Digital onboarding: the traditional bank versus the neo-bank

Aoife Loy
Aoife Loy
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What’s this all about?

Slow, complicated, paper-based approaches to onboarding customers are increasingly antiquated in the era of the smartphone. Today, people often prefer not to have to talk to another person at all let alone visit a physical branch. Many traditional banks have invested heavily in digital, but how do the experiences stack up against neo-banks? In this article, Aoife Loy compares typical digital onboarding journeys.

Read on if you:

  • Are launching a digital bank
  • Want to learn more about digital onboarding
  • Are keen to create the best experience possible for your customers

Ten years ago, the idea of opening a bank account with a selfie would have been unfathomable to most. But in the age where even the hashtag ‘toddlerselfie’ has become a thing, companies have taken note and are using selfies as a means for identity verification. That includes digital-only challenger banks which are increasingly gaining traction. 

As the initial touchpoint with a brand, onboarding plays a significant role in first impressions and it can be a source of frustration. Research from 2019 highlights customer dissatisfaction with onboarding-related processes, finding that 38 per cent say they’ve given up on an application in the previous year.

Onboarding with a traditional bank has been known to take between three and four weeks from scheduling an appointment to filling in paper forms, sitting through a in-person interview, having the application approved and receiving confirmation in the post. 

Many are taking steps to bring a more digitised experience to their customers. But how do they measure up against neo-banks? Here’s our comparison.

Bring out the challengers

Most readers of the LEVERIS blog will be familiar with the names of Europe’s most popular neo-banks (Revolut, N26, Monzo, Starling) which have been garnering notice from investors and journalists.

Among European neo-banks, Revolut claims the top spot for the highest number of customers. In February 2020, it announced its $500m Series D at a $5.5bn valuation making it the most highly valued fintech in Europe alongside Swedish lender Klarna.

On the global stage, Brazil-based Nubank leads the pack, reaching 25 million customers across its markets of Brazil and Mexico on its seventh anniversary.

The pool of major players continues to expand with most European countries represented by a growing neo-bank. A 2019 report expects that up to 85 million will use neo-banks by 2023. So does this ever-increasing interest stem from pack mentality or is it really any easier to open an account? Let’s dive in.

Typical digital onboarding with traditional banks

While all the Irish banks reviewed for this piece have an iOS app and the option to apply for an account online, two out of three don’t allow you to actually open an account within the app.

In one case, if the user doesn’t already have an account, they’re directed to click on a link which brings them out of the app and onto a webpage. Once there, it’s hard to find any guidance in the form of, for example, links or text that explain how to open an account. It feels like a dead end. This leaves the user scratching their head and likely thinking: I’ll just call.

Another bank requires a call from the get-go to start the process or book an appointment.

Digital onboarding with the one traditional bank that does allow you to create an account within the app starts with entering your email address. You then receive a code to type into the app as a means of verification. The user is forewarned to have their passport with them, but identity verification is done over a video call rather than for example, using informed AI or Optical Character Recognition (OCR) technology.

To verify your proof of address, you receive a code in the post which you are advised takes around three days. Once you get that, you can go back to the app, enter the code and complete the next step. Finally, your PIN and debit card are estimated to arrive in the post within five working days.

Typical digital onboarding with neo-banks

Digital onboarding with the typical neo-bank similarly starts with an app download. You are asked to enter your mobile number. You then immediately receive a six-digit code to enter into the app as with the traditional bank.

The next step is to enter personal details including your legal first and second names, date of birth, home address and primary email address.

The identity verification process varies. The most pared-back approach allows you to submit images of the front and back of a document proving you live in that country (e.g. passport), then take and submit a selfie. 

One requires, as with some traditional banks, that you verify your identity with a video call while two ask for a short selfie video as well as a photo of your ID document.

Once your account has been approved, most neo-banks provide you with a virtual card to add to Apple Pay until the physical one arrives in the post. This makes the account-opening process feel instantaneous.

Not one of the neo-banks reviewed redirects you to a website. Instead, you are guided through the entire process all within the app in an easy-to-use flow delivered in jargon-free language.

To sum it up

Trying to onboard digitally with some traditional banks results in a kind of ‘lost-in-the-woods’ experience. Onboarding with the neo-banks is on the whole faster and more convenient to get done.

In the past, there’s been a tendency to stay with the same bank for years. Now, the question is: can the neo-banks retain the customers they’re amassing? There’s evidence to suggest that this continues to be a challenge, with one article predicting that a key trend in 2020 will see many challenger banks bulking up, adding services to try to fulfil the unmet needs of their current customer base.

With increasing competition entering the market, ‘digitised’ might be an improvement but it is not enough to ensure loyalty. Equally, once customers are onboarded, there should be ample reason for them to stick around.

digital onboarding leveris
Some digital onboarding screens from the LEVERIS white-label mobile app

Truly Digital banking

At the heart of delivering improved digital onboarding experiences is the system used to support and deliver a bank’s business. That starts with a flexible platform that’s cloud-native, highly automated and real-time; a platform that’s configured to fit the local regulatory environment and helps customers better manage their finances by being able to do things like:

  • Link cashback to respective transactions
  • See fees and individual transaction detail records
  • Share their account
  • Self-serve their loans 

Additionally, modern platforms allow mobile-first onboarding experiences to be created that are fully compliant while still being smooth for the end-customer. For example, in terms of user effort required, it can take just 20 clicks to get from ‘create an account’ to the final screen of the LEVERIS onboarding journey. 

Upon completing an efficient screening process, those prospects deemed exceptions can be manually reviewed by operators without impacting customers who meet requirements.

By comparison, onboarding with the fastest neo-banks can require anything from 24 to 45 clicks – a great review by UX company, Built for Mars puts that in perspective against the most popular traditional banks in the UK, finding that 24 clicks is almost five times faster than some of the slowest big banks.

So onboarding can be even better for banks and their customers. It all comes down to technology.

Aoife Loy
Aoife Loy
Aoife is Lead Content Marketer at LEVERIS. She writes about our mission and approach to technological innovation.
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