Digital onboarding – or by some Merchants referred to as “Faster onboarding”, is a hot topic in the payments landscape. Everyone wants to have their (new) merchants on board within the “speed of sound” – whilst staying compliant to all the rules and regulations, not limited to:
- KYC/ KYB requirements.
- Regulatory compliance requirements.
- Scheme compliance requirements.
Some limits within this rapidly changing landscape are “hard coded” – for example, the rules and regulations on the sanction screening and monitoring. Other elements are based on the RAS (Risk Appetite Statement) of the company.
Having managed several projects from start to end from a risk & compliance point of view with different partners, in my humble opinion, the main driver of “digital onboarding” is the focus on User Experience (UX) – how easy is it for the user to get through the full process – with the lowest churn rate possible?
Next to that - from a company perspective - you want to automate the “leg work” in order for your KYC / KYB (or first line team) to be only responsible for the “brain work” – the main rational behind that are summed up in a few bullet points:
- The leg work is too expensive to organise manually – and causes your CAC (Customer Acquisition Costs) to be too high – and could cause your company losing the competitive edge.
- The leg work is boring – which derails employees focus – which triggers basic mistakes.
- It is in the current labour market almost impossible to recruit employees that are happy to
execute the “leg work”.
Your organisation will benefit from digital onboarding for the following reasons:
- Operating fully compliant – less mistakes caused by manual processes.
- Acquiring banks operating in the E-com longtail part of the industry – or in combination with a soft POS solution for smaller scaled merchants can not afford a boarding process mainly based on manual processes.
- Operating at greater scale – giving your sales teams the right tools to actually offer competitive onboarding SLAs.
- HR: lower unwanted churn rate – giving people a challenging day job by removing the “leg work” from their task list.
- Lower merchant churn rate – less “basic” mistakes made with setting up the account and better “automated” communication with the merchant.
Having worked within the merchant onboarding function for over 10 years myself, in my experience the main pain point is not that the process might take a bit longer – the main pain point is the lack of communication – or the non-existing communication from the payments provider. The most efficient way of solving that communication problem is through automation.
you should realise that the onboarding function touches almost every process and every department within your organisation, so aligning all teams across the business from the start is crucial to your project’s success.
The partners you work with should really understand the key points of your onboarding process documenting your processes via a flow chart could be really beneficial.
You could manage this via a priority list – which features in the onboarding tool are must have (green) / nice to have (amber) and which features are the “icing on the cake” and marked as “red” at the start of the project.
The main reason to work with partners is to make a completely roadblock free happy flow and to make the process a digital first process – with the fast majority of the applications going thought the onboarding journey with the minimum level of human interference.
The second main reason is that working with partners could look rather expensive at the start – but could save you a lot of “headache” during the building and going live phase. It is always good to compare the expected costs for every case to the costs when doing this process manually. For example – let’s say an automated bank account check does cost you EURO 1.5 – fully automated – let’s calculate 15 minutes of an KYC analyst doing this check manually – not once – but for 20 cases every day – suddenly it starts to make sense.
An important element to include in the business case is the building versus buying dilemma – make sure if you decide on the building strategy that you have the right resources in place in order to make the development strategy a success.
The main stakeholder is your Underwriting or onboarding team, other important stakeholders:
- The board (for the Risk Appetite).
- The sales and account management teams (they have to sell the solution).
- The IT teams.
- The customer service Teams / Customer success teams.
- The marketing team.
- The legal team.
- The compliance team.
- The project management team.
The digital onboarding is in our humble opinion a crucial pillar for a successful merchant onboarding journey.
Are you aware of the CAC (Client Acquisition Cost) for your organisation? A good start will be making a realistic calculation, do not forget to include the following elements:
- Calculate a realistic value for the time spent within your KYC & Risk team (First line).
- Add a certain margin for the cost of the second line and third line (annual audit).
- Measure time on a realistic basis.
- Make sure you add in the time that your sales team is communicating with your KYC & Risk Teams – time that your sales team is not using to win more deals.
- Can you imagine how much costs you could save if you are able to divide your calculated CAC by 5?
- Or, can you imagine how happy your sales team would be if you mention: our onboarding capacity has just gone up by 5 times the current capacity.
Digest the findings from your CAC calculation, you might find that your business case will support the scalability of your business towards new customer segments not obtainable before
PSD2 and Open Banking are transforming the industry. They require the implementation of strong customer authentication (SCA) for online financial activities. Its purpose, along with many other things, is to reduce the risk of fraud and to increase security through additional authentication factors.