By Ajay Trehan
The world of financial services is at a transformative juncture. The industry is bombarded with increased customer expectations and technological advancements that demand attention. Traditional banking models often encumbered by lengthy procedures and cumbersome paperwork, are now being challenged by a new wave of innovation that prioritises speed, efficiency and user experience. Amidst this shift, the concept of ‘automated onboarding process’ is evolving, which aims to redefine how customers initiate their relationships with financial institutions.
‘Frictionless Onboarding’ is redefining how customers initiate their relationships with financial institutions. This new approach leverages automation to streamline processes, reduce manual errors, and eliminate redundancies. By harnessing cutting-edge technologies like artificial intelligence, machine learning, and blockchain, financial organisations can create seamless, intuitive onboarding experiences. Automation not only accelerates the customer journey but also ensures compliance with evolving regulations, enhancing both security and trust.
As we navigate this shift, it is clear that the convergence of regulations and innovation is reshaping the financial landscape. Financial institutions that embrace automated onboarding will not only meet rising consumer demands but also position themselves as leaders in a rapidly changing market.
Frictionless onboarding: A critical necessity
According to a report by PWC, India currently has the third-largest FinTech market globally and is poised to expand at a compound annual growth rate (CAGR) of 31% up to 2025, which is higher than the global growth rate. Therefore, frictionless onboarding is not just a trend, it’s a make-or-break opportunity for financial businesses to interact with their clients. In a competitive landscape, the onboarding process can set the tone for the entire customer journey. A smooth and easy experience helps customers trust and feel confident, making them more likely to use financial products and services. However, it is important to ensure this is done by following rules like Know Your Customer (KYC) and Anti-Money Laundering (AML) standards.
While these regulations help companies ensure security and prevent financial crimes, they often introduce complexities into the onboarding process. What’s challenging here is to find the right balance – complying with these regulations without sacrificing critical business metrics like Turnaround Time (TAT) or customer satisfaction.
Advantages of automated onboarding
Frictionless onboarding is seamless, fast and intuitive for customers. It involves several key steps like digital identity verification that speeds up the onboarding process and enhances security. This is where innovative solutions come into play – helping institutions remain compliant while keeping the onboarding experience smooth. For instance, advanced technologies like biometrics and AI enable quick and secure verification that reduces the need for in-person visits or extensive paperwork
Automated data capture is another key element. Technologies like Optical Character Recognition (OCR) allow financial institutions to gather information from submitted documents, cutting down on manual entry. This makes onboarding faster and reduces mistakes, keeping customer data accurate and current. In addition, smooth onboarding paves the way for personalised experiences. By looking at customer data during sign-up, banks can tailor products and services to each person’s needs. This personal touch not only builds customer loyalty but also creates long-lasting relationships.
Compliance without compromise: Leveraging technology
Automated tools powered by AI and machine learning are redefining how financial institutions meet regulatory requirements. Video KYC – endorsed by the RBI – allows financial institutions to verify customer identities remotely using facial recognition, AI-driven liveness checks, and digital signatures. Implementing VKYC can reduce operational costs for banks by 85-90% and decrease TAT for KYC verification by nearly 99%. Moreover, automation further allows institutions to conduct real-time compliance checks, like AML transaction monitoring and sanctions screening, reducing human error and speeding up the process. The use of biometric data, AI-based document verification and integration with government databases such as Aadhaar, ensures that institutions onboard customers quickly while adhering to regulations.
The RBI’s 2024 KYC Master Direction also encourages institutions to adopt a risk-based approach to onboarding (ZCybersecurity). This allows financial institutions to adjust the intensity of due diligence based on the customer’s risk profile, offering a lighter touch for low-risk customers while still meeting regulatory expectations. This approach not only speeds up the onboarding process for low-risk individuals but also enhances the overall customer experience.
In wssence
While the benefits of frictionless onboarding are compelling, financial institutions must also address potential challenges. Security remains a top priority as increasing digital processes can expose institutions to fraud and data breaches. Implementing robust security measures such as multi-factor authentication and encryption is essential. By using AI and machine learning to monitor customer transactions, institutions can detect unusual behavior instantly, allowing them to take preventive action without disrupting the customer experience.
The author is founder and CEO, AuthBridge. Views expressed are personal and not necessarily those of financialexpress.com.
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