Sunil Madhu, founder and CEO of Instnt, had the opportunity to share his experience and perspectives on the financial services industry and managed customer onboarding in this four-part podcast series. Here’s a recap of the Future of Payments podcast, hosted by Georgie Frost with guests Anil Aggarwal, CEO of Fintech Meetup, Ajay Hans, CEO and founder of Mobetize and Adam Moelis, co-founder of Yotta Savings.
Episode 1: fraud as the new normal
Anil Aggarwal, CEO of Fintech Meetup, joined Sunil on the first episode, discussing digital transformation that will be ongoing now that the pandemic is receding.
AI and automation can be used for many aspects of the onboarding process, including KYC and anti-money laundering (AML). Not only does AI essentially automate compliance, but it can also address customers’ impatience with having to wait or jump through hoops while signing up for a new financial service. If the user journey is not customer-friendly and is causing delays, new customers will leave.
The customer experience improves, but the business can actually grow faster because more clients are quickly signing up.
Unfortunately, fraud is the new normal. To address and combat it, financial services firms buy a range of tools for know your customer (KYC), AML and other compliance measures, but it’s an imperfect process at best.
Instead, firms should consider a shared services model, leaving the onboarding process to a provider with access to wide amounts of aggregated data. In this way, the stack can be minimised and firms don’t need to manage a range of vendors that only provide one component, such as phone number verification.
There will soon be an institutionalised way of doing things. Regulators, legislators and industry bellwethers might prefer a wait-and-see approach, but managed customer onboarding will soon be the industry norm.
Anil Aggarwal, CEO of Fintech Meetup, and Sunil Madhu, Founder & CEO, Instnt
Episode 2: fintechs might be nimble, but credit unions have an opportunity
Ajay Hans, CEO and founder of Mobetize, joined Sunil on the second episode, discussing the challenges for instant digitisation by banks brought on by the pandemic.
Fintech newcomers are not bound by geography, time zones or real estate. Without significant capital expenditures, start-up financial services organisations can put their brand into the hands – literally – of millions of potential customers.
The market is demanding a fast and frictionless experience when signing up and creating accounts. However, compliance, including the handling of KYC and ID verification, is a competing priority that must still be handled quickly in the background, so as not to disrupt the onboarding process and turn away potential customers eager to get started with an app.
However, smaller banks and credit unions are challenged to compete with such start-ups, because most still use older, clunky legacy systems and inefficient, manual processes. Such systems do not meet the needs of – and might even turn away – younger customers who might be swayed by the convenience and user-friendly interfaces of digital and mobile-first experiences offered by fintech newcomers.
Credit unions are realising that they can’t go through this alone, as innovation is needed for customer onboarding and the complete customer journey. They will soon adopt the idea of “open banking,” which is about adopting technologies to make it easier for customers to do business with them.
Ajay Hans, CEO and founder of Mobetize and, Sunil Madhu, Founder & CEO, Instnt
Episode 3: fraudsters know how and when to play
Adam Moelis of Yotta Savings joined Sunil for the third episode, to discuss the increase in fraud sophistication and what banks need to do to encourage new sign-ups while keeping information safe.
It seems logical that larger financial services firms, holding a significant volume of customer assets, would be more vulnerable to fraud than would younger fintech start-ups, but this is not always the case.
Fraudsters know that start-ups don’t always have the technology and processes in place to stop them. Many start-ups underestimate the effects of fraud and often experience massive losses early on before they learn their lessons.
Additionally, fighting fraud is not a core strength for companies more concerned with building great products and providing great services. As such, ensuring privacy and security, especially in the onboarding process, should be outsourced to a shared service whose core competency is keeping out bad actors. This is possible because that shared service has learned from the collective experience from several customers.
While each firm might have its own rules and processes for judging the veracity of new accounts, customers, markets and technologies are constantly changing and evolving. A shared service with built-in AI that not only keeps up with industry rules but also leans on the collective experience of several firms can provide the best defence in the onboarding process.
Adam Moelis, Co-Founder of Yotta Savings and, Sunil Madhu, Founder & CEO, Instnt
Episode 4: industry disruption
There has been a constant evolution of bundling and unbundling of services in the financial services industry. Fintechs are great at this disruption, and their products, including payments, often disrupt multiple industries at once.
Rather than subscribing or licensing the product offered by a fintech startup, often the larger institution will invest in the smaller company to minimise the risk exposure to a less mature business.
A managed service can offer value on multiple levels: reduction of costs (CapEx, OpEx), but also faster top-line growth, generating more customers and more revenue in a shorter amount of time.
A medium-sized enterprise might spend £350,000, on technology associated with onboarding customers and opening new accounts, whereas a solution might be 30 to 40 per cent cheaper if they outsource it.
Most businesses want to keep their fraud losses below 1 per cent. In order to do this, the business will need to use a range of technologies and services to vet the people they’re signing up. However, the trade-off is that when bad people are kept out, the good people are kept out as well. A managed service can address this and does not give away the user experience or the sign-up journey.
Sunil Madhu, Founder & CEO, Instnt
Instnt is the first fully managed digital customer onboarding solution for businesses with up to $100MM annually in fraud loss insurance. See how we can help your business safely onboard good customers today!