Digital onboarding: Speed, personalization & compliance

March 11, 2024

The banking and financial sector in India is undergoing a transformative phase, fuelled by rapid technological advancements, changing customer behaviours, and stringent regulatory requirements. The shift towards digitalization has been significantly accelerated by the COVID-19 pandemic, marking a new era in how banking services are consumed and offered. This blog delves into the future of banking onboarding in India, focusing on the need for instant gratification, personalized communication, and the balancing speed and scale with growing compliance demands.

Growth of the Banking and Financial Industry

India's banking sector has been at the forefront of embracing digital innovation, resulting in unprecedented growth. According to the Reserve Bank of India, the country's banking sector has witnessed a surge in both deposits and advances, indicating robust health and growing consumer trust. Digital payments, in particular, have seen a significant uptick. The National Payments Corporation of India reported a remarkable increase in transactions processed through the Unified Payments Interface (UPI), with billions of transactions amounting to trillions of rupees monthly.

Today's consumers demand more than just traditional banking services. They seek instant offers, faster approvals, personalized communication, and tailored financial products. This shift is largely driven by the broader digital transformation across industries, where instantaneity and personalization have become the norm. A study by EY Global suggests that customers now prioritize banking experiences that offer convenience, speed, and relevance, underscoring the need for banks to adapt to these evolving expectations.

The Necessity for Speed and Personalization

The race to meet customer expectations has led banks to innovate continually. Customers, especially millennials and Gen Z, accustomed to the immediacy of services in e-commerce and online entertainment, expect similar responsiveness from their financial institutions. Personalized offers and communications, based on data-driven insights into customer behaviour and preferences, are no longer a luxury but a necessity for banks aiming to capture and retain market share.

Compliance vs. Customer Experience

However, the drive for speed and personalization comes with its set of challenges, particularly concerning regulatory compliance. Indian regulators, including the Reserve Bank of India (RBI), have been tightening norms to ensure customer protection, financial stability, and prevention of fraud. These regulatory requirements, especially around Know Your Customer (KYC) protocols, can sometimes slow down the onboarding process, working counter-intuitively to the demand for speed.

A case in point is Paytm's experience with the RBI regarding KYC norms. In 2018, the RBI barred Paytm Payments Bank from onboarding new customers due to non-compliance with KYC requirements, highlighting the potential impact of regulatory issues on business operations. This instance underscores the delicate balance financial institutions must maintain between accelerating digital transformation and adhering to regulatory mandates.

The Path Forward

To navigate this complex landscape, banks and financial institutions in India are leveraging advanced technologies such as artificial intelligence, machine learning, OCR, and embedded decision engines within the onboarding platforms. These technologies enable more efficient data analysis for personalized offerings, while also streamlining compliance processes. For instance, onboarding platforms like ONBOARD with the Smart forms make customer onboarding a hassle-free process. It allows

1. OCR using Deep Learning

Auto fill identity and address information from images of document proofs with an accuracy of 99.5%, using modern OCR technology that use Artificial Intelligence.

2. Know Your Customer (KYC) API

Auto fill customer information by using KYC API integration to fetch details from KYC registries or populate the details from an organization’s central Customer Information System (CIS).

3. Online Payment Collection

Accept online payments from the customer for account opening charges, initial margin or annual fees, enabling the customer to start their investment journey immediately.

4. Verification Checks

Ensure the correctness of data provided, by validating against regulatory and non-regulatory authorities. System verifications like OTP additionally verify the mobile number and email address.

5. Webcam IPV

Technology now allows In-Person Verification (IPV) to be done through a web camera. A series of verifications like Face Match and OTP on the video recording allow the process to be completed online.

6. Regulatory Compliance

Generate and submit files for upload to KRA / CKYC registry as per regulatory guidelines. Additionally export files for both internal and external systems like Exchanges or Depository Participants.

The future of banking onboarding in India lies in achieving a harmonious blend of speed, personalization, and compliance. As the banking industry continues to evolve, financial institutions must prioritize innovation in customer experience while maintaining rigorous compliance with regulatory requirements. The ability to offer personalized, fast, and compliant banking services will not only satisfy the growing demands of today's digital-savvy consumers but also position banks as leaders in the competitive financial services landscape of tomorrow.

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