Digital onboarding: a Europe-wide headache for banks
Mapa recently completed a major study of bank and credit card onboarding journeys in key European markets, and through it we evidenced a well-known fact: KYC, AML and other regulations profoundly affect the way banks onboard new customers. What this means is that in each market there is a relatively standardised process and therefore common pain points, which even the most innovative players can struggle to address.
At Mapa we believe the goal for banks (and credit card providers) should be that customers can apply, access an account (digitally), and start spending all on the same day. This is possible if customers go to branch – Metro Bank in the UK is one example of a bank that issues a card in branch on the day of application – but not for customers applying digitally. One or more the following reasons is to blame: a lack of digital ID verification, a dependence on paper contracts, delays in providing account credentials, or the absence of virtual cards.
Now, it is not the case that many markets suffer from all of these problems and some are closer to offering instant access than others. For example, it is common in the UK for banks to be able to ID customers through credit checks and immediately approve accounts, but then applicants normally wait at least two days for account credentials and a card to arrive in the post. If customers can’t be verified through credit checks they then must also go to branch, though we have seen NatWest and Bank of Scotland introducing digital document upload facilities. So, the UK market still has some way to go before customers are offered the best possible experience.
However, the regulations in the UK are clearly more accommodating towards instant account opening than in other markets. In Spain we highlighted the dependence on paper-based contracts that banks are obliged to collect, which hampers a market that is generally strong in terms of digital provision. ImaginBank, the app-only bank built by La Caixa, offers a strong mobile application and digital ID capture, but at the conclusion the applicant must print off a contract, sign it, and arrange for a courier to collect it.
So, is there a market that stands out? Yes, and it may not be the one you’d expect.
The German market has been something of a laggard when it comes to digital banking, but the signs are there that change is coming and it is change that is profoundly influenced by the challengers in the market, namely N26 and Fidor. Both banks have offered immediate account access as a feature for a number of years, by allowing applicants to complete a video chat-based ID verification process. The video chat is completed by one of two firms, IDnow and WebID. What is great to see is that, as these challengers have raised the bar, the largest incumbent has followed suit. Deutsche Bank now also offers same-day account access by using WebID to verify customers. While this has yet to trickle down through Germany’s highly localised and fragmented market, it shows that instant access can and should be the norm.
The next challenge for these banks is to offer immediate card access; they are not immune to postage delays. Digital wallets and virtual cards are not present in the market. Indeed, we have not seen banks anywhere in Europe do what NAB has done in Australia. NAB customers can apply for a credit card and immediately load it into NAB digital payments wallets and start spending. This may well change with the advent of PSD2. In the German market, consumers are already used to making direct-from-bank payments when they shop online, using services such as Sofort. Theoretically, there is nothing stopping a customer who opens one of these accounts from depositing money, setting up an account with Sofort, and immediately shopping online. With the next generation of PSPs and account aggregator tools, waiting for a new card might well no longer be an issue.
It will be interesting to see how other markets move towards offering instant access and instant spending capability, particularly as PSD2 facilitates alternative onboarding and spending journeys. For now, though, European banks are struggling to deliver great onboarding journeys.
For more of Mapa’s insights around onboarding, ID and verification and other digital banking journeys, speak to us today about the products and consultancy we can offer.