5 Key challenges in Indian bank onboarding and how to solve them

In banking context, onboarding begins as soon as a potential client engages with the bank’s marketing or sales team. The bank processes the request and initiates the Know Your Customer (KYC) verification by collecting relevant information and performing background checks, as mandated by the Reserve Bank of India (RBI).

Once the necessary documentation and regulatory requirements are fulfilled, the bank sets up the account and provides access credentials to the client. Onboarding presents a crucial opportunity for Indian banks to deliver an excellent customer experience and foster loyalty. According to a report by Boston Consulting Group, Indian banks could boost profits by up to 30% by introducing digitization in their onboarding processes. However, many traditional banks in India are slow to adapt to digital trends, leading to lengthy and expensive onboarding processes.

Challenges with Traditional Client Onboarding in Indian Banking

1. Delays and Costs of Onboarding According to industry reports, onboarding a new customer in Indian banks can take days or weeks, depending on the complexity of the account and compliance checks. Approximately 60% of the costs associated with onboarding are spent on processes such as KYC, credit checks, and regulatory approvals. These delays are exacerbated by manual interventions, which can lead to frustration among customers who may turn to fintech alternatives that provide faster, more customer-centric services.

2. Fragmented Data Sources Indian banks often rely on a mix of manual and semi-digital processes for KYC, leading to inconsistencies in data collection. The data gathered from clients may be structured, semi-structured, or unstructured, making it difficult for banks to extract meaningful insights. Moreover, the lack of a centralized data repository results in data silos, where information is duplicated or conflicting across different departments.

3. Legacy Systems Many Indian banks still operate on legacy IT systems that are not equipped to handle modern data needs. These outdated systems struggle to integrate data from various sources and formats, leading to inefficiencies in client onboarding. The high cost of maintaining these systems, along with the need for customizations, reduces the speed at which banks can acquire new clients.

4. Regulatory Compliance Indian banks must adhere to an evolving set of regulations from RBI, SEBI, and other regulatory bodies, including stringent anti-money laundering (AML) laws and the Foreign Account Tax Compliance Act (FATCA). Non-compliance with these regulations can result in heavy fines and damage to the bank’s reputation. For instance, in recent years, Indian banks have been penalized for lapses in AML compliance, underlining the need for robust, automated compliance checks.

5. Manual Interventions A significant portion of Indian banks still rely on manual processes, such as physical form submissions, in-person verification, and paper-based documentation. According to a report by PwC, manual onboarding processes can extend client onboarding times to over 30 days, leaving customers frustrated and more likely to switch to digital-first banks or fintech solutions that offer faster service.

The digitization of onboarding processes presents a clear pathway for Indian banks to enhance operational efficiency, reduce costs, and improve customer satisfaction. Transitioning to digital onboarding tools like Onboard with real-time KYC verification, automated document management, and centralized data repositories can significantly reduce onboarding times, while ensuring compliance with ever-evolving regulatory frameworks.

1. Smart forms make customer onboarding a hassle-free process

Automatically populate identity and address details from document images with 99.5% accuracy using advanced OCR technology powered by Artificial Intelligence. Seamlessly auto-fill customer information through KYC API integration, retrieving data from KYC registries or pulling details from the organization's central Customer Information System (CIS). Facilitate online payments for account opening charges, initial margins, or annual fees, allowing customers to begin their investment journey instantly.

2. Automated verifications allow quick processing of forms

Ensure the accuracy of customer data by validating it against both regulatory and non-regulatory authorities. System checks, such as OTP verification, are used to confirm mobile numbers and email addresses. With advancements in technology, In-Person Verification (IPV) can now be conducted via a web camera, allowing online completion of processes through a series of verifications, including Face Match and OTP on video recordings. Generate and submit files to the KRA/CKYC registry in compliance with regulatory guidelines. Additionally, export files for use in both internal systems and external entities like exchanges or depository participants.

3. Digital Identity Verification

The online account opening software acts as an identity verification platform. The solution supports multiple methods of verifying the identity of your customer. Each of these methods are compliant with regulatory norms and cover both Fresh KYC and accessing KYC details from depositories.

• Aadhaar Online e-KYC

• Aadhaar Paperless Offline e-KYC

• Digital KYC

• Central KYC

• KYC Registration Agency

• Video KYC

• DigiLocker