We commissioned Forrester Consulting to help us investigate the value we drive for businesses who use our document and biometric identity verification solution. To do so, they conducted a Total Economic Impact (TEI) study by interviewing five of our existing customers. Following our recent webinar on the topic featuring guest speaker, Kim Finnerty (Forrester Senior TEI Consultant), we spoke with her again to answer some common TEI questions and talk about what she discovered in the process.
To set the scene, what is a Total Economic Impact™ (TEI) study?
The TEI is Forrester’s methodology for measuring the comprehensive impact of investments, technologies, projects, and initiatives. TEI studies are holistic business cases that include decision drivers, the customer journey, and qualitative and quantitative impacts – culminating in a sample financial model that shows an estimated return on investment (ROI) for a composite organization representing those who participated in Forrester’s research. They are meant to help readers who are considering a similar investment to understand the experience and outcomes achieved by other customers. These studies are commissioned by solution providers who wish to discover and articulate their product’s value to the market.
What problems were our clients trying to solve?
Many of the customers Forrester interviewed were experiencing losses from fraudulent activity and from failure to comply with local Know Your Customer (KYC) regulations and other legal requirements. This was especially true for organizations doing business in more than one country, even those whose operations were largely contained within the European Union. If customers had not directly experienced these losses, they were highly aware of the risk, and motivated to avoid the potential loss of money and/or reputation.
A second set of problems related to the onboarding experience of the organizations’ potential customers. Decision-makers at the interviewed organizations were very aware that other businesses—including their competitors—were successfully delivering an online experience consistent with the promise of the channel. They found that potential customers were easily frustrated with the time it took to verify their identity and were abandoning the process mid-stream, leading to significant lost business as well as damage to their image as digitally sophisticated brands.
Was there clear alignment on the quantifiable benefits of Onfido’s solution?
Yes, there absolutely was alignment. Each of the organizations we interviewed placed a slightly different emphasis on the different benefits and, of course, the monetary value of each to the businesses varied by factors such as the organization’s size, digital sophistication, and overall profitability.
Onfido’s ability to speed up this process resulted in a higher conversion rate and significant revenue improvement
One of the first benefits every interviewee pointed out was a decrease in application abandonment. Onfido’s ability to speed up this process resulted in a higher conversion rate and significant revenue improvement for these organizations. The head of onboarding at an online trading organization stated, “We used to require a whole set of documents, but we now can proceed with simply an ID document and a selfie. So, this really reduces the time of onboarding.”
Onfido’s role in allowing these organizations to lower their exposure to application fraud was another valuable benefit. While most customers had robust fraud protection processes in place, for most the protection was only as strong as employees’ skill at detecting fraudulent papers or ID photos. One interviewee put it this way: “the more manual the verification process, the more mistakes were made. This not only slowed down the whole procedure, but probably allowed more fraudulent accounts to be created.”
Finally, the interviewed executives all pointed to significant productivity improvement within their own onboarding teams. With onboarding teams freed up from the time-consuming task of ensuring that applicants are who they say they are, the teams finalized significantly more applications and created more accounts each day. Each employee created more revenue, and the organization could handle more growth without expanding the size of the onboarding team.
How did you approach the process of quantifying the benefits?
Forrester used the cost, benefit and risk data gathered by interviewing five decision-makers at four different organizations using Onfido, along with Forrester’s own research in the market space. The study team designed a composite organization—a $240 million global, digital-native bank—based on the characteristics of participating organizations. Finally, the team constructed a financial model based on the same organizations’ experiences.
The model showed $5.8 million in risk-adjusted Present Value (PV) from incremental accounts added over the course of three years, driven by a 5-point decrease in the abandonment rate, a $158 lifetime value per account, and a 35% net margin.
The value of lowering the composite organization’s exposure to fraud was $4.2 million, based on a 20-point improvement in detection (to over 95%) of an industry standard 2% fraudulent application rate and $900 loss per fraudulent account.
Forrester determined that increased productivity on the part of the onboarding team delivered $3.3 million in cost savings to the composite organization. Assuming a 30% decrease in the time to open an account and an average fully burdened salary of $67,500 per team member, the organization could grow at 15% per year while expanding the onboarding team much more slowly, allowing those employees to take on other critical tasks.
Do you think these benefits would be applicable outside of Financial Services?
Yes, these benefits should all be applicable to organizations in other verticals. The problems the interviewed executives discussed are common to many types of organizations. Fraud, for instance, is a problem that faces any business advancing credit, whether to consumers or to other businesses. A more effective verification process would lower that risk for all those organizations. Many organizations also face significant fines, both from governments and clients, for failing to adhere to regulations or industry standards of customer verification. If that verification process slows down the speed of any buyer’s online purchasing—becoming an ever-larger portion of most organizations’ revenues—it has the potential to cost the organization both current and future business. Finally, businesses in virtually all sectors could benefit from fewer manual processes that entail increasingly large organizations. Automation of identity verification processes and more productive use of human assets is a goal toward which many organizations strive.