Banks are the life-blood of any economy, and every business – big or small – depends heavily on them for their services. However, even as it is a no-brainer, banking procedures are not always easy to navigate. From understanding the process from the inception to identifying and assembling the right documents, these journeys can be complicated for the layperson.
Oftentimes, these issues don’t get caught up front: It takes a measure of human effort to look through all the submissions made for any errors to be identified, and it is most often the case than not, that these errors might set back the process significantly – or require an individual to start again, from scratch.
One common category of issues, called “First Time Not Right,” are where lapses occur on part of the entity seeking to set up a current account. These lapses can prolong the journey of setting up a current account. They can also make the entire experience frustrating for an applicant. One way to address these issues is to strengthen and enhance all current account onboarding strategies.
The Current Account Onboarding Journey
Anyone who owns a business is expected to have a current account, which is fundamentally designed for high-volume transactions that are typical to the industry. Typical current account onboarding strategies all begin with a check on whether one meets the eligibility requirements.
There are two types of current account onboarding journeys – 100% physical and partially digital. In the former, the relationship manager visits the office and provides a checklist of essential documents. The relationship manager manually collects the documents, takes them to the back office for verification, and processing. In these journeys, issues with masking the Aadhaar are very common.
In the second category, the relationship manager visits the office with an app, requests essential documents and uploads them in the presence of the applicant. In these cases, there may be rejections when the signature or ID detection processes are not integrated.
After relevant forms are filled out online or in person in a bank, an elaborate list of documents are collated and submitted along with these forms. The typical suite of documents include the proof of identity of the proprietor or organization, proof of address if it is an individual, proof of existence of the business, and relevant registration certificates and licenses (such as those issued by the municipal authorities, GST, professional tax, and business registration certificates, and other licenses as appropriate), along with existing bank account statements if applicable. There is also an iteration involving a KYC process for each, the individuals involved as well as for the board of directors.
Within the scope of the current account onboarding journey, however, different types of entities must submit unique sets of documents. On paper, a smooth onboarding process may seem easy to understand and map in an organized fashion – however, it is also the site of first time not right issues.
Documents and Verifications based on the Entity
As part of a smooth onboarding process, different documents and verification processes are followed for particular categories of entities setting up current accounts.
NRIs opening a current account are expected to submit a declaration indicating the source of funds and that the firm is not engaged in agricultural activities, print media, or real estate work. A limited liability partnership must submit a certificate of incorporation, the LLP agreement, designated partners and their KYC documents, and a resolution showing that the designated partner as the authorized signatory.
A company opening a current account must submit the memorandum and articles of association, certificates of incorporation and commencement, as well as a list of directors of the company and the board resolution appointing signatories.
These documents and filled forms are processed by the KYC team of the bank, and regulatory due diligence is performed by the credit team of the bank. Once approved, the account is set up by the operations team within the bank.
Where do the First Time Not Right Issues Emerge?
Setting up current accounts requires strict adherence to protocol, which can often be complex and challenging for a variety of entities. It is most often the case that an entity setting up a current account may be doing it for the first time – where most of the common mistakes in current account onboarding unfold. Broadly, issues may emerge as a result of the ignorance of the Relationship Manager on the key documents required and steps to be taken, or the sheer complexity of the process in itself, or the absence of relevant documents in the hands of the entities themselves.
- A key first time not right issue concerns missing documentation. The list of documents expected by a bank to open a current account may not always be available. Different entities require different documents, and it is possible that some documents may be missed out while making a submission. Most of these incidents may be attributable to mere oversight on part of the individual making a submission. If the lapse is because of the customer, the relationship manager may wait for them to arrange for the documents, or may submit it without these documents. The issue does not become apparent until the paperwork goes to the back office, which either places the application on hold or rejects it altogether.
- A second challenge is incomplete compliance, such as an unmasked Aadhaar capture or missing signatures in a document. In case of the former, applicants may submit a photo or photocopy of their Aadhaar card without masking it (a standard iteration in any application process), and this may raise flags when the application goes to the back office. There may also be overmasking (where more numbers are masked than needed) or undermasking (where more numbers are exposed than needed), or improper masking (where all numbers are obscure or what needs to be obscured are not) of the Aadhar card – where the key numbers may not be covered in full or may be identifiable. The latter tends to happen because of both oversight and perhaps a lack of awareness. While submitting an application, documents should be prepared in line with specific rules – such as self-attestation, affixing signatures, and submitted in a certain number of copies. If these items are missing, the application can be rejected. The lapse may happen because of oversight and human error.
- Finally, another case of First Time Not Right manifests as mismatches. For instance, there may be a mismatch in the name and nature of the business in the application with the details in the databases. It is also possible that the names may not match across several documents for the same entity. This could be the result of misspelled names, typos in data entry stages, and in some cases, even a change. The discovery of these issues happens after the submission of all the data, as the Relationship Manager may not spend time validating these documents, which may lead to a rejection.
High rates of First-Time-Not-Right issues can result in a large pool of applications being placed on hold or rejected. This can be frustrating for a customer who might invest a significant amount of time and energy, and may be left without being able to open an account. Repetitive iterations of submitting the application can be time consuming, and may lead to a customer either dropping out of the system altogether or moving to another bank.
How can banks reduce first time not right issues?
Banks can build robust systems as part of their current account onboarding strategies to avoid and mitigate the impact of first time not right issues. Part of this involves building a smooth onboarding process by relying on cutting edge technology.
For instance, in confronting missing documents, we recommend setting up conditional journeys based on the entity type and constitution. This means front-loading a checklist of documents essential for each type of entity in the current account onboarding strategy, and then issuing clear, real-time prompts to indicate missing documents before submission. This could look something like the error that comes from not filling out the “required” form fields in an online account onboarding journey.
To address incomplete compliance, a bank could prioritize ensuring that Aadhaar masking is completed automatically in a fully compliant manner. The current account onboarding strategy could also prioritize auto-detection for the presence of a signature in all documents and issue prompts to highlight any areas that are omitted.
Finally, in addressing mismatches, a bank could prioritize the auto-detection of mismatches in common areas such as the name, address, and date fields in the form. The adoption of a template can also help capture the customer affidavit with an e-signature. The onboarding journey could be strengthened to flag any compliance but with mismatch (such as difference in the type of business) for a reviewer to intervene and make a decision. It is also useful for the relationship manager to request the entity applying for a current account to submit an affidavit reconciling the mismatched names and indicating a preferred name to generate the account.
Looking ahead
Enhancing current account onboarding strategies is important now more than ever. Technology has demonstrated tremendous benefits in easing up onboarding journeys for users in the banking sector – and it is time for more and more banks to build smooth onboarding processes. Addressing the first time not right issues in current account onboarding journeys can ease up the process, enhance efficiency, and speed up account creation with minimal hiccups.
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