Home Slider Why KYC Regulations, Client Onboarding and Digital Transformation Are Driving Banks to Invest in Technology

Why KYC Regulations, Client Onboarding and Digital Transformation Are Driving Banks to Invest in Technology

by internationalbanker

Reetu Khosla photoBy Reetu Khosla, Senior Director of Risk, Compliance and Onboarding for Financial Services, Pegasystems





Thanks to the “Uber Effect”, traditional retail banks through to corporate and investment banks today are facing a number of challenges in their fight to remain competitive and keep pace with digital challengers. As a result, banks and clients alike are moving towards a more transparent, global, customer-centric and digital experience through technology.

In an ever-changing environment, banks are required to meet increasing global and regionally specific regulatory requirements, while also delivering the enhanced customer experience that consumers demand across a multi-channel platform. There are two key opportunities in particular in which technology applications can support this transition—omni-channel access and quick turnaround of new onboarding and product requests globally. Customers are looking for a true omni-channel experience whilst being viewed as the same customer across jurisdictions and products. They are looking for multi-channel, multi-product and global onboarding. Banks that are able to offer these elements well will ultimately become more competitive in the market. So what are the challenges involved, and what can banks do to meet them head-on?

Client onboarding and customer service 

Client onboarding is one of the most costly and time-consuming functions burdening global banks. A recent survey has shown that banks lose a significant amount of corporate business due to slow and inefficient sales, onboarding and customer-service processes. In fact, 78 percent of banks admitted that poor service had cost them corporate business in the last 12 months.

The onboarding stage is often critical to the long-term profitability of a customer, and yet it is during this period that process challenges often appear that can delay time to revenue and generate customer-satisfaction issues. On average, banks still need four to five weeks, and in some cases three to four months depending on the complexity, to bring a new corporate customer on board—which seems like an eternity in this digital world of online immediacy. Online document submission and collaboration may seem like simple technology these days; however, it’s surprising how many banking partners may not have this facility, which can be frustrating for corporate clients.

Typically, onboarding systems at financial institutions are also largely disconnected from other systems, including KYC (Know Your Customer), credit and account opening. There is no seamless view of the client and transparency in the process. Many global banks have 50 plus onboarding systems globally. The additional time that’s required for manual workarounds in addressing new product requests can be another cause for frustration. Banks need an onboarding application that helps them to deliver a seamless experience for their corporate customers, not focused just on data capture but also efficient orchestration of the full end-to-end client-lifecycle management process: onboarding through to KYC, credit, fulfillment through to legal and customer service. The best applications are those that are able to manage regulatory changes globally, integrate with leading KYC utilities and legacy systems, globally manage complex entity onboarding and due diligence, and are able to scale. Global banks are moving towards global client-lifecycle management technology investment to not only ensure compliance but to drive revenue while improving customer experience, all while ensuring a fully digital experience for the customer. 

Regulatory pressures 

On top of customer concerns, banks are facing some extreme pressures with continued low-rate environments, the pace of regulatory change and arcane, complex infrastructures. For example, the current fines and risks for not meeting KYC, due-diligence requirements are unprecedented. Yet, according to the same survey, only 21 percent of banks think their current KYC technology is flexible enough to handle changing regulations rapidly. New regulations and enforcement are occurring at an unprecedented rate and continue to impact onboarding times and customer experience. Onboarding and KYC systems have traditionally been siloed and manual. Banks are now investing in robust and scalable technology to not only rapidly manage new compliance rules but to ensure consistency globally to provide further efficiency in onboarding and due diligence.

One solution is to streamline the process by which banks incorporate regulations into their systems. Historically, regulations have been “hard coded” into systems, and therefore banks are investing in applications that can be easily updated while minimizing the operational costs and customer impacts. Traditionally KYC systems have also been heavily siloed across 40 to 80 countries and multiple lines of business. Banks need the ability to update rules rapidly, and technology should enable that. Truly flexible KYC applications that allow business-friendly tools to manage updates to an ever-changing set of regulations on one global platform while accounting for differences (i.e., anti-money laundering – AML, Dodd-Frank, FATCA, CRS and EMIR) based on customer type, product and location allow for rapid compliance.

Consider this: What if some components of KYC, due-diligence requirements could be moved to the front office as part of the initial customer interaction? Other components could then be part of centralised KYC functions across different lines of businesses and jurisdictions, ensuring consistency and faster due diligence. What if the system would drive only what’s required, when required and ensure re-use of due diligence, manage refresh using rules and large-scale remediation, on one common system? By ensuring this level of end-to-end orchestration, banks can drive parallel processes with country- and product-specific due diligence in a truly automated environment. 

Omni-channel engagement, transparency and efficiency 

Transparency across the client journey is essential in addressing these two main issues around onboarding and regulation changes. Banks should be looking to invest in technology that gives relationship managers and clients a single view over processes and allows omni-channel engagement across any device to ensure optimum customer experience. Again, CLM (customer lifecycle management) applications can have a role to play here by enabling managers and customers to engage seamlessly across any channel or device—be it via email or chat on a laptop, tablet or smartphone—so all parties know the latest status.

Customers and banks are simultaneously seeking faster transaction times, improved visibility, self-service and a global customer view—it’s the only way to ensure customer centricity in a highly competitive market. Today’s customers are less patient and want to transact faster across channels, countries and lines of business in a digital environment. As challenging as that may seem, banks have little choice but to evolve their existing systems to keep pace with these demands.

The leading global banks are already taking the current environment as an opportunity to move towards becoming truly digital organisations. By opting to use best-practice CLM solutions, they’re making tangible moves to transform their existing business processes to operate across multiple jurisdictions and lines of business, while putting the customer at the centre of the experience. With capabilities such as front-to-back office onboarding and orchestration, multi-jurisdictional and multi-product onboarding with omni-channel engagement and simplifying KYC and due-diligence compliance—technology has the potential to provide significant financial release for financial institutions via customer retention and long-term customer profitability, whilst also avoiding those hefty fines and the regulatory scrutiny.

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