Onboarding clients in the financial sector can be an
elaborate and sophisticated process. Advanced technologies are playing an
essential role in enabling banks and financial institutions to streamline their
client onboarding procedures. The digital transformation in the sector driven
by the need to meet operational hinderances and lengthy due diligence methods.
In essence, onboarding is the process wherein a bank or financial institute
brings in a new business client. Onboarding new clients involve collecting
vital and relevant records from the customer and performing proper identity
verification to adhere to KYC and AML compliance regulations.
Complying with regulations presents the most significant challenge as banks tend to have outdated systems that offer less transparency and are all over the place. Addressing these concerns has been an uphill battle for the financial services industry, but it is coming around to implementing advanced tech solutions.
Challenges in the Current Onboarding Procedures
A survey done by Forrester suggests that, on average, a
client is contacted ten times during the onboarding process. The costs of
onboarding a new client can go as high as $25,000, with an average of $6,000.
Some challenges in the existing client onboarding procedures include;
As the onboarding process involves deliberation on the part
of different departments including operations, legal and credit, every
department follows regulatory requirements differently. It may end up creating
confusion amongst clients. They may also have to provide the same documents and
information multiple times. It can take more time and can be a cause for
Rapidly Changing Regulations
The financial sector is a highly regulated one as it is. Over
the past decade, however, global financial regulators have increased the
crackdown on financial crimes like money laundering and terrorist financing. In
the wake of Panama Papers leak, institutions like FATF have become more active
against money laundering activities that take place around the world. They have
increased anti-money laundering (AML) requirements for countries, who in turn
have made their laws more stringent. With such a rapidly changing regulatory
environment, banks have to keep their compliance structures up to date through
modern tech solutions.
Slow and Limited Access
As the fintech industry is advancing, financial institutes
have to consider the implication and impact that modern technology can have on
their onboarding procedures. Banks and financial institutions still adamantly
use legacy systems that are costly and inefficient. Customers require their
services to be fast and remote. They need to access their accounts and other
information remotely. Technologies like AI can allow banks to make their
services instantly available to clients. Moreover, the involvement of multiple
departments and the requirement of different documents at different stages of
the onboarding process slows down the whole process. It may even end up making
the customer abandon the process entirely.
Automating Client Onboarding
Digitizing client onboarding procedures
presents itself as the perfect solution to address all challenges. It can allow
for more and better transparency, not to make onboarding faster and more
efficient. Automation can also allow for better visibility of client onboarding
and improve access to information across institutes in the government and
private sector. New technologies including artificial intelligence and big data
analytics present many opportunities for the Fintech industry and can help in
developing prolific solutions. Automation facilitates three critical benefits
for the onboarding procedure:
● Reducing onboarding time and allowing for
an increased number of customers.
● Enhancing productivity in the process by
eliminating manual procedures.
● Lowering costs for onboarding clients and
maintaining clear auditable records.
Revolutionising Onboarding With Advanced Tech
At present, the Fintech industry stands at the pinnacle of
growth. It has presented the financial sector with brilliant solutions that
have lent increased capability to standard procedures. Through AI banks are now
able to screen clients through global AML (Anti Money Laundering) databases and
sanction lists. They can also use an identity verification
service to authenticate their client’s credentials. The OCR (Optical
Character Recognition) technology enables the extraction of information from
scanned documents, thus eliminating any inaccuracies caused by manual
procedures. Moreover, machine learning algorithms are increasingly being used
for predictive analysis in detecting fraud in customer transactions. It reduces
the risk of fraud and allows banks to build trust amongst their clientele.
to a tech-savvy structure is not easy and can take time to adapt. However,
change is essential to get rid of silo systems that have isolated compliance
and onboarding procedures of clients. Increasing transparency within and
outside the financial institutions is crucial to get rid of inefficient and
static methods. Sharing of information is also equally essential in developing
better onboarding procedures. To effectively implement digital systems of
compliance and identity verification, financial institutions need to have a
clear idea about where they stand and what they require to achieve their set
goals. By automating client onboarding procedures, they can make the process
more efficient and productive.