The Rise of Onboarding

Abandonment Rates

How to Adapt to Shifting Consumer Demands and Reduce Application Abandonment

Rates for Your Business

CONTENTS

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CONTENTS

Application Abandonment Rates Are Increasing � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4

The current onboarding process � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 5The challenges for financial services � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 5

Why Are Abandonment Rates Increasing? � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6

Why do consumers abandon applications? � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 8Why are abandonment rates increasing? � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 9Raising consumer expectations � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 9Consumers want efficiency over brand loyalty � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 9

How Can Your Institution Prepare For Increasing Abandonment? � � � � � � � � � � � � � � � � � 10

How to decrease abandonment rates � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 11Knowledge through responsible sharing � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 12

The Right Solution For Your Business � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 13

How do you choose the right digitisation partner for your business? � � � � � � � � � � � � � � � � � � � � � � � � 14Instant Access from Instantor � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 15How Instant Access works � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 16The fastest way to digitalise credit application flows � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 16Client testimonials � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 17

The Future Outlook � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 18

THE RISE OF ONBOARDING ABANDONMENT RATE

Application Abandonment Rates Are IncreasingApplication abandonment rates are on the rise� In 2018, 60% of consumers surveyed in Sweden abandoned bank applications� It’s not just a problem faced by Swedish financial service companies, either� In Germany, 40% of customers abandoned bank applications that they started in 2018, and in the UK, this figure is 56%, up from 40% in 2016�

Why? While increasing consumer expectations are partially to blame, the fuller picture is a little more complicated� The first step to understanding the problem is awareness, but even once the problem is recognised and understood, what can your business do about it? Is it possible to mitigate this risk for your company? How do you solve this troubling problem?

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APPLICATION ABANDONMENT RATES ARE INCREASING

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The current onboarding processOnboarding is the process of capturing a new customer into your business’s platform� In the financial services world, this could mean the process of applying for and receiving a loan, applying for a new credit card or sign-ing up for a new bank account� Onboarding is one of the most vital steps in establishing a relationship between a customer and a bank and involves capturing all the necessary information to ensure a person really is whom they say they are�

The process of onboarding can take many formats but in recent years has come to be dominated by the internet� In 2016, an estimated 3�5 billion people accessed the internet, so it is no wonder that many businesses are placing their applications online and focusing on im-proving overall online experiences� Doing things online is cost-effective, accessible and fast – or, at least, it should be�

In 2016, Millennials* spent an average of about 7�5 hours online per day� Many users are increasingly turning to their mobile devices, even for their financial services; four out of 10 people in the UK now regularly use mobile banking apps� Increased mobile usage puts pressure on businesses to develop fully mobile onboard-ing experiences and to have a mobile-first focus�

“ The customer desire for convenience is driving this shift towards an increasingly digital world� Mobile and online banking systems are easy to use, safe and reliable� Many customers prefer to use this technology rather than making time to visit a bank branch� ” Stephen Jones, Chief Executive of UK Finance

The challenges for financial services From the perspective of the customer, the first step in on-boarding usually involves going to a companies’ website or app, navigating to the product webpage and starting

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THE RISE OF ONBOARDING ABANDONMENT RATE

an online application� However, from the moment a potential customer starts an application to the point at which an application is finished, there are many stages at which an application can be abandoned� Customers expect a smooth, easy-to-use process which can be completed quickly and easily� This is where businesses are facing tough challenges of increasing numbers of candidates dropping off and abandoning applications half-way through�

Financial service companies face a particularly tough challenge for applications because of the need for higher levels of security� Cybersecurity and background checks are essential to ensure customers are offered the right product for them and to prevent any fraudulent attempts�

Regulated companies must perform Know Your Customer (KYC) to obtain the relevant information from applicants, as part of anti-money laundering (AML) and counter terrorist financing (CTF) preventatives� AML regulations are local and fall under the responsibility of each financial institution or other regulated company and apply to all organisations that deal with sensitive financial information�

To comply with a country’s AML regulations, performing KYC due diligence is a necessary part of the customer identification process used to verify, collect, and classify new customers� KYC includes verifying a customer’s identity, financial status, and address to allow financial institutions to onboard customers and open new accounts�

The purpose of KYC is to protect all participants in the financial system, but the result often means outdated and painful onboarding processes from a customer’s perspective� The financial services industry historically involves lengthy credit checks and information requests, often requiring physical bank visits and a lot of paperwork to meet AML requirements� As a result, many companies fall short in providing an easy onboarding experience because of the costs of updating and maintaining legacy systems�

It is for these reasons, balancing customer demands with online security, that many financial services businesses are still failing to provide a smooth onboard-ing process� As a result, abandonment rates are severely costly for businesses�

*Millennials, also known as Gen Y, are generally considered to be those born in the 80s and early to mid-90s so are between 22 and 35 years old� They are typically very familiar with communications, media and digital technology and are often considered more self-assured than other generations�

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WHY ARE ABANDONMENT RATES INCREASING?

Why Are Abandonment Rates Increasing?

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Outside of the financial services industry, many other sectors are providing mobile-based onboarding experiences with smooth interfaces and fast results� For example, applying for a new phone service, paying utility bills and finding the best insurance rates are im-measurably easier than they were ten years ago because you can do these things flawlessly online through apps and websites� With the click of a few buttons, you can be saying hello to your new service from the comfort of your home� Technology giants such as Facebook, Amazon, and Google are setting the bar for tech-savvy customers on what a mobile experience should look like for banks and building societies as well as the broader financial services industry�

It is no wonder then that similar standards are expected in the FinServ industry� Due to increased security require-ments, many new businesses struggle to meet these needs, but success stories such as Revolut show that it is very much possible to have both a strong onboarding experience and to be KYC compliant�

When demands are not met, however, consumers are quick to run� Where KYC and AML processes were involved, abandonment rates have increased by 35% within the UK in the last two years � Consumers are increasingly frustrated with time-consuming, legacy processes and are willing to switch to challenger banks in their search for a streamlined, user-friendly experiences�

SaleCycle recently completed a market report which showed that abandonment rates for both online and offline finance applications were an average of 79�3% for Q3 of 2016, second highest only to travel�

THE RISE OF ONBOARDING ABANDONMENT RATE

Source: SaleCycle (The remarketing report - Q3 2016)

Abandonment rates by industry

Why do consumers abandon applications? As noted in research recently conducted by Signicat, there are a few reasons why applicants may abandon an application :

• Language: Confusing terminology, wordy sentences, and complex questions can be a reason why someone does not fully complete an application�

• Non-digital process: Manual process such as, visiting a branch or sending in paperwork via mail is an immediate put-off for candidates� Having an application that can be completed 100% online is a big draw for applicants�

• Change of mind: Sometimes a change of heart by the customer halfway through an application can cause applications to be abandoned� While this is a hard risk to mitigate, a good onboarding experience should be convincing and take users smoothly through the application so that there are few opportunities for a candidate to stop halfway through�

• Information heavy: Applications that require a lot of details and support documents are very off- putting to candidates� Customers feel like this is an invasion of privacy and are sceptical of giving away too much personal information�

• Time: Length of time taken to complete an application is a significant cause for abandonment� In the UK, the average onboarding time is 19 minutes� In Sweden, where standardised eID schemes are in place, the average time is 14 minutes� Those extra five minutes leave a lot of time for applications to be abandoned�

WHY ARE ABANDONMENT RATES INCREASING?

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Source: SIGNICAT (The Battle to On-board II)

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Reasons For Application Abandonment

Why are abandonment rates increasing?Many of the explanations for abandoning an application have been an issue for a long time� So why do abandon-ment rates continue to increase? It’s hard to believe that onboarding processes are deteriorating� Companies continue to pour money into their technology, so you would be forgiven for thinking that the onboarding process is improving� However, while onboarding experiences are not necessarily getting worse, it does not mean that they are good, either�

In fact, the data shows that the experiences are very poor� It seems that financial service providers are not receptive enough to consumers changing demands�

Raising consumer expectations

The main reason for increasing amounts of abandoned applications is because FinServ providers are not agile enough to adapt to shifting consumer demands� Custom-ers expect simplicity in design and experience� They expect an application to be done 100% online and to be able to be completed via mobile technologies� They expect application processes to be faster, slicker and easier than ever before�

So, what do consumers really want?

• Simple language that makes sense and is free from jargon�

• A friendly tone that is engaging and inviting�

• Applications that can be completed 100% online, with a mobile-first approach�

• To be convinced the customer is getting a good deal personalised to them�

• Requests that are not information heavy and do not require significant amounts of research and data-collecting�

• Applications that do not take long to complete� Consumers do not want to take additional time visiting a branch or a post office�

Consumers want efficiency over brand loyaltyEstablishing trust is often crucial to success, and perhaps the loss of trust also plays a part in rising abandonment rates� Since the financial crisis, trust in many high-street banks has been dwindling� Coupled with archaic and complex onboarding processes, candidates find it hard to trust businesses in the FinServ industry, mean-ing that it is harder for companies to convert potential customers�

While adequate risk management procedures remain, critical, convenient and efficient onboarding systems will likely beat trust in the long run� Trust alone is not enough to stay competitive with digital-only challengers since research shows that consumers value quick and simple user experiences that are entirely online higher than any other feature� Businesses that don’t meet these expectations will lose out�

With so many choices for consumers, brand loyalty is rapidly decreasing as customers jump ship in search of the smoothest application process and friendliest user experiences� Disruptions by the latest tech start-ups and challenger banks make a tricky landscape for established financial service institutions, and in a race that often feels frantic, it can be hard to know how your business can keep up�

THE RISE OF ONBOARDING ABANDONMENT RATE

How Can Your Institution Prepare For Increasing Abandonment? With companies vying to improve their onboarding experience, many companies feel like they must cut corners to keep up with market pressures� Experian notes that 61% of banking institutions say removing friction from the customer journey is the most important trend in 2018 � Many banks may feel that the priority should be on faster, easier appli-cations for the customer, pushing online security as a secondary priority� Yet, there is no shortcut for adequately complying with KYC and AML demands, so how can next-gen digitalised onboarding processes keep up?

Thanks to new data-sharing measures, security and convenience can be compatible� It is possible for financial companies to streamline their processes without jeopardising security and introducing more risk�

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HOW CAN YOUR INSTITUTION PREPARE FOR INCREASING ABANDONMENT?

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How to decrease abandonment ratesTo give your business the best chance of reducing abandonment rates, your business needs to get digital� From identity verification to submitting the application, having a process which can be completed 100% online is essential to staying ahead of the game�

Long gone are the days of paper statements and cumbersome manual processes� Your business needs a fast way to digitalise and automate applications, in a way which does not frustrate potential customers� For example, by replacing the need for a physical, paper bank statement with a digital one, businesses can streamline processes and create an application that is easy and straightforward for the customer�

Digitalising means eliminating manual steps, keeping times taken to complete to a minimum and having an easy-to-use, understandable user interface� Having progress bars or showing the estimated time to completion can help manage expectations and reduce abandonment due to long lengths of time� Ensuring language is personable yet simple can also go a long way�

Yet, aside from aesthetics and semantics, how do you ensure your business is digital ready? There are a couple of methods for staying ahead of the game:

1. Get an electronic identity system in place – electronic identity (eID) schemes have the potential to reduce on-

boarding abandonment rates� These eID schemes lower the barrier to entry by removing significant obstacles such as identity verification� While eID has been shown to improve onboarding, they all have varying security mechanisms for identification and authentication and sometimes lack cross-border recognition� Sweden and Estonia have been very successful in using eID schemes, but it may be a few years until their use is widespread across Europe�

“ As the market becomes more competitive, financial institutions are under increasing pressure to attract and retain more customers but at lower costs� It’s a huge challenge, and the old analog process for onboarding has proved cumbersome and outdated� There is enormous scope for digital identities to reduce inefficiencies as well as ease compliance with KYC� But building those identities is a complex task and financial institutions need to create interoperability between regions in a fragmented European landscape� ” Gunner Nordseth, CEO at Signicat (June 2017)

2. Use data-sharing API technologies – machine learning, AI and digitalisation are all key to getting your business at the forefront of the onboarding experience� Solutions through innovative technology speed up processes while reducing costs and don’t sacrifice KYC, AML and other risk management procedures� Taking advantage of API technologies can assist in real-time decision making, replacing forms with just a few clicks and have been shown to reduce abandonment rates significantly�

THE RISE OF ONBOARDING ABANDONMENT RATE

Knowledge through responsible sharingWith the implementation of PSD2, consumers have become empowered to share their data in ways like never before� With their consent, consumers can share data in their bank accounts with trusted third-party providers and APIs� This includes information such as identity data, rent, income, financial commitments and more�

With consumers sharing more data with financial service providers, this has given rise to a new wave of personal finance tools but can also greatly benefit businesses that require a seamless onboarding experience� More data means more insight, better decisions, and lower risk, presenting a massive opportunity for overhauling the online onboarding process�

While the world waits for a universal eID scheme, your company can immediately take advantage of new data-sharing regulations by fetching information directly from banks, once you have approval from the customer� For a new business, or those less familiar with digital data, the vast quantities of data can seem overwhelming� Yet, with many well-established bank APIs already in place, it is not difficult to integrate the solution you need�

Your brand needs a strategic partner with an API that improves the decision-making process, analysing the right data to help your financial institution reduce risks and increase customer acceptance�

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HOW CAN YOUR INSTITUTION PREPARE FOR INCREASING ABANDONMENT?

The Right Solution for Your Business

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THE RISE OF ONBOARDING ABANDONMENT RATE

Finding the right solution for your business is hard� With new products popping up left, right and centre, how do you choose the best API for your specific needs?

The best way to do this is to choose a digitisation partner that will work with you, to create an onboard-ing process that is smooth and can be completed in as few steps as possible for the end user� Onboard-ing should be as simple as buying something on Amazon�

One way to do this is to take advantage of the information that is already out there� For example, there is a lot of information in consumers’ bank account data such as address details, income levels and telephone numbers� By using this information, after approval from the applicant, you can cut down the number of onboarding steps providing a quicker and smoother application experience�

How do you choose the right digitisation partner for your business?Here are the key aspects to look for: Strong track record: In an increasingly complex world you need a partner who has been there before� Instantor has over eight years of experience in the industry and has worked with many happy clients to take their business to the next level�

A large database: Many new and unestablished companies run the risk of not having enough infor- mation to understand the big picture fully� This comes through direct experience with hundreds and thousands of banks and customers�

Security as a priority: Compliance and security are vital to ensuring your business stays afloat� Here at Instantor, we take security very seriously and ensure that all data is correctly encrypted and secure to protect you, and your customers�

THE RIGHT SOLUTION FOR YOUR BUSINESS

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THE RISE OF ONBOARDING ABANDONMENT RATE

Expertise in risk management: Mitigating risk is paramount in the financial services sector� Instantor’s solutions leverage years of experience in risk management� Coupled with innovative machine learning techniques, we know our stuff�

The right solution for your business: While a strong track record and a team of experts may seem impressive, they’re nothing if they don’t have the right solution for you� Instantor has worked with lenders of all sizes to streamline processes and enhance profitability, from small, one-person businesses to challenger banks and lenders that have operations in countries across the world� We work with you to tailor the right solution�

Instant Access from Instantor

For lenders, Instantor is a great solution to help your business tackle the problem of rising abandon-ment rates� The solution is called Instant Access�

Instant Access is a simple way to get started with digitalised onboarding and is a perfect solution for online and digital lenders, as well as trading platforms� Without heavily investing in your in-house technical capabilities, your company can offer a professional platform with state-of-the-art UX for applications with minimal internal effort� It’s a swift and easy first step in digitalising your loan applica-tion process and increasing digitalisation across your organisation�

Choosing the right business partner can be instrumental to your businesses’ success and by partnering with Instantor, you will have an expert guide by your side, whatever the stage of your business� Your customers will enjoy an easier onboarding experience, and your business will see lower abandonment rates and increased acceptance while maintaining adherence to KYC and AML�

How Instant Access worksInstant Access is simple to use and requires no technical knowledge� In fact, our users can be up and running within 15 minutes with no involvement from their IT departments�

The process is simple:

1� We set up and host a page for you�

2� You integrate the Instantor hosted page into your regular workflow, whether through email, SMS or via your website�

3� The customer uses your normal application process and authorises to share their transactional bank data�

4� We analyse the data and send you a report�

Anyone can use Instant Access, but it is particularly useful if you want to get started with digitalised on-boarding but your development resources are limited� You have the control over where it is integrated into your existing onboarding process, whether this is a small section of your website or through the entire process across all channels�

With little effort, Instantor’s Instant Access can be easily integrated with your current workflow� As a hosted solution, we take on the effort of maintaining the pages and send you the data we collect on your behalf in a human-readable PDF� Instant Access offers strong identification factors like SMS alerts, eID or 2-factor

verification, where your organisation can quickly verify phone numbers, providing the possibility for customers to verify themselves�

The fastest way to digitalise credit application flowsOur experience has proven that the functionality offered by Instant Access is far superior and leads to much higher application completion rates� In fact, of the 95% of users who choose Instantor over manual processes, 99% will go on to fully complete an application� This is in comparison to the average completion rate of 56% for comparable manual processes�

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THE RIGHT SOLUTION FOR YOUR BUSINESS

Instantor Impact On Onboarding

THE RISE OF ONBOARDING ABANDONMENT RATE

Client testimonialsMany of our customers using Instant Access love the digitalised onboarding capabilities that our product provides� Here’s what some of our customers have said about Instant Access:

BlueStep The Swedish bank BlueStep uses Instantor to access additional data, which helps them to make better and faster credit decisions� This means that customers can simply make a few clicks on a landing page to approve their data be used for credit analysis� Bluestep then re-ceive a report which is used in their credit underwriting processes� Erik Adeler Business Development Manager at BlueStep Bank says:

“ At BlueStep we want to constantly develop and improve our processes not only for customers, but also internally� Being able to analyse transaction-al data has opened up so many new possibilities for us to make better credit scoring decisions� ”

Northmill A Swedish fintech company founded in Stockholm in 2006 with a mission to simplify people’s financial life by developing understandable and well- designed consumer finance products� Northmill use

Instantor products to verify customers’, prevent fraud, identify income information and to improve the KYC and AML processes�

“ In the spirit of our corporate mission to simplify everyone’s financial life, Instantor helps us to be even more inclusive� Since credit information oftentimes is not up to date we can rely on the services of Instantor that can, with our customer’s consent, retrieve credit information that repre-sents customers true current financial situation� In doing that we have been able to help creditwor-thy and reliable customers who might not have gotten their financial needs met elsewhere� ”

Learn how Instantor’s Instant Access solution can reduce risk, increase acceptance, and minimise application abandonment�

Find out more about Instant Access here.

We set up and host a branded page, and you direct your targeted customers to it� They log into their bank and give permission to access their transaction information� We analyse the data, compile a report and send it to you� It really is that simple�

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The Future OutlookChallenger banks and other financial service organisations offering friendly, simple, and fully digital onboarding processes are increasingly likely to entice customers away from more traditional players� Consumers want digital onboarding and banks that don’t meet this expectation will lose out�

The future of onboarding is already here, and through new technology, many financial services companies can start to redefine their onboarding processes already� Digital identities will be the key to changing the future of onboarding, bringing many benefits such as reduced financial crime and better experiences for customers, and fully digital processes will mean reduced abandonment rates and better customer retention� It’s an exciting time for both new and old banks and lenders to take advantage of these new technologies�

Position your business more competitively in today’s digital world� By choosing the right business partner such as Instantor, financial institutions can reap the benefits of digital-ised onboarding experiences by cutting costs without adding risk�

It is vital that your business stays ahead in this current competitive market� Businesses that can adapt quickly to changing demands will be the ones to win consumers, and it is clear that those with a digital-first mindset will be the best positioned for success� Will you be one of them?

THE FUTURE OUTLOOK

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Helping everyday people and financial organisations communicate.

THE RISE OF ONBOARDING ABANDONMENT RATE

Raiha Buchanan

Hannes AhbeJennifer Thunander

Sarah KokSimon Edström

Marcus Dahlman

• Instantor AB • @InstantorAB • @instantor_ab • @Instantor

www�instantor�com