The onboarding process is the first impression customers get of your brand. In seconds, you set the tone for the entire customer relationship.
Fintech companies, however, face an uphill battle in the onboarding process. Know your customer (KYC) and Anti-money laundering (AML) regulations require companies to gather detailed information about who clients are and where their money comes from. Historically, these regulations limited fintech companies' ability to improve the onboarding process.
But times are changing. New technology makes securely signing up for a fintech app fast and easy. Plaid's new solution, Layer, is drastically improving financial onboarding without increasing the risk of fraud.
Let's explore how the onboarding process looks today and how we can improve it.
What does the fintech onboarding process look like today?
Depending on the solutions used, fintech onboarding can require customers to type in personal information and navigate through several manual steps. While the process varies by platform (for example, the onboarding process for purchasing crypto might look different than for joining a budgeting app), the steps are similar.
Customer signs up: The customer clicks to create an account. They are prompted to enter their email address and create a password. They may be prompted to provide a phone number or set up two-factor authentication.
Provide personal identifying information: The customer is then prompted to verify their identity to ensure KYC compliance. This may include uploading a picture of their ID, adding a birthdate, and other steps to confirm their identity.
Linking an account: After verifying their identity, customers are prompted to link a bank account to the fintech application or platform. If the fintech doesn’t use a streamlined solution like Plaid Link, customers may have to look up routing and account numbers and manually type them in.
Convert: Customers who completed onboarding can convert to functioning end users. Depending on the fintech platform, converting may be funding a new account, purchasing a stock, applying for loan pre-qualification, or something similar.
Each step is necessary. However, the process can add friction if new users are prompted to manually find and enter information.
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The two main challenges in fintech client onboarding
User onboarding has a significant impact on fintech companies' success and customer satisfaction. The current process creates two main challenges for clients and companies alike.
1. Customer drop off
One of the most significant challenges in fintech onboarding is the rate of customer drop-offs. Plaid’s customers report that average drop-off rates in the onboarding process vary greatly based on different factors but range from 20% to 88% per organization.
While some of the drop-offs are low-intent users who aren't motivated to convert, many customers drop out due to the high-friction process. Customers may intend to come back later to complete the process but never do.
2. Fraud risks
Fintech companies must know who they're doing business with to reduce the risk of identity theft, fraud, and bad actors. Fraudsters constantly look for weaknesses they can exploit in the onboarding process. When handled incorrectly, limiting identity verification processes exposes client information and gives bad actors access to financial tools.
However, fraud protection processes can also create friction in the onboarding process for legitimate users. Finding the right balance between security and user experience is crucial.
How Plaid is enhancing the fintech onboarding process
Plaid has been at the forefront of onboarding for years with solutions like Plaid Link and Identity Verification. Now, we're providing the internet’s fastest financial onboarding process with Layer, which provides a sign-up process where customers just enter their phone number, verify their details, and start using your product—without increasing the risk of fraud.
Here's how the process works:
Customer enters their phone number: Layer uses this to see if the customer is on the Plaid network and meets your onboarding requirements. Tens of millions of people have opted in for remembered experiences with Plaid.
Introduce Layer: If their saved information meets your set criteria, the customer is prompted to sign up faster with Layer.
Authentication: Layer authenticates the customer’s device and uses real-time risk analysis to deliver a fast sign-up experience, just 15 seconds in most cases.
Confirm details: The customer is prompted to confirm their identification details, which are customizable but typically include name, email, birthdate, and bank account information.
Onboarding complete: If the customer meets all the criteria, you can send the details to your KYC provider for verification, and the onboarding process is complete!
All the customer has to do is enter a phone number and verify their details. Since they have chosen to have their information remembered by Plaid, there is no scrambling to find bank routing numbers. Layer reduces manual data entry, drastically improving the customer experience and reducing user drop-offs.
Plaid Layer + Identity Verification = The perfect onboarding experience
Together, Plaid Identity Verification and Layer deliver an ideal onboarding experience. Using our no-code or API solution, fintech companies can build a fully customizable, secure onboarding experience. New customers are directed to Plaid Identity Verification to securely verify their identity and Plaid Link to connect their accounts. Returning eligible users can link financial accounts in as little as 15 seconds with Layer, then companies can verify their identity using Plaid Identity Verification and quickly complete KYC.
Customers are pleased with the faster onboarding, and fintech companies drastically reduce drop-offs. Layer can reduce the time it takes for a new user to sign up for your service by nearly 90%. Early customers have seen increases in end-to-end sign-up conversion of up to 17.5%.