What does a bank’s onboarding process look like?

Joining a new bank is about much more than simply opening a bank account. It’s also an opportunity to build a lasting relationship – one built on trust – to help you develop and implement your projects. The initial contact between bank and client is a crucial part of making this a reality. This period is also known as onboarding.

What is onboarding?

Onboarding is the process of establishing a relationship between a bank and a new client. It is during this period that you will get to know one other. As part of the onboarding process, the financial institution will make sure that you meet various legal criteria, as well as criteria pertaining specifically to its risk policy, before it can commit to taking you on as a client. It will ask you for the information it needs to verify your identity and confirm that you are indeed eligible for the services it offers.

Now’s the time for you to assess whether this particular institution is able to meet your expectations. These initial discussions are an ideal opportunity to find out about the products on offer and the level of support provided in order to ensure that they meet your needs.

What steps make up the onboarding process?

After researching the market and comparing the various banking offers available to you, you are now ready to begin the onboarding phase.

> Making contact

Depending on the financial institution, you will be able to contact the bank either via an online account opening application form, by visiting your local branch or through a fully digital application. Some banks also offer appointments via video call.

> Supporting documents

The bank will ask you to provide supporting documents to find out more about your personal and professional situation. The documents required may vary from bank to bank. While there is no official list of accepted documents, the most commonly requested ones include identity document, proof of residence, document confirming your employment status (employment contract, pay slips, pension certificate, etc.), proof of source of funds, tax identification number (TIN), etc.

> Compliance checks

The bank will then carry out compliance checks to ensure the information you’ve provided is accurate. It may ask you additional questions to ensure there is consistency across all data.

If the bank has a fully digital onboarding process (certified identification, electronic signature, etc.), then every step, including the act of opening the account, may be completed remotely, without you needing to meet with a Relationship Manager.

> Discussions with your bank

If your application is approved, you can then make an appointment with your Relationship Manager to open your bank account and sign the paperwork. This will be an opportunity for you to review both the package you’ve chosen (type of bank card, payment and withdrawal limits, etc.) and your overall financial situation.

If your needs go beyond simply managing your day-to-day finances, we encourage you to make sure you come to this appointment well prepared. The clearer you are in expressing your expectations, the better your banker will be able to support you. During the appointment, you can ask any questions and discuss your financial objectives. Your Relationship Manager will be able to help you tackle subjects such as buying a property, financing your children’s education, preparing for retirement, estate planning, etc. They will then be able to guide you towards the solutions that are best suited to your circumstances.

Useful info: if the bank has a fully digital onboarding process (certified identification, electronic signature, etc.), then every step, including the act of opening the account, will be able to be completed remotely, without you needing to meet with a Relationship Manager.

Why do I have to provide the bank with so much personal information?

> It’s a legal obligation

Your bank is going to be collecting a lot of data and asking you to complete and sign a number of documents. While this may feel stringent, the bank really has no choice. This is a legal and regulatory obligation that must be complied with – failure to do so could lead to the bank being fined or prosecuted.

The aim here is to prevent any illegal activity (money laundering, terrorist financing, identity theft, fraud, etc.), thus protecting clients and ensuring the reliability of the bank.

Your bank has a duty to verify the identity of its clients and to obtain information about them (KYC, or Know Your Client, procedure) as part of the fight against money laundering and terrorist financing. It may ask you about the source of your funds (economic and geographic), your income and the type of transactions you are planning, as well as your expectations, your tax situation, etc.

In addition, the nature of Luxembourg’s ecosystem necessitates even greater in-depth analysis, as the country brings together a wide range of profiles: international clients, sometimes complex tax situations, etc.

These verification procedures apply to all clients. The aim here is to prevent any illegal activity (money laundering, terrorist financing, identity theft, fraud, etc.), thus protecting clients and ensuring the reliability of the bank.

Useful info: banks are legally entitled to refuse a client or close their bank account if they provide inacurate information, withhold information, or fail to comply with the applicable laws and regulations.

Lastly, while these compliance checks are carried out during the onboarding phase, they may also be carried out again from time to time during the course of the business relationship. While the bank is required to adapt to regulatory changes, it also needs to ensure that the transactions you carry out are consistent with your typical activity. It may therefore ask you to update your data or to justify certain transactions. The upside to all these requests is that they ultimately help ensure the reliability and stability of your banking partner.

> To personalise the support your receive

Your banker can also help you finance your projects if asked. In order to provide you with personalised recommendations that are tailored to your situation, they will need to speak with you.

They may ask you questions about your professional situation, your spending, your outstanding loans, your family situation, when you plan to retire, the composition of your assets, your risk tolerance, your sustainability preferences, and so on.

In order to know which investment product to offer you, for example, they will need to know your financial objectives, your risk profile, your ESG preferences and, for the more complex products, your level of banking knowledge. It’s their job to ensure that the product or service they advise you on is suited to your needs, your financial situation and your life goals.

The same applies if you want to take out a loan. The bank will need to know your income, your living expenses, how much you can afford to save, whether you’ve taken out any loans, and so on.

A financial expert needs to know you well in order to give you the best advice on how to manage your finances.

Useful info: It’s in your interest to answer all of these questions accurately and honestly. Just as a doctor needs information in order to prescribe the right treatment, a financial expert needs to know you well if you want them to be able to give you the best advice on how to manage your day-to-day finances and make your private and professional goals a reality.

The onboarding phase is an essential step on the path to building a relationship with your bank. It will help you get things off to a solid start and make your life easier moving forward. Find out more about opening a bank account in Luxembourg.