Onboarding optimization has allowed some banks to reduce onboarding time dramatically – up to 80-90%.

Meanwhile, fines and penalties of up to nearly $2 billion have been levied on banks for breaches of regulations governing trading with suitable clients. In total, banks paid over $4 billion in fines just in 2012 for compliance and KYC violations, in most cases because of structural issues with systems, processes and a culture around customer onboarding and KYC that prevented them from identifying and deselecting customers with a high risk of financial crime.

An expectant new customer gains its first impression of the bank’s true level of service and commitment from the customer onboarding process. 75% of cross-sell opportunities arise in the first three months, so a smooth and impressive experience is vital to delivering the customer satisfaction promise, cementing the relationship, and of course to this initial additional revenue.

Banks now require a single solution to these two issues, both consequences of how essentially the same process is carried out.  You can have your cake and eat it.

Banks want to take control of the customer experience proactively. Swift and efficient onboarding increases customer stickiness and retention levels resulting in greater value to both the corporation and the bank.  Simultaneously, banks need not only to comply with ever-changing regulations but be able to demonstrate active investment in the seriousness with which it views compliance.

Whilst many of the heaviest fines are coming from the US with the Dodd Frank Act, the US Patriot Act and FATCA regulations, many other territories are also being stringent about KYC and related topics.  MiFID and EMIR in Europe also have provisions that apply to this process.

So the challenges that banks are currently facing are with manual and fragmented onboarding with multiple, inconsistent processes, especially across different lines of business. Paper is slowly giving way to electronic documents but exception handling processes are still largely manual. Limited or no automation results in long operational life cycles and so a costly, inefficient operation. The costs of onboarding customers have been shown as up to thirteen times greater in some lines of business than others – showing the potential for saving when best practice is adopted. A prime example is applying manual due diligence checks to clients suspected of being high risk, which can inflate the elapsed onboarding time from hours to months.

The major challenge for banks is thus to manage evolving compliance and risk while at the same time offering customers with a differentiated customer experience – and reducing cost. The market is actively moving towards centralized client onboarding that provides a single point of access to client data and a consolidated view of a client across the enterprise, which in itself generates other benefits. Banks tackling client onboarding and KYC projects separately will suffer, while those that consolidate the data from both functions under a single view in order to ensure consistency of data across the enterprise will benefit.

The compelling need is to adopt a customer onboarding process that centralizes, streamlines and cost effectively creates a differentiated customer experience while ensuring regulatory certainty.