Why is Automating Onboarding Procedures Inevitable for the Financial Sector

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Complying with regulations presents the most significant challenge as banks tend to have outdated systems that offer less transparency and are all over the place.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;

●      Unstructured Processes

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 clients’ frustration.

●      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. Shifting 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.

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