The unique situation initiated by COVID-19 has vastly reshaped the operations of financial institutions. A McKinsey survey of global executives published in Q4 2020 found that nearly all respondents have strived to implement and accelerate the implementation of a digitised system for their customers, supply-chain management, and overall operations since the beginning of the pandemic.
This trend was driven in large part by customers’ demand for online channels as a method of conducting their businesses with all entities, including financial companies.
As the scope and depth of innovation projects continue to expand, company digitisation responsibilities are not solely the responsibility of the respective IT and Innovation department heads.
Today, the success of any digitisation process depends on companies’ ability to leverage both internal expertise and external partners to ensure the fast roll-out of long-lasting business solutions.
Take client onboarding, for instance.
The advent of technologies and innovations that can streamline the overall efficiency of client-side operations has drastically changed expectations of how firms should handle their client relationships from the start.
In this new landscape, the focus on digital transformation has given IT leaders a unique opportunity to rethink this crucial phase and embrace a more customer-centric perspective very quickly.
Gone are the days of paper-based processes that are tedious, difficult to execute, and do not scale easily.
But to successfully transition to the new era of client onboarding, compliance teams must be brought on board to seamlessly facilitate the process of digital transformation.
Traditionally, the compliance department has not simply been responsible for fulfilling regulatory commitments in relation to clients but has also played a strategic role in maintaining confidence in the services that financial institutions provide.
By working in tandem with the IT team, internal compliance experts can provide actionable feedback on what needs to be further refined and worked on, uncovering potential blind spots, and identifying risks and exposures during the onboarding phase.
Similarly, compliance departments typically deal with large amounts of data on a daily basis and know how to correctly interpret them to ensure that their organisation heeds requirements set forth by their regulators.
Their existing data sources may include official company registries, credit scoring services, anti-money laundering watchlists, or business databases. Understanding what these sources are and how they are accessed will help IT teams design the best process to aggregate and reconcile available data for a more transparent analytical process.
But it is not simply a matter of aggregating different data sources. Regulatory requirements for electronic Know Your Customer checks (e-KYC) – which are central for any client onboarding process and have become even more important since the beginning of the COVID-19 pandemic – often vary across jurisdictions of operations.
These variations have technical implications for the digital systems being built by the IT teams, and as such should be mapped and identified as early in the digitisation process as possible.
Let’s take two-way live video verification, for example. While this is specifically prescribed in jurisdictions such as India and Germany, elsewhere it can be replaced by more cost-effective and automated processes.
Regulators in Hong Kong and Malaysia, for example, have embraced a more flexible model which relies on identity documents plus liveness detection and can leverage AI-based technology to a much higher degree. Being aware of these differences will enable IT teams to implement digital processes that are optimised based on the country of the client that wishes to be onboarded.
The same attention to detail can be beneficial when configuring the back-end system to centralise all onboarding operations.
Here, compliance teams will have specific needs in terms of internal workflows, handover rules, and other permission-based actions; building these into the new system from the start will contribute to a smooth transition to digital onboarding.
Finally, if implemented strategically, automation-driven digitisation can also make internal and external reporting more efficient.
According to Thomson Reuters’ Cost of Compliance report, 50% of surveyed compliance teams spend at least four hours creating and amending reports for their board, and that represents only one small percentage of compliance teams’ overall reporting requirements.
Thus, there is a lot to gain from implementing technology that automatically tracks all steps undertaken during client onboarding and compiles individual and aggregated KYC reports to be retrieved with the click of a button.
This approach has the potential to save financial institutions a lot of time, spend and headaches, reducing the likelihood of negative outcomes of audits and improving overall efficiencies during onboarding.
In conclusion, digitisation projects of client onboarding are a unique opportunity to implement a more customer-centric, efficient, and secure process. However, due to its regulatory requirements and associated risks, it is also an extremely complex task.
Fostering a collaborative environment where IT and compliance teams can work hand in hand is financial institutions’ best action plan to address immediate needs and future-proof their strategy for years to come.
