How customer onboarding can maximize customer lifetime value

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April 17, 2013

Businesses that have long standing relationships with their customers miss-out on profits if they offer a poor customer onboarding experience. Poor customer onboarding leads to poor first impressions as as customers have difficulty going through the application process and wait a long time for approval. After a few mistakes they may consider switching to a competitor, while complaining to their peers about their frustrating experience. If you are a sales executive at a financial institution, you need to understand the importance of customer onboarding and how it can help you maximize the lifetime value of your customers.

Customer onboarding encompasses all the processes that transform a potential lead into a regular customer using your service. Tata Consultancy Services has developed a framework that breaks down customer onboarding into seven processes. These seven processes are:

  • marketing/customer education
  • application filing
  • application initiation
  • compliance checks/validation
  • decision
  • onboarding
  • analytics/insight

While all of the processes are important, we will focus on the three processes in bold above – application initiation, decision, and analytics/insight – to explain how onboarding can help maximize the lifetime value of a customer.


Application Initiation

Application initiation is the process of collecting the information needed to assess a new account application. It’s a necessary step that prevents financial institutions from taking on risky accounts, but from the customers’ point of view it is an annoying step standing in between them and their new account. It is also their first interaction with your company as a customer. They are forming a first impression of your business based on the speed and efficiency of your data gathering processes that will influence future purchase decisions. This makes customer onboarding an important moment for financial institutions. Clearly, getting new customers to the finish line is the first major step to unlocking their value.



The decision-making process within customer onboarding is another important part of earning value from customers. While obviously there is value in applications that are approved, there is also untapped value in those that are rejected. Customers that are rejected for account opening or loan applications may be eligible for other products or after some time. Well designed customer onboarding processes can offer other declined customers other products or invite them to apply again after taking steps to improve their credit worthiness.



Analytics/insight is the most important opportunity to help unlock a customer’s potential value. Using business intelligence to analyze the potential cross-sell opportunities for new customers, banks can maximize the lifetime value of a customer by providing multiple services to the same customer. The opportunity to cross-sell is greatest while onboarding a new customer. Studies have shown that the cross-sell rate for customers is highest (10%) during the first month after accounting opening, and immediately decreases to less than 2% for the remainder of customer lifetime. The key takeaway is that customers are open to suggestion during onboarding; take advantage of that opportunity to grow their lifetime value.

Most banks today can improve their customer onboarding through automation. A major reservation for undertaking such a project is the concern for ROI. Most people focus on cost-saving, however there is a significant opportunity for automated onboarding to improve revenue.  To see how onboarding can help boost revenue, you must understand the various processes within customer onboarding.  Once you understand onboarding, you will be able see the untapped value in your customers.