Why Automating Customer Due Diligence is Key to Faster Onboarding
Yes, it’s a cliché, but nonetheless true: you never get another chance to make a first impression.
For financial institutions, onboarding new customers is your first opportunity to win them over and set the stage for the entire relationship going forward. Your onboarding process needs to be as fast, seamless and painless as possible. Customers who feel your initial onboarding and activation is too difficult or time-consuming are likely to walk away.
In fact, 90 percent of new customers abandon account applications before they are completed.1 Forty-two percent stated they opted out of the process because the time to complete and the terms and conditions were too long.2
Even if they stay, first-time customers who have a bad experience with your onboarding process will be reluctant to conduct more business with your bank after the initial account setup or loan approval.
Customer Due Diligence is Creating Onboarding Headaches
Know Your Customer (KYC), Anti-Money Laundering (AML), and Customer Due Diligence (CDD) regulations require verification of a customer’s identity against numerous watch lists and public record databases before your bank can open a new account or approve a loan. You also need to conduct ongoing due diligence for any material changes such as address changes.
On a global basis, financial institutions spend an average of $16 million for client onboarding and regulatory compliance, