As the digital economy plays an increasing part in our lives, many players in financial services have been leveraging the digital channels to onboard customers. Most digital onboarding processes relate to services and/or payment products targeted to consumers, while more often commercial customers do not enjoy the option to onboard online. The banks that did not overlook the importance of offering digital onboarding processes to prospect commercial customers are often preferred by SMEs (over 90% of European businesses).
Onboarding acquiring services
Payment acquiring services provide an example. A number of acquiring banks today do not offer automated agreement processes. It is often the corporate sales network that manages merchant contracts, in many cases through a paper-based and largely manual process. In other instances, the merchant needs to visit a branch. The process is always expensive for the acquirer and lengthy for the merchant. That brings these acquirers at a disadvantage from those that onboard merchants via a digital process. In fact, some acquirers offer an end-to-end digital onboarding process, inexpensive for the acquirer and quick to complete for the merchant. A digital onboarding process is aimed at attracting small and medium-sized merchants as it would be too expensive to approach them via a sales person. In addition, recent research shows that many smaller companies prefer to interact online.
Even in countries with low penetration of IDs, a user-friendly process may be completed in approximately 15 minutes and requires an extremely limited document set. The online session may be stopped at any time and resumed in one or more subsequent sessions, and the most advanced processes allow to onboard merchants even if they are not ready to sell online or ahead of creating a website/getting a domain. The acquiring service is activated in a couple of days, but it may be reduced to less than 24 hours in specific circumstances.
Five acquirers we have provided support to switched to digital onboarding and enjoyed an average increase in acquiring contracts of 200% YoY for 3 years.
Commercial cards
Nowadays most banks are issuing commercial payment cards the traditional way, i.e. via meeting business customers on branch or at their premises. This in the event of a new contract but often also when requesting additional cards out of an umbrella agreement. For instance, when a company needs to provide an additional card to a new employee both the company and the employee need to sign an agreement with the bank and often the employee is asked to pick up the card at a bank branch.
However, all this could be improved by introducing digital onboarding processes addressed to business and corporate customers. Some challenger banks and Electronic Money Institutions are onboarding business customers via end-to-end digital processes, including KYC, delighting their customers and reaping the benefits of initiating a relationship with a positive perception. Other benefits include higher card penetration among businesses as it is easier to request cards online and lower onboarding cost due to the use of an automatic, streamlined online process instead of sales or branch personnel. In addition, cost benefits increase as the number of customers onboarded increases. Today most processes aim at issuing debit and prepaid cards, but adding a credit scoring engine would allow to adapt the process to issue credit cards also.
Challenges
As banks have invested heavily in transforming traditional onboarding into digital processes market, evidence shows that they are not using their potential to improve the way they onboard their business clients. The opinion of some large banks is that most corporates are not inclined to digital onboarding and are happy to stick with what they have been experiencing so far. In addition, they feel that digital onboarding applies to just a few restricted business clusters such as those operating in high-tech and more innovative industries. That is a shame. Although the needs of SMEs and corporates differ in several circumstances and one-size does not fit all, businesses of all sizes and industries find benefits in most aspects of digital onboarding. For instance, smaller businesses would prefer using a digital onboarding process to start a relationship with a Payment Services Provider, while corporates find it convenient to add more payments and banking products/services via digital processes.
Established PSPs face more complex IT systems than newer financial players: the former will need to build upon many legacy systems while the latter enjoy flexible and scalable platforms that make it easier to leverage on new technologies and offer customer-centric experience. That should be taken in careful consideration, but established players should also value that their benefit from digital onboarding is far greater than what newer players would even dream to enjoy due to different scale of reach, visibility and trust. Most businesses in fact turn to challenger PSPs as they feel the burdensome of traditional business banking, but even the smaller businesses do not easily turn away from all their traditional banking relationships as they sooner or later may need one or more credit lines. That suggests that if traditional players invest sufficiently in building onboarding process and focus on offering premium experience, most business clients will not look for alternatives.
What to focus on
A structured approach that focuses on critical issues is key to evolve toward effective digital onboarding and use budget and resources efficiently.
We would recommend to focus on investing in:
Flexible platforms that allow sufficient flexibility to offer differentiated processes, each in line with the needs of target business clusters and products/services offered;
Automated customer profiling engines to achieve proper clustering from the start aimed at more rapid onboarding, limited manual processing and reduced costs as well as effective cross/up-selling resulting in lifelong customer value;
Harmonized data and efficient exchange mechanism among platforms involved to achieve high data quality and improved reliability over time.
About Marco Fava
Marco Fava is Managing Director at CleverAdvice. With 20+ years in payments Marco helps issuers in improving their commercial cards strategy, customer journey, digital onboarding, online marketing and portfolio performance leveraging Open Banking opportunities. Marco speaks regularly at conferences across Europe.
About CleverAdvice
CleverAdvice is an independent professional services firm focused on the payment industry and member of the European Payments Consulting Association (EPCA). Areas of expertise include Commercial Cards & B2B payments, Instant payments, Access to the account & Open Banking opportunities and strategies, Authentication, Digital onboarding, Conversion techniques and Customer retention.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now