Breaking the onboarding bottleneck: the digital imperative for commercial banking

As financial institutions face increasing competition, regulatory complexity, and shifting customer expectations, one of the biggest challenges remains onboarding and origination. These processes, which should be fast and efficient, are often bogged down by fragmented systems, manual workflows, and a lack of standardization. 

As competition grows and regulatory requirements become more stringent, outdated onboarding processes lead to skyrocketing operational costs, lost revenue opportunities, and a frustrating customer experience. And in a world where clients expect seamless, digital-first solutions, delays can push them toward fintechs and alternative providers who offer more flexible services.

Addressing these pain points is no longer optional — it’s essential for banks to remain competitive in today’s market. In this article, we’ll explore why these processes are so challenging, the risks of outdated systems, and how digital transformation can help banks streamline operations and improve customer satisfaction. Let’s dive in.

Unlike retail banking, which has raced ahead with digital innovation, commercial banking has been slow to evolve — held back by legacy systems that were never built to meet the demands of today’s fast-paced business environment. To shed light on the issue, let’s explore the factors that make onboarding and origination so complex and time-consuming for financial institutions.

1. Delayed access to banking services

Whereas small business account openings are quite straightforward, commercial banking onboarding is complex, tailored to each business’s unique needs. As such, delays in enabling key services become a huge challenge in the onboarding process. 

The sheer volume of documentation and approvals, often requiring the input of multiple stakeholders, extends the process to weeks or even months, making it difficult for clients to access banking services as quickly as they would like to. 

In origination, the challenge is even greater for complex commercial loans, which require extensive underwriting and pricing. These loans involve detailed financial assessments, risk evaluations, and multiple rounds of approvals, often requiring weeks to finalize. For many financial institutions, these delays remain a significant hurdle that are difficult to overcome with their current systems in place.

2. Manual processes and paper-based workflows

Many banks still rely on paper-based documentation and manual data entry, increasing processing times and error rates; research from McKinsey has shown that as much as 50% of banks don’t have the tech for many of the onboarding processes. And with a process as complex as the one commercial clients go through, the back-and-forth required for banking onboarding and origination leads to frustration and lost opportunities.

3. Siloed systems and fragmented workflows

Many financial institutions have separate systems for services like trade finance, cash management, lending, and commercial banking onboarding, which often creates challenges for clients. Opening multiple services at a commercial bank can be frustrating, as clients are required to provide the same information repeatedly due to departmental silos and a lack of clear communication. This disconnected experience makes it difficult to smoothly set up accounts and get loans approved.

Instead of a streamlined process, banks rely on legacy infrastructure that lacks integration, slowing down approvals and increasing costs.

4. Regulatory and compliance hurdles

Banks must adhere to strict KYB and AML regulations, but many still use time-consuming compliance processes that require businesses to repeatedly submit the same documentation across multiple departments. In fact, 48% of financial institutions identified insufficient or outdated AML compliance technology as a major challenge. This redundancy prolongs the already lengthy onboarding approvals for commercial clients.

Manual and siloed compliance checks may also overlook critical red flags, exposing banks to potential fraud, money laundering, and regulatory penalties. While financial institutions aim to accelerate banking onboarding, simply rushing compliance processes isn’t the answer. Instead, modernizing KYC and AML with automation and data-driven risk assessment enables both speed and accuracy.

The consequences of inefficient onboarding extend beyond customer frustration — it’s costing banks revenue, market share, and operational efficiency. Here’s what’s at stake:

• Higher operational costs: Manual onboarding requires extensive human resources, driving up costs per client. 

• Lost revenue opportunities: Slow onboarding processes mean lost deals. Non-bank providers are capitalizing on inefficiencies in traditional banks by offering faster, digital-first alternatives for services like lending, cash management and trade finance  — further eroding market share.

• Client attrition: Only 46% of commercial banking executives rated their bank’s service as excellent or very good, according to Deloitte. This highlights the need for better client experiences, and simplified processes. 

• Regulatory risks: Failing to streamline compliance can result in fines and reputational damage. With increased scrutiny on KYC and AML compliance, banks must ensure their onboarding processes are both efficient and audit-ready.

Addressing these challenges requires a shift towards a digital-first, platform-based approach. Here’s how banks can modernize their onboarding processes:

1. Deliver an omnichannel experience

A unified platform integrates onboarding for various banking services — whether payments, lending, or treasury management — under an omnichannel experience layer. This ensures that commercial customers, from CFOs to treasury teams, can seamlessly onboard and manage services across channels.

Instead of requiring customers to submit the same information multiple times, the system reuses data across services and channels, eliminating redundancy and accelerating approvals. The result is enhanced satisfaction for clients and more effective cross-selling and upselling for financial institutions.

2. Automate and streamline processes

Manual processes create bottlenecks. By leveraging AI-driven document verification, KYC automation, and real-time decisioning, banks can accelerate onboarding while reducing manual effort. Automated document scanning and applications enhance efficiency, cutting down processing time from weeks to days.

3. Enable personalized journeys at scale

A platform approach makes it possible to configure banking onboarding journeys based on both customer archetypes and the specific products and services. 

Rather than requiring customers to fill out redundant forms, banks can pre-fill information using existing data from other products and services, asking only for validation. This ensures that clients provide only the necessary details for each service, streamlining the process whether it’s a small business owner opening an account or a multinational corporation setting up complex treasury services.

4. Implement a connected ecosystem for seamless integration

Legacy systems often make it difficult to integrate new solutions, leading to siloed data and redundant processes. Open APIs solve this challenge by enabling a more connected ecosystem where data flows efficiently across departments and integrates with a commercial client’s existing systems, such as accounting or ERP platforms. 

This means, for example, that instead of requiring businesses to manually submit multiple financial reports for a loan application, banks can automatically pull in the necessary data, accelerating approvals and reducing friction in the onboarding process.

5. Enhance self-service capabilities

Digital banking platforms empower clients to complete portions of the onboarding process themselves. Whether it’s submitting documents, tracking application status, or configuring account settings, self-service capabilities can significantly reduce onboarding time and free up bank staff for more strategic tasks.

Beyond efficiency, self-service tools improve transparency by giving clients a clear view of where they are in the process and what steps remain. Instead of waiting for updates, they can check their application status in real time.

A single digital platform also facilitates collaboration between clients and bank employees. For example, if a banker needs more information to underwrite a loan, they can send a request directly through the platform. The client then receives an SMS notification and can quickly upload the required documents, eliminating back-and-forth emails and scattered paperwork.

As commercial banking continues to evolve, institutions that prioritize a digital-first strategy will have a significant advantage. Banks that fail to modernize their onboarding and origination processes risk falling behind as non-bank competitors and fintechs offer faster, more flexible solutions.

A shift toward composable banking solutions enables banks to build scalable, adaptable platforms that cater to the specific needs of their commercial clients. Moving away from legacy, monolithic systems to modular, API-driven platforms enhanced by AI-powered automation will be crucial in ensuring speed, efficiency, and personalization in onboarding and origination.

At Backbase, we believe that the future of commercial banking is about more than just digitizing legacy processes — it’s about rethinking how banks engage, onboard, and serve their commercial clients. A unified platform approach is the key to making that transformation a reality.

Learn more about how Backbase can streamline commercial banking processes.