop one by rolling up several piecemeal point solutions — banks and financial institutions can lean on a single solution, Instnt, for the strongest, most effective, customer onboarding.
Increase Revenue with Instnt Accept™
A bank must know who its customers are — including new ones who are in the process of setting up their accounts. A customer onboarding system is needed as an essential component of effective risk identification, assessment, measurement, and management.
Instnt Accept™ is the only customer onboarding service that provides performance guarantees for each good customer a bank accepts while offering fraud loss indemnification up to $100MM. Because Instnt assumes liability for fraud, banks can experience growth like never. For more information on Instnt’s innovative solution to an age-old problem, start your free demo today.
To learn more about ways to grow revenue with our no-code software, read our blog: 5 Benefits of No-Code Customer Onboarding Software.