Are you looking for a surefire way to irritate and alienate eager customers? If so, all you need is an onboarding process that makes it frustrating and difficult for people to sign-up for your services and hand over money.
Obviously, no business actually wants to do this. However, the sad reality is that many companies do it inadvertently.
This is especially prevalent among organisations that are legally required to complete KYC due diligence on their customers, such as fintech firms and cryptocurrency exchanges.
This is a very real problem. Studies suggest that 68% of customers abandon the sign-up process for fintech firms during the onboarding process. Most consumers could readily provide an example of where a sign-up process was “easy” and another where it was a “nightmare.”
Speaking simplistically, if you want your business to thrive, you need to ensure you’re falling into the first category.
Of course, there’s a difficult balance to strike. As Coinbase points out to customers, identity verification and KYC is “mandated by law.” Crypto exchanges like coinbase are heavily regulated these days – verifying customers’ identities is not optional for them.
Affected companies can’t simply choose to opt-out in order to give customers a frictionless experience. However, the ability to sign up and use a new account with minimal hassle is often a way that fintech differentiates itself from its more “old school” competitors. As such, finding an effective way to get the balance right is critical.
Let’s have a look at what can be done.
How to Reduce On-Boarding Friction
As SEON explains, the KYC processes that crypto and fintech sites are obliged to follow are not optional. And if you run one of these businesses, nor would you truly want it to be. Crypto exchanges, in particular, are a common target for fraudsters and money launderers.
The ideal scenario is to filter out the scammers at an early stage, leaving yourself with the resources to provide genuine customers with the slickest onboarding experience possible.
A reliable way to achieve this is to introduce Digital Footprint Analysis – as part of your KYC checks, or as a “pre-KYC” check. The latter allows you to reject highly suspicious customers before you invest time and money in putting them through a full KYC check. This can cost up to $150 per customer, which can make or break your profit margin in some sectors.
Digital footprint analysis uses freely available data you otherwise ask for or see during registration, such as:
- A customer’s email address and phone number.
- Their IP address.
From these basic data points, the analysis can identify anomalies, such as:
A customer being in a different physical location from where they claim:
This is easy to identify if the customer’s IP address points to a geolocation far from their provided address).
A customer having a suspiciously low number of profiles on social networks and online services:
Most popular social networks and online services allow you to check whether a specific email address is registered as a user. As most people have accounts on a selection of services, email accounts or phone numbers linked to few or none raise suspicion. This can suggest that an email address or phone number has been “freshly minted” for nefarious activity.
The use of VPNs and proxies:
These widely available services allow people to connect to servers in a range of global locations, making it appear that they are located in those places.
A good digital footprinting solution can check all of these things – automatically, and in the background of a user session using an API.
The information gleaned is then combined into a risk score. This can be used to filter out the most suspicious customers before hard KYC checks are triggered. Meanwhile, low-risk customers whose digital footprint appears genuine can pass straight through. The higher-risk customers can be rejected outright, or “parked” until they choose to contact you and follow up.
While this helps to combat risky and illegitimate customers, you may be wondering how it helps reduce friction for genuine customers.
First off, while you won’t be able to allow a customer to skip a KYC check just because their digital footprint checks out, you may be able to streamline their checks. As Wise tells its customers, sometimes the level of checks required comes down to certain financial thresholds. Smaller customers with a solid digital footprint may be able to go through minimal checks.
In addition, the fact that you’re filtering out suspicious customers means that you can dedicate more resources to genuine ones. KYC checks are costly, but if you can eliminate a significant proportion of them, you could potentially invest more in better and more efficient tests for low-risk customers.
The Importance of Communication: Handling Onboarding and On-Going KYC Requirements
Another way to reduce onboarding friction is to ensure you communicate clearly with customers. Perhaps even more importantly, you must ensure that they can communicate with you in the event of a problem while they complete KYC processes.
There’s little more frustrating than encountering a roadblock in a KYC process and having nobody to contact to resolve the situation. This is especially irritating when the process is automated.
It’s important to be wary of false positives, and ensure there’s a way for genuine customers to contact a “real person” to resolve a problem. With a little more integration, you can make the risk score information available to the customer relations team, ensuring they are fully informed in these situations.
Another simple (and often seen) mistake is to needlessly complicate follow-up KYC checks with existing customers. Nobody likes being asked to repeatedly provide the same information, especially if it’s as a result of a company failing to log and store it the first time around.
If regulations do require you to inflict “Groundhog Day” checks on customers, this cannot be mitigated. However, it can be explained with effective communication.
While it’s not possible to circumnavigate legal requirements, it IS possible to make onboarding and KYC much more straightforward than many companies manage. If your company’s processes skew more towards “nightmare” than “easy,” it’s time to make some changes. Otherwise, your customers may choose companies that already have.
Author Gergo Varga
Gergo Varga’s fight against fraud has been going strong since 2009. Working at various companies, he’s even co-founded a startup. Today, he serves as Product Evangelist at SEON, where he continues to disseminate his insight and expertise across the company and beyond. He has authored the Online Fraud Prevention Guide for Dummies and hundreds of other articles and guides. Based in Budapest, Gergo enjoys reading, tech and philosophy.
SEON is an online fraud prevention platform that detects and stops fraud in real-time through transactional data analysis.
Founded in 2017, the company is headquartered in Budapest, Hungary.
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