Almost two thirds (63 per cent) of potential customers have abandoned their applications for financial services due to a lengthy and complicated onboarding process, according to new research.

A survey of 4000 banking and financial services customers in the UK and Belgium, Germany, Sweden, Norway, Finland and the Netherlands for digital identity company Signicat found that financial services firms have seen the worst abandonment rates during the COVID-19 pandemic since the annual survey started in 2016.

The data shows a sharp increase of 23 points from the 40 per cent abandonment rate in 2019, with one in five abandonments due to increased friction in the onboarding process.

A total of 41 per cent of consumers across Europe have been unable to access new financial services due to lockdown restrictions and a lack of digital options as branches closed and providers struggled to keep up with demand for online and app-based services.

Meanwhile, with branch attendance declining even before the Coronavirus took hold, two thirds (68 per cent) see pandemic-driven change as inevitable and expect 100 per cent of digital onboarding to be introduced in the coming months.

The survey found that Know Your Customer (KYC) processes and Anti Money Laundering (AML) rules, which require consumer data sharing, are often ill-suited to digital provision of services, with documentation and information often required in paper or manual format.

More than a quarter (26 per cent) of consumers argue that the financial services onboarding process is “difficult”, with 28 per cent reporting that it is longer than they expected.

The rapid growth of mobile-first services across financial services has also meant customer expectations have changed, with 69 per cent of consumers saying they consider providers with a mobile app to be better than more traditional providers.

The report showed that 47 per cent of consumers are now using a mobile-first financial service, up from 30 per cent in 2019.

In addition, 69 per cent are happier with their mobile-first provider than they were before, with a similar amount (70 per cent) of those with a digital first account saying that convenience means they are more likely to use it every day.

Signicat stated that this shift towards digital, particularly during the pandemic, spells the end of the phenomenon of “learned helplessness” amongst consumers, whereby they are refusing to put up with substandard options.

The report also showed that there is a generational divide when it comes to expectations of financial services providers, with over a third (36 per cent) of Gen Z (18-24 year olds) saying the onboarding process is longer than they expected, and just under a quarter of this group (24 per cent) abandoning applications altogether due to lengthy processes.

Gen Z is also more likely to be deterred by too much detail (22 per cent), and most likely to simply change their minds (24 per cent).

As a result, Signicat suggested that the panic around meeting the expectations of millennials—the first digital natives—has been misplaced, with Gen Z, rather than the slightly older cohort, the generation that financial services should be worried about serving to stay head of FinTechs and digital challengers.

Commenting on the findings, Sarah Kocianski, head of research at 11:FS said: “This year we have all been forced to start doing everyday tasks differently. For many that has meant managing the entirety of their financial lives using remote channels for the first time. And this is where some financial service providers' offerings have been found lacking.”

“Onboarding, in particular, is crucial. If customers can't or won't open new accounts, these organisations will struggle to cope with further economic turmoil.”

“In short, providers should prioritise ensuring customers can apply, open, and start using accounts quickly and digitally if they want to compete in today's environment,” Kocianski concluded.

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