Imagine your organisation requests you to go from Europe to Singapore… What would your itinerary be like?
Now think again: Did you consider to take the boat? Indeed, technological innovation created a world in which we all take international air travel for granted. Travelling by boat has largely been substituted.
This paradigm shift has unfortunately not taken place yet in corporate onboarding, i.e. onboarding of a legal entity. Technology has been enabling innovation, but many of today’s corporate onboarding processes offered by banks and financial institutions (FIs) are still like travelling by boat: a journey with long, insecure travel times and an intransparent itinerary. The overall experience is clearly conflicting with the customer centric onboarding processes that legal entities are increasingly seeking.
Innopay strongly believes that a well-designed digital onboarding process can bring a major competitive advantage to any provider in the increasingly competitive financial services market . Highly customer centric players, i.e. neo banks (N26, Monese, Bunq) and FinTech (Square, Klarna), are ahead in this regard, providing their customers the airline services they desire. Most corporate banks and FIs, on the other hand, seem to be failing to pick-up the vast opportunity of onboarding, risking their future relevance.
Without ignoring the complexity of corporate onboarding due to regulation, operational complexity and the lack of European industry standards, this series of two blogs reasons that corporate banks and FIs would benefit greatly from innovating their onboarding processes. This first blog elaborates on the competitive advantage of a customer centric onboarding process and six causes for many corporate banks and FIs to be lacking behind.
Corporate onboarding: essential for the customer relationship
For corporate banks and FIs, the primary customer relationship is essential in maintaining a profitable and future proof business. Already in 2014, Forrester research  demonstrated that current deficiencies in onboarding impact the profitability of practically all (98%) customer relationships due to deals lost and low business development rates. Onboarding thus matters and a well-designed corporate onboarding process significantly adds to the business development rate. The competitive advantage of a well-designed onboarding process is in fact threefold:
- Key differentiator: A proven track record in corporate onboarding is a competitive advantage towards prospects as it is a corporate’s first touchpoint with their selected financial service provider;
- Fast time to revenue/service: A digital, straight through process optimises the time to revenue and service;
- Cross-/upsell: A positive onboarding experience determines to a large extend the quality of the future business relationship, which is crucial in developing the relationship to its full potential through cross- and upsell.
Corporate onboarding essentially is about creating a customer identity for a new legal entity and charging it with all things required to deliver the requested product or service. The process can be broken down into five building blocks as depicted in figure 1.
Figure 1: building blocks of corporate onboarding
Corporate onboarding basically starts when a prospect or existing customer submits data in order to get information or a new product or service. It ends when the legal entity receives the final outcome with regards to acceptation or rejection and the use of the product or service requested. The quality of the process is mostly determined in what happens in between. Especially intensive regulatory (AML4, KYC, FATCA etc.) and risk related checks take up a lot of time and significantly impact the overall customer experience. Moreover, the onboarding lead time strongly correlates with the complexity of the legal entity and product / service requested.
Six causes for banks and FIs to be lacking behind
Unfortunately, the before mentioned building blocks of corporate onboarding are rarely streamlined and far from straight through processing, severely impacting the customer experience. Due to our extensive onboarding experience, Innopay has identified six most common causes in below table that highly impact the customer experience.
Table 1: Six common causes for frustrating customer experience during corporate onboarding processes
As a result, onboarding in the B2B and G2B area is more often a dissatisfier than a unique selling point. This problem is likely to become even more stringent as banks and FIs increasingly struggle to comply with regulatory reforms to avoid fierce fines. The Financial Conduct Authority (FCA) in the UK has for example recently imposed a penalty of £163 million to the Deutsche Bank for AML controls failing, the highest penalty ever imposed by the FCA . Under AML5, fines can amount up to 10% of the annual turnover for serious compliance breaches. Therefore, many banks and FIs maintain a “better safe than sorry” rather than a customer centric approach. Legacy platforms, siloed organisational structures and product centric cultures further complicate onboarding for legal entities.
Although banks and FIs intent to innovate, efforts are particularly focused around these specific areas without taking the overall onboarding process into account. This has resulted in a bad compromise of the overall customer experience; a luxury banks and FIs can no longer afford. Banks and FI’s should quickly navigate to redesign their onboarding processes if they want to turn their disqualifying processes into a competitive advantage.
Do you want to know how to become the N26 of corporate banks and FIs? In the next blog, Innopay will explain the guiding principles for a well-designed and customer centric corporate onboarding process. Please feel free to contact us if you have any questions or would like to discuss your corporate onboarding process.
 (Re)designing your onboarding process? These are the requirements to consider – Innopay (2017)
 Client-Centric Onboarding, Hopes And Realities For Global Banks – Forrester (2014)
 AMLD4/AMLD5 KYCC, Know Your Compliance Costs – Consult Hyperion (2017)