1. Dear Bank – You need to be on boarded, not me.
Around 4 million households open a new bank account every year in the US. Sixty percent of these are estimated
to be the millennials who own a smart phone, are digitally savvy and of course quick to switch loyalties if something
goes wrong in their first brush with a bank. And something will – given the way most banks prospect, on-board and
service their new clients.
Picture this. Where do banks get their new customers from? Through direct mailers, online advertisements,
university campuses and referrals from new employments, family or estate planners. Initial sales pitch sets in to be
followed by gigs of information demanded from the prospects for the Know Your Customer, aka KYC. The KYC could
be different for each product line, in content, channel or speed. The customer may have to provide certain
information repeatedly, deliver part in digital or part in paper form and may complete the KYC for a fancy product
ahead of that for a basic but essential product.
KYC completed, the mailbox may be flooded with offers on dozens of products or schemes whether directly
relevant or not. And if the customer does decide to choose one of them, the bank may send a polite refusal or
demand extra fee because there was insufficient banking or credit history with the institution. It is equally possible
that the type of service the customer signed up for is only available for a trial period, or requires committing
additional products or funds. Industry reports cite that out of 100 customers a bank prospects, only 60 get on-
boarded within a week post KYC, and only 10 of those remain with the bank six months down the line.
Research further shows that
 96% of dissatisfied customers just leave without voicing a complaint.
 First-contact resolution has consistently remained the top frustration factor for customers
 About one-third of distractors find exit barriers pretty low
 About two-thirds of existing millennials customers would be open to consider products and services from
non-banking companies or even from other consumers (e.g. peer to peer)
The iterative model of on-boarding practiced by banks seeking information about their prospects’ financial status,
risk profile, product preferences, fee tiers etc. and mapping existing products to the same worked quite well for
the banks in the past, generating good revenue for the banks in the bargain. Products like credit cards, mortgages
and insurance have been the classic examples of fine prints and fat bills. This model is predicted to fail in future.
The new crop of millennials are digitally savvy, demand greater transparency and wish to spend little time providing
information that already exists in some form on the other in public domain or over social media. Very often, they
may not even know what information they have or can provide – rather expect the bank to tell them about the
same and suitable products for them. How can the bank meet such expectations without even knowing anything
about the customer? Simply by realizing that the banking relationship for the millennial clients now predates the
creation of Customer ID in their systems. And this is where bank need to innovate – or shall we say onboard itself.
What millennials expect
Banking for the millennials isn’t just a checking account, a mortgage or an insurance cover from a bank. It is also
not about exchanging reams of documentation for each product type, awaiting approvals, making proactive
payments to avoid defaults or pay penalties on late payments. It in fact is “un-banking” everything that a bank does
today.

2. The client of the future seeks a partner that can
1. Scan most of their digital footprint across existing conduits such as lifestyle, education, entertainment,
travel, healthcare, retirement, vacation, income, receipts, inheritance etc. and develop an Avatar
2. Create Communities of similarly profiled Avatars and develop solutions that are relevant for each
3. Personalize user experience
4. Aggregate opportunities, access and value in creation of wealth
5. Act as custodian of their vital information as also information exchanges for value transfer
That this partner need not be a Bank, but any corporation or individual is a real threat to the Banks today. Nearly
half the millennials believe that the innovations required to meet these expectations go beyond technology, and
that most of such innovations will come from outside the Banking industry. A third of them believe that they won’t
need a bank at all by 2020 as most of their financial needs will get embedded into service providers who will “bank”
value for them.
Reinventing the bank
Challenged by Fintech companies, tech savvy customers, proliferating regulations Banks seems to have been
pushed to the wall with no option but to reinvent themselves – at all frontiers. The business model, revenue model,
customer engagement model and the delivery model all need to change.
Traditionally, banks have been providing financial, investment and payment services to their clients. In doing so,
they created products keeping the bank’s interest ahead of their clients. These products were characterized with
Sherlock kind spreads, low transparency and high exit barriers to keep the revenue pouring. Even as margins
evened out for a given product stream, new products and client segments were invented to cross subsidize and
often mask the underlying cracks. It was not long before the banks got caught in their own quagmire. Soon their
clientele, processes, systems, costs and revenue got split across products. They lost sight of the cross-sectional
view of their customers – their profitability and risks. The risks mounted within lines of business, and within each
line of business by product type. And when regulator came calling, it became more expensive to unearth the cause
of the problem, than the problem itself. Cost of compliance (read redress) overshot cost of banking. Because banks
were really not “banking”, but merely profiteering. Till now.
The transparency, instant gratification, cost efficiency and the trust that technology inspired forced several
industries to trim their bulges and pass on the benefits to the customers. Retail, Telecom, Entertainment, and
Healthcare pioneered in offering the clients what they didn’t even know existed or could have asked for.
Interestingly, Banks watched from the fringes and even enjoyed such offerings – but slept until these “outsiders”
started foraying into financial, investment and payment services. Banking suddenly seemed no longer about
money, but information about money. Of course, banks stand a good chance to manage information about money
for their clients, only if they let go the temptation to manage their client’s money in the first place.
To do that Banks need to start charting their clients – bit by bit. What do they do, where do they spend, where do
they go, what are their goals, capabilities, limitations, aspirations, risks and obligations. The bad part is that most
of this information may not be available with the existing banking relationship or worse still even known to the

