Onboarding is broken – Artesian uncovers common consensus on the solution

In October, Artesian held an open discussion on the art and science of customer acquisition in financial services, and how to tackle the highly nuanced and complex customer onboarding process in business and commercial banking.

Attended by 22 delegates from 11 different banks – big, small, traditional, challenger, private and commercial, each came with a different view and a different set of challenges.

Not a one size fits all issue

Whilst some consider onboarding ‘horses of courses’, a process that takes time, takes money and takes resources, but one they must complete diligently in order to comply with KYC regulations, others certainly felt that more could be done to improve the process of conducting identity checks and gathering the vital information needed to adhere to and maintain risk management standards.

Onboarding SMEs or private banking customers are often more straightforward, however, these clients perhaps have high expectations of the onboarding process, requiring it to be slick, quick and simple.

Whilst at the other end of the spectrum enterprise-level customers come with increased complexity challenges but are willing to accept a longer process.

Another significant issue raised was that of resource and cost.

Whilst more nimble and unencumbered by legacy technology, challenger banks and smaller banks might be able to offer swifter onboarding processes than their traditional larger peers, but the pressure to get it right is increased by the fact that they simply cannot afford a fine.

However, for the larger banks constrained by a siloed infrastructure, onboarding is hampered by the departmental nature of banking operations. Of course, the answer could be to increase headcount in a more linear fashion, but this is often cost-prohibitive.

To put some stats around this:

• 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

It appears that there is no-one size fits all solution to onboarding across the banking spectrum.

The startling fact remains however, that currently regardless of the type of bank, the size of the team, or the type of customer, 36% of financial institutions have lost customers due to inefficient or slow customer onboarding, 81% believe poor data management lengthens onboarding and negatively affects customer experience, and 84% believe the client experience during the customer onboarding process impacts the lifetime value of the client.

The challenge today is for banks to transform customer onboarding in such a way as to provide good customer experience, whilst also meeting compliance requirements and improving operational efficiency.

So where can we find common ground in tackling the diverse range of issues faced by banks?

What are the common onboarding challenges?

As part of the event we sent out a survey to every delegate. This offered a great starting point for discussion, and uncovered some vital commonality on the current state of onboarding:

• 90% of attendees agreed that improving KYC and onboarding processes is a top priority, or extremely important
• 63% felt that realistically ‘good’ onboarding means eliminating the pain, complexity and hassle for customers and colleagues, whilst 18% felt ‘good’ meant getting the basics right reducing pain, but accepting that some friction is inevitable
• When it came to the main hurdles to improvement, 81% listed better processes and 81% stated a need for improved systems, tools and data

The big finding, however, was that 100% of respondents agreed that when they have seen onboarding and KYC working really well, it was the technology that made the difference. We found some common ground!

Using the analogy “are we aspiring to be good dentists” i.e. do we accept that onboarding is a painful process that no-one relishes (banks or their customers) and the aim is, therefore, to reduce pain and friction as much as possible, or are we aiming higher – for the ultimate in slick, pain-free onboarding – it became clear that whatever side of the argument our delegates sat on they agreed that technology offered the solution.

As the event unrolled, it became apparent, however, that ‘good’ onboarding is actually as a result of the combination of human and technology. So we explored further.

Human & machine working together

With customer experience so high on the agenda when it comes to onboarding, it would be foolish to disregard the importance of human-to-human contact during such a complex process.

Delegates from all of the banks agreed that customers still very much value human-to-human interaction and that the human touch is still important.

Likewise, bankers value their role as a trusted advisor. They want to have the conversation, they want to build relationships, and feel strongly that being a well-informed trusted advisor has real lasting value both for the customer and the bank alike.

Increased competition from fintechs is driving a move towards automation and digitisation, but banks still want and need to offer the one thing that the fintech’s don’t – human interaction.

Although digital banking is on the ascendancy, the continued relevance of the human touch is still a significant driving force behind customer acquisition and retention.

Technology offers dramatic improvements in efficiency and service enhancements, and customers certainly value this when it comes to onboarding, but sometimes there are just some conversations and issues that are best dealt with human-to-human.

Banks cannot afford to keep amassing vast KYC, compliance teams alongside vast teams of front line customer-facing staff.

Combining automation and human connection can give banks the leg up over fintech competitors. The challenge is for banks to figure out what to automate and how to still offer a personal experience.

Invest in the things customers care about

The conclusion we came to was that in order to fix broken onboarding processes the key was to reimagine it by looking through the customer lens. Start with what matters most to the customer and build from there.

Customers want well informed and well-timed conversations throughout the onboarding process, but they also want slick, efficient and speedy processes.

Seems like an expectation dichotomy, but its solution is one and the same – invest in the things customers care about.

Automate processes that don’t add value to the conversation, whilst also embracing technology to augment the things that do.

The obvious role of automation is to take over repetitive laborious tasks that leave banking staff free to immerse themselves in the engaging, experience-enhancing and value-adding aspects of their roles.

But more than that, automation and digitisation offer the potential to augment the banking professional’s abilities.

Machines can swallow vast amounts of data in real-time, far beyond the capabilities of manual processing.

Machines can collect, rationalise, organise and deliver instant access to the highest-value information, and direct how to act on it based on solid, measurable facts.

In onboarding automation and digitisation offers the ability to:

• Have meaningful, well informed, timely conversations that improve experiences
• Reduce the gaps and cracks in processes where risk management typically falls down
• Automate data flows and eliminate fragmentation across departments (compliance and front line) which typically slow down onboarding processes
• Gain access to the hazard and opportunity data that matters most in KYC and CDD faster – identity checks, key financial, fraud and credit indicators, corporate structure and director intelligence, UBO structure, jurisdictions and markets, adverse media etc.
• Reduce administrative burden and overheads on manual staff
• Reduce costs and therefore invest more into the things that matter most to the customer.

The Artesian Risk and Compliance Hub (ARCH) – the common-sense solution to the onboarding problem

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

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 it 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 customer-facing frontline 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.

ARCH enables banks to make full use of their combined knowledge and expertise in different areas to ensure that regulatory needs, 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.

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