The initial client on-boarding procedure is crucial for both banks and their clients. For banks, the efficiency and speed of the process can leave a lasting impression in the mind of the customer. It can dictate how amenable the relationship would be in the coming months and years. A cumbersome process can make the customer doubt the technical capabilities of the bank and its ability to service their needs efficiently in the future.
For the banks, too, the process is equally critical. They have to follow very strict internal and external guidelines and ensure complete and total compliance. Any errors can result in substantial reputational, financial, and legal harm. Yet, they must also ensure that the process is smooth and effortless for the clients. Any delays could result in a loss of revenue, and it is not uncommon for certain banks to get stuck with a reputation for having an inflexible and cumbersome on-boarding process.
It is in the context of these issues that we explore the fully digitized customer on-boarding process of eIDAS. We are guided by some of the findings of a PwC study on this topic, carried out on behalf of the EU Commission.
The need for eIDAS enabled digital on-boarding
Let’s start off by examining, in brief, some of the key objectives behind having an eIDAS-enabled customer on-boarding process. What advantages do the new eIDAS-enabled systems provide?
- Providing an EU-wide single digital market for financial services.
- Allowing for the purchase of such products remotely, across borders while ensuring complete regulatory compliance.
- Enabling the Customer Due Diligence (CDD) process to be fully digital and remote at the time of initial on-boarding as well as during the course of the relationship and periodic CDD renewals.
- Doing away with divergent rules and practices that create an artificial barrier in terms of cross-border delivery of financial services.
- Ensuring that the guidelines of all relevant national regulators are fully complied with along with the legal requirements.
- Harmonizing not only legal/ regulatory practices, but also accounting for the differing business practices across countries.
- Identifying the EU's best practices and ensuring that they are promoted
- Ensuring that the high Level of Assurance (LoA) provided by eIDAS is maintained.
There are also some more indirect or potential benefits like:
- Providing more funding to the SME sector by allowing them access to a broader market. This would also likely reduce the cost of banking for both retail and corporate clients and create a more competitive banking environment.
- KYC portability – making the completed KYCs portable between financial institutions can also provide huge benefits to the customers as well as the newer banks. It would make switching banks much simpler and faster and will thus likely enhance customer experience a lot.
- Financial instructions using eIDs can really propel the digitization revolution and encourage its use in other sectors as well.
eIDAS-enabled digital on-boarding solutions can provide a quicker, less expensive, and more secure method to build new client relationships. By making the process less cumbersome, it will engender more competition as financial institutions put their best foot forward to retain their clients. Finally, it provides a true single-market experience throughout the EU and ensures regulatory and legal conformity.
In Part 2, we will examine the real process that is followed currently and provide a few examples of the nifty tools and tricks that some banks, financial institutions, and even independent app developers are using to digitize the customer on-boarding process.
References and Further Reading
- REGULATION (EU) No 1316/2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010(12/2013), by the European Parliament and the European Council
- Selected articles on Authentication (2014-today), by Heather Walker, Luis Balbas, Guillaume Forget, Jan Kjaersgaard, Dawn M. Turner and more
- Selected articles on Electronic Signing and Digital Signatures (2014-today), by Ashiq JA, Gaurav Sharma, Guillaume Forget, Jan Kjaersgaard , Peter Landrock, Torben Pedersen, Dawn M. Turner, and more
- Study on eID and digital onboarding: mapping and analysis of existing onboarding bank practices across the EU (2018), by PwC EU Services EEIG for the European Commission, Directorate-General for Communications Networks, Content & Technology
- The European Interoperability Framework - Implementation Strategy (2017), by the European Commission
- Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (2016), by the European Commission
- REGULATION (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (2016), by the European Parliament and the European Council
Proposal for a REGULATION concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Regulation on Privacy and Electronic Communications), (2017), by the European Parliament and the European Council
- Revised Directive 2015/2366 on Payment Services (commonly known as PSD2) (2015), by the European Parliament and the Council of the European Union
- REGULATION (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (2014) by the European Parliament and the European Commission
DIRECTIVE 2013/37/EU amending Directive 2003/98/EC on the re-use of public sector information (2013) by the European Parliament and the Council