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    Customer Onboarding in Banks- A Detailed Guide

    The customer onboarding process is probably one of the most important stages of a customer lifecycle. When this process comes right at the start of any journey associated with a potential customer, it sets the tone for their whole relationship with your product and company.

    Just like that customer onboarding is also an important procedure in any bank. It has a significant impact to ensure whether a customer keeps using your product long-term or churns after just a few months. 

    If customer onboarding is done well, it sets your customers up for success and significantly demonstrates the value of your banking product. Likewise, if done poorly, it leaves the customer questioning why they signed up in the first place.


    What is customer onboarding? 

    Customer onboarding is the process of improving an individual customer’s requirements and achieving success with a product or service provided by the bank. 

    This term is often used as a reference to different software products, and it can also be done in a manual or automated way. However, this process has greater use in banking sectors as well.

    It is the process through which new software is designed in a bank such that new users are provided and acquire the necessary and adequate knowledge, skills, and behaviors in order to become “up and running” and effective users of the banking service. 

    The term onboarding originates from the human resources term, onboarding, which refers to the mechanism through which new employees of a company acquire the necessary knowledge, skills, and behaviors to become effective organizational members.

    Importance of customer onboarding

    Customer onboarding is so important for a bank as it sets the tone for the ongoing relationship that your customer has with the banking service. 

    A good customer onboarding process will:

    Keep the customers engaged

    Customer onboarding helps the customers to clearly understand and experience the value they’ll get from the service generated by the bank and will mean they start using it successfully, but more importantly, it’ll give the customers a reason to log back in and increase the customer’s retention. 

    Improve trial conversions

    If you are offering a new or discounted product trial, customer onboarding is where your trial users can experience the value of your service. If you can easily demonstrate the real value of the service in the onboarding process right at the start of their trial you’ll make it more likely to convert them into paid customers.

    So good customer onboarding sets the customers up in the bank to get value from using the service immediately and repeatedly for as long as they continue using it.

    customer onboarding

    Customer onboarding strategy in banks

    If your bank, credit union, or financial institution has a well-defined customer onboarding process, it misses enormous growth opportunities. It is a popular, widespread but false belief that having contact with new account holders too frequently may irritate them and push them to quit your bank. To receive irrelevant communications can add to the customer’s annoyance.

    This customer onboarding process of a bank includes Know Your Customer (KYC) procedures, identification checks, data collection, document collection, and, sometimes face-to-face interviews with prospective clients. 

    The customer onboarding process of a bank must be completed before any new client may open a bank account or conduct transactions with the bank. Banks also need to adhere to onboarding regulations when making the process as pleasant as possible for users.

    In the olden days, several forms had to be completed, documents were to be submitted, manual compliance checks should be completed by hand, and a face-to-face identification checking process was conducted at branch offices.

    With advances in technology, banking procedures have become more easily such as online form completion, in recent years, which remains a lengthy process.

    Challenges associated with current onboarding processes in banks

    There are a lot of challenges that are associated with the current customer onboarding process. These are as follows

    Absence of a structured process

    The customer onboarding process follows different processes within the departments like different legal, credit, and operational processes. One important thing during this process is that each compliance officer of these individual departments has its own interpretations pertaining to the regulations.

    The results of each department come with its own specific process that might be different from the other departments all within the same bank. It means that an individual bank can have three or more three different departments that will have different interpretations of these processes/regulations.

    Such different interpretations or processes can get customers more confused as to why they are provided with the same information at various points of the process.

    Changing regulations

    Rules and regulations of a bank keep on changing on a monthly or even on weekly basis. That’s why banks must adapt their systems according to the regulations. 

    It is a great challenge for the banks as they don’t only have to explain these changing regulations to the client but also they have to ensure that their customers are amended in the onboarding process.

    Because of the clusters of changes in the rules and regulations, banks need to revisit their current processes/operations. Moreover, the officials also need to rely on different cutting-edge technologies like digital transformation, reengineering, etc to make themselves compliant.

    Know your customer


    Any public financial institutions like banks want to get close to their customers all across the globe. However, the lack of drive and access to understand the changing requirements of customers as well as the dynamics and underinvestment in different strategic opportunities have proved to be a great barrier.

    As per a recent survey by McKinsey’s, culture accounts for more than 33% of the other major barriers to digital effectiveness.

    for top global executives around the world, 


    Being the world becomes technology-driven, the usage of modern technology has increased in banks and financial institutions in recent days, there is also pressure on banks to provide every service on a real-time basis.

    So nowadays, the average customer is expected to access all the banking services on their smartphone so that visiting the bank branches can be avoided.

    Time-consuming processes

    The customer onboarding process is a time-consuming process as there is a variety of documents required. Apart from that, there are different touchpoints involved in this process that contributes to the overall time consumption.

    For example, let’s consider that a bank has three different entities that include retail, insurance, and corporate that caters to different types of customers and businesses. Now, just imagine a customer who becomes a customer of all these three sectors. Now, different customer has to go through the entire time-consuming process of onboarding thrice.


    As you read the article this far, you read you might have understood the customer onboarding process. 

    It is very important to understand that focusing on the experience of customers will be the key for different banks and financial institutions as it will compel their customers to change how they engage with their customer base. 

    So in order to keep attracting and retaining their customers, banks must keep reinventing themselves, innovating, creating excitement, and most importantly focusing on customer retention. 

    *image source from Google

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