3. customer itself. The good part is that much of this information can be mined beyond the banking relationship. Just
as the non-banking players are stepping into the financial services arena, Banks have to counter the threat by
entering into the non-Banking domain and winning the game of information. They need to preempt the disruptive
forces in capturing the customer information before anyone else.
The customer today has a huge digital imprint. Banks may be intersecting at only 20% but Banking is intersecting
at 80% of the same. Various service providers are already gnawing into that pie of 80% - offering solutions to day-
to-day needs (aka everyday banking) paying with loyalty programs, crypto currencies, digital wallets, eMoney and
of course real money (that is the 20%). Banks need to scratch the remaining 80%, innovate experiences to wean
the customers away from competition and emerge from their pupal stage. Banks are today behaving like a
caterpillars. Even the incremental innovations being undertaken by them are only creating bigger and fatter
caterpillars – eating more into the money train. Millennials like butterflies. That’s onboarding.
Onboarding the Bank
Banks have to first believe in the beautiful butterfly skin, to be one. It requires the following game changing
approach to Banking:
 Social is not an additional or value added service. Social IS THE service.
 KYC is dead. Instead, Mine-Your-Customer (MYC). Do not seek information – discover one.
 Engage with the client – seamlessly and non-intrusively. (Gamification can help)
 Develop Communities around your customers. Develop Solutions and Experiences for Communities .
 Position Data Scientists and Behavior Psychologists than MBA Finance Grads in client critical roles.
 Identify yourself purely as an intermediary that aggregates access, value and opportunities for your
customers. Your competition is with other aggregators. Whoever aggregates well, succeeds well.
Of course this requires investment in technology, business process reengineering and cross skilling. Following are
some of the key programs to embark upon, in journey of getting on boarded with the customer:
 Go Paperless – Almost all customer interaction has to move away from paper. Further, Internet-of-Things
(IoT) has to capture beyond what is visible through online and mobile channels. Identify your core
businesses that can benefit from IoT and fast track those solutions, ahead of the industry. Examples include
health insurance, mortgage, leisure & travel etc where wearable devices and near proximity gadgets can
beam real time customer data for designing worthy user experiences and solutions.
 Gamification – Allowing customers not to write cheques, then not to visit branches, then not to even log
into the websites – Banks now need to dispense away with the need for clients to explicitly contact the
Bank at all. Any or all information, including business, needs to be solicited inconspicuously through
gamification. Customers need to be engaged in scenarios through tailored and proactive contact that will
nurture them financially, influence their behavior, make them financially responsible and repose trust in
the bank. Greater the trust, higher the quantum of information vested with the bank.

4.  Live Social – Most of the banking will be delivered on the social media. Banks need to develop communities
that the customer will relate and listen to. The solutions will be designed, priced, debated, reviewed,
adopted and dispensed with in these communities. Opportunities and Experiences (including pilot runs,
trial offers and promotions) will be aggregated, distributed and availed on these platforms. Especially for
providers who are able to address real needs and provide strong value for money, using partnerships with
players that bring a wider range of products and services than those of a traditional bank.
 MYC, not KYC – Banks need to generate a digital avatar of their customers by mining customer information
through non-conventional channels, over non-banking domains and non-intrusive mechanisms. It will
provide them with valuable leads in designing solutions, promotions and offers that the customers find
hard to resist. Explicitly asking even a mundane information that the Bank is already expected to know is
likely to ward off the customer from the bank. The art of the possible lies in telling the clients what they
themselves may not know.
 Fintech Solutions – Banks need to trim almost all of their product-centric applications, systems and
processes giving way to point solutions powered by next gen technology. Banks that aggregate most
number of Fintech Solutions to service their clients will end up as winners.
 Next Gen Technologies - Banks need to employ cutting edge technologies such as natural language
processing, machine learning, virtual assistants, self-healing applications, unstructured data analytic tools,
predictive analytic tools etc. so as to mine, manipulate and manifest data coming from varied sources.
On-boarding customers in to a world of banking products, qualifying them for pre-defined segments, filtering them
out of others, offering them privileges in proportion to their contributions, charging them flat fees and hoping to
de-risk the bank by asking the customer to assume liabilities detailed in fine print is soon going to be history.
For there is a larger risk that the bank is assuming in onboarding customers who are required to sign liability
undertakings at account opening stage because the risk profile of such customers is already flashing out there in
the social world (it is irrelevant if such sign was taken on paper or even through e-signature). That the bank
managed to get them till the on-boarding table speaks of its own risk management or the lack of it. A smart bank
would ward off such risks entering the enterprise by mining the client info upfront, guiding them appropriately and
welcoming risk appropriate customers faster without taking their signatures on documents not worth their
content. It promises bank with a happier customer too and a long lasting banking community.
These are exciting times. Transformation is in the air. Banking will survive, Banks as we know them will not.
Please send your comments to Avinash Kumar