Voice of the Industry

Digital onboarding – the beginning and end of digital services

Thursday 7 May 2020 12:55 CET | Editor: Mirela Ciobanu | Voice of the industry

A key component of the onboarding to any financial service is the ‘Know Your Customer’ process. Steve Pannifer from Consult Hyperion has some ideas on how to get it right

Last year we celebrated the 30 years of the web. Over those 30 years, we have been on an unstoppable journey towards the digitisation of everything. But we are not there yet. In financial services, one of the most mundane things is preventing the full digitisation of services – onboarding. The processes employed often place friction where you can least afford it, at the point you are starting to build a new digital relationship with a customer. At one level onboarding needs to be hard – it needs to be hard enough that fraudsters and money launderers cannot exploit the services. But all too often, that involves making it hard for everyone else as well.

KYC is hard

A key component of the onboarding to any financial service is the ‘Know Your Customer’ process. This is where the financial service undertakes checks to confirm they know who is requesting the service and that the request is legitimate. It is a well-known point of friction. In their ‘Battle to Onboard’ market research, Signicat found that ‘nearly 40% of consumers abandon digital onboarding processes’. Why? Because financial services are all too often employing identity-checking processes that were not designed for the digital world. Asking people invasive questions or requiring them to fiddle around with paper documents is no way to introduce someone to a forward-looking digital service.

KYB is harder

When it comes to onboarding an organisation, the problem gets harder. Much harder. To complete a ‘Know Your Business’ process, the financial service needs to establish the identity of organisation, the nature of its business as well as identifying the persons with significant interest or control. This can involve asking the business for documentary evidence to show who they are and what they do. It can also involve checking third-party data sources to corroborate that evidence. The problem is that there are many types of organisation (companies, charities, partnership, societies, trusts, and so on) with different structures and ownership arrangements, so getting to the bottom of the purpose of the organisation and determining who has significant interest or control can be time consuming and difficult.

Is this something technology can solve?

At one level yes. KYC and KYB processes can be broken down into discrete steps and technology can help at each stage. Mobile technology can be used to accurately scan documents, biometric technology can be used to identify or authenticate people, advanced analytics can be used to normalise data and pinpoint the right records. Different technologies need to be employed at different points in the process, however. And putting it all together in a way that works for every customer may not be straightforward. Some customers will embrace new technology and be happy, for example, to use mobile technology to upload evidence and perform biometric identification checks. Others will not.

Ultimately it is not about technology however – it’s about data. The data you collect from your customers needs to be verified against reliable sources. In countries like the UK, with its love of credit, the credit bureaux have been the mainstay data source, aggregating information on a large proportion of individuals and businesses. Even then data quality issues, and the use of different identifiers across data sources, will mean that frequently the verification of customer data cannot be fully automated. Furthermore, the beneficial owners of the business you are verifying could live in a different part of the world where such comprehensive data sources may not exist.

The 5th European Anti-Money Laundering directive has put in place measures to help with this. As of 10 January 2020, European governments are required to provide public registers of the ultimate beneficial owners of businesses. Only time will tell how effective these registers are at helping financial services meet their onboarding requirements.

Onboarding is just the start

Once you have navigated your way through the complexity of building onboarding processes that both satisfy the relevant regulatory requirements and work for your customers, you cannot relax. AML regulations require you to continue to ‘know’ your customer. That means keeping records up to date and knowing when something has changed that could affect the customer. For business customers, this is a lot of work. Think of all the changes that can occur during the life of a business. Changes in ownership, control, and purpose are all things that could require you to revisit the due diligence performed on the customer when you first onboarded them. You should require your customers to tell you of such changes, but you cannot rely on it. This again is a place where data plays an important role. Monitoring the media, for example, may flag up changes affecting one of your customers.

Digital onboarding is a key differentiator for financial services today. It requires a careful mix of technology and data. It is where your new customers begin. Don’t let it be where they end.

Figure: Elements of Customer Due Diligence based on Article 13 of the 4th European AML Directive (modified by the 5th European AML Directive)

The article was first published in the Digital Onboarding and KYC Report 2020, which offers insightful editorials on topics such as digital onboarding best practices and key challenges, financial crime and how to fight it, crypto, and more.

About Steve Pannifer

Steve is COO at Consult Hyperion and a digital identity and security expert. Steve has a detailed understanding of the global digital identity market having advised numerous organisations around the world on all aspects of digital identity – commercial, technical, and regulatory. He is actively involved in key identity initiatives in both government and financial services sectors, and is a regular speaker at digital identity conferences and events.




About Consult Hyperion

Consult Hyperion is an independent consultancy. We hold a key position at the forefront of innovation and the future of transactions technology, identity, and payments. We are globally recognised as thought leaders and experts in the areas of mobile, identity, contactless and NFC payments, EMV, and ticketing.


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Keywords: mobile, identity, AML, EMV, KYC, digital onboarding, banks, KYB, Consult Hyperion, financial services, Steve Pannifer
Categories: Securing Transactions | Digital Identity, Security & Online Fraud
Countries: World
This article is part of category

Securing Transactions