Advanced onboarding – Why banking and financial services must change its approach

COVID-19 has highlighted that banking and financial services must change its approach

The COVID-19 pandemic has dealt a seismic blow to the banking and financial services industry. With global commerce facing extensive and protracted disruption.  One thing has however remained constant during the crisis and that is the importance of getting the basics right:

  • Improving client experience
  • Strengthening controls
  • Reducing cost and complexity
  • Earning client trust every day

Few activities combine all of these transformational and reputational challenges like onboarding a new client and completing a Know Your Customer (KYC) or credit decision process. For onboarding and operations leaders, they pose unique, sometimes highly emotive, and highly complex challenges.


The impact of COVID-19 on customer onboarding in banking

Banks and financial service organisations have a unique opportunity, as the world resets after COVID-19 to reach out to their anxious customers and establish long-lasting relationships.

However, sales and relationship management teams face significant pressures to bring on new customers, only to find their efforts frustrated by the sheer length of time taken to arrive at a decision about whether the client meets the bank’s credit and risk appetite.

As a result it takes an average of 32 days to onboard a new customer, and thanks to the departmental nature of banking operations, each customer goes through around 8 different interactions during the customer onboarding process.

According to Fenergo:

One in three (36%) financial institutions have lost customers due to inefficient or slow onboarding and 81% believe poor data management lengthens onboarding and negatively affects customer experience.

84% believe the client experience during the customer onboarding process impacts the lifetime value of the client.

But it’s not just customer experience that is suffering, slow onboarding processes in banks are costly:

  • An average of 307 employees work on KYC adherence
  • It costs banks an average of $40m per year to onboard new customers
  • Banks and financial institutions are expected to see a 13% increase in CDD and KYC outlays in the next 12 months

Why a siloed approach won’t work in the post-COVID-19 new normal

Within banks and financial services organisations selling to companies involves a period of prospecting and engagement before any formal customer onboarding process can commence.

More experienced individuals within these teams tend to be quite adept at recognising typical risk issues at this stage, if they are evident.

For the most part, this sales process is worked upon in good faith by both parties, and aspects of a deal (such as products and limits) are decided upon ready for the onboarding phase.

Identity documents are taken and checked, and depending upon the process of the bank involved, the credit risk process is started and aspects of the KYC process may begin.

It is at this point that the bank is assessing various risks as required by their policies, designed to meet regulatory requirements.

The outcome of these checks is often to complete the onboarding process and to welcome the new customer.

However, in many instances, bank policies dictate that the nature of the deal needs to change in one or more aspects – and in more extreme cases, the bank is unable to complete the deal entirely.

The Coronavirus Business Interruption Loan Scheme (CBILS) highlighted perfectly the delay caused by the need to apply eligibility and lending criteria to applications before front line teams get involved.

In the new normal it will be important for front line staff to optimise their use of time and resources. If sales and relationship managers are wasting time chasing the wrong type of deal, then compliance and KYC teams are likewise being unnecessarily burdened with unmanageable workloads.

Data, automation and collaboration – the three pillars of advanced onboarding

It is commonplace to talk of meeting the KYC needs of a bank by accessing more complete data sources, more accurately and more quickly.

On the surface this may appear a good idea, but looking holistically at the goals of the bank, it is instead contributing to the problem of an unmanageable workload in KYC and therefore contributing to longer queues, longer onboarding windows, lower customer satisfaction and ultimately, greater dissonance between the twin drivers of meeting regulatory compliance and delivering commercial growth.

Data alone is not the answer.

Artesian has coined the term Distributed Compliance – bringing together data, collaboration and automation to improve an organisation’s ability to meet its regulatory KYC requirements whilst at the same time delivering advanced onboarding.

Distributed compliance involves giving the Compliance team control of a sophisticated decision engine to enable data coming in to have rules applied and tasks created.

Further, it means distributing these tasks to appropriate staff, monitoring the completion of the tasks and evidencing the whole process. The automation aspect of this is fundamental because it brings efficiency, consistency and control to the areas it transforms.

Combine this automation with improved collaboration and its gets really interesting. Distributed compliance gives a KYC view to Relationship Managers on the front line of new relationship building, and also involves them in the first stages of the KYC journey. It puts risk at the front line of the business and at the same time distributing the KYC queue to allow compliance analysts to focus on work that requires their skills and experience.

Distributed compliance puts knowing your customer back where it belongs – in the hands of Relationship Managers – thereby improving an organisation’s ability to meet its regulatory KYC requirements, delivering advanced onboarding and improved new customer experiences.

ARCH for Relationship Managers

Bring KYC and advanced decisioning to the front line and improve your onboarding processes

Artesian’s Risk and Compliance Hub (ARCH) distributes simple KYC tasks to Relationship Managers and other appropriate people in the organisation, leaving KYC specialists to deal with complex tasks requiring their knowledge and experience.

ARCH enables full and transparent collaboration in an organisation so that policy specialists can place KYC actions exactly where they need them and so that front line Relationship Managers can really know their customers before they even engage with them.

ARCH enables banks to make full use of their combined knowledge and expertise in different areas to ensure that regulatory needs are met and also that task queues are minimised through distribution, and the needs of the customer in onboarding are met.

In early tests, ARCH has been 100% accurate in reflecting risk and KYC policy in pre-screening. In fact, it has (on average) uncovered 14% more risks than were identified in the onboarding process.

The data gathered in pre-screening has helped reduce the time spent in the data-gathering phase of onboarding by 90% – giving Relationship Managers more time to spend on building relationships.

“Artesian will help us put risk and compliance at the heart of our commercial process, to serve a greater need than regulation alone” Jeff Courtney, Head of Portfolio & Planning, Business & Commercial, Metro Bank


Want to boost onboarding for the post-COVID new normal?

To understand more about the future of risk management and KYC and the opportunity of harnessing digitised distributed compliance please download our new Risk paper Distributed Risk: The Answer to the Increasing CDD & KYC Challenges.

Or take a look at how Artesian Solutions has been helping Banks Accelerate CBILS Lending by Alleviating the Bottleneck.