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PSD2 puts fresh pressure digital account opening

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Remote digital account opening is a huge opportunity, but it's a tricky job from both a technology and regulatory perspective, particularly in the PSD2 era.

According to a recent Gartner study, new customers often abandon applications due to a confusing process or the amount of time it takes, typically resulting in added pressure being placed on already burdened call centers and branches.

A 2018 study by Gartner, which focused on how banks should overhaul the process of digital account opening, introduced a bold strategic planning assumption its first few pages: By the end of 2020, 20% of retail banks would be able to offer the ability to open a new deposit account in 10 minutes or less.

Of course, for “10 minutes or less” to live up to its promise, the process would have to be a wholly digital one. There’d be no place for a part-digital journey ending in a last-minute dash to the branch for a customer to supply the several pieces of paper-based information needed to comply with know-your-customer (KYC) and anti-money-laundering (AML) regulations, among others.

And then there’s the arrival of disruptive opportunities like Europe’s open banking and PSD2 regulations, which empower consumers to switch banks more easily. These requirements are impacting the U.S. market as global banks roll out reactive innovations across all their geographies, paving the way for an increased demand for better digital account opening functionality.

Times are changing, and innovative new technologies can— and must— play a big part in improving the process, especially where legacy infrastructure is to blame for the lag. In most instances, firms don’t need to reinvent the wheel either: They can learn just by looking at what successful competitors have done.

But before this can happen, organizations need to inspect each of the steps involved in the account opening process to identify and remedy gaps in internal practices and resources, as well as points of abandonment. These are application and data capture, identity verification, decisioning and account approval, disclosures, consent and account funding.
While steps 3 and 5 are mostly internal, steps 1 and 4 lend themselves perfectly to the functionality offered by mobile phones and tablets, for example, to facilitate the process.

From obtaining paperwork and filling in forms, to the potential of biometric fingerprint sensors and built-in cameras to electronically gather data during registration, this class of consumer device holds the key to a superior user experience.

But it’s the matter of identity verification, or proofing, in step 2 that seems to be the biggest hurdle for most retail banks to overcome. Because regardless of where in the world they are, stringent compliance checks requiring various forms of personal information almost always apply in one form or another, adding to the complexity of the challenge.

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