Application Abandonment: A Challenge in Digital Banking

What Causes Application Abandonment?

Digital onboarding abandonment is a serious hurdle faced by banks in registering new customers through online channels. According to a recent study by Signicat, the percentage of European consumers who abandoned a digital banking application surged from 38% in 2019 to 63% in 2020. 

As digital onboarding is the first step in establishing a relationship with a new customer, banks cannot afford a sub-optimal customer experience. One of the major reasons for application abandonment is the time taken to complete an online application. According to a study conducted by Built for Mars on online account opening in banks in the UK, it takes anywhere between 70 and 120 clicks to open an online account in a traditional bank. A Signicat report cites ‘the amount of personal information requested for’ and ‘the time taken to fill forms’ as the two top reasons for application abandonment.

Lack of automation leads to cumbersome manual data entry and higher data entry errors, ultimately delaying the onboarding time. Such an experience is counterintuitive for today’s digital-savvy consumer who expects customer experiences to be on par with those of popular e-commerce and social media apps. 

Another primary reason for application abandonment is inadequate identity verification processes. During the onboarding process, banks require customers to provide their legal identifiers. Banks match these identifiers with supporting documents to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Inaccurate data and inconsistency across data sources (both public and private) prompt banks to conduct manual reviews to ensure compliance and protection against fraudulent registrations caused by identity takeover. 

Identity Pre-Fill Is the Solution

Banks can improve the velocity and efficiency of digital onboarding by simplifying the onboarding experience. Besides ensuring superior customer experience, they must thoroughly mitigate identity takeover risks. Banks can strike a balance between the onboarding experience and minimizing identity takeover by following these principles:

  1. Reduce the number of forms and fields
  2. Pre-fill identity information: Fetching PII data (with prior approval from the customer) from trusted sources to pre-fill onboarding forms will reduce manual errors, speed up the process, and eliminate the need for manual reviews.
  3. Use phone-centric intelligence to verify identity: Verified and trusted phone data is one of the most dependable information sources about a consumer.

Legacy data sources provide static data. Due to the stale nature of data, fraudsters often use it to create synthetic identities. Modern platforms for data sourcing have replaced national identity numbers with a better identifier—a consumer’s phone number. The utility of a user’s phone number and its linkage to several other authoritative data sources has made it a vital key in resolving trusted PII data. One specific case of a Tier 1 issuer pre-filling identity data based on phone intelligence was shown to deliver the following benefits*:

  1. 15% increase in sign-ups (on average)
  2. 80% reduction in the number of keystrokes in online onboarding
  3. $200 Mn increase in annual revenue

Identity verification and authentication based on phone-centric identity instantly eliminate fraud such as SIM swaps, burner phones, and synthetic identities. Forward-thinking banks and other financial institutions have been adopting the ‘PRO’ model of identity authentication and verification based on the following three checks to align with NIST SP 800-63 identity guidelines:

  • Possession: Passively prove possession of the phone
  • Reputation: Assess the real-time reputation of the phone (tenure and behavior)
  • Ownership: Prove ownership of the phone line

Pre-fill solutions that employ the PRO methodology can eliminate synthetic identity fraud.

COVID-19 Pandemic Has Accelerated Digital Adoption

The COVID-19 pandemic has accelerated the move to digital across industries, including financial services. According to a study by J.D. Power, 30% of the surveyed consumers increased the use of mobile banking apps, and 35% are using online banking more than they did in pre-COVID-19 times. Increasing digital activities in the financial services domain are compelling banks to combat application abandonment and reduce identity fraud. A well-implemented onboarding solution that leverages the identity pre-fill technology delivers benefits such as higher pass rates, better straight-through processing (STP), and fewer identity fraud cases.

*Based on actual results from Tier 1 financial institutions that use identity pre-fill.

This article is a synopsis of a full-length article originally published by Prove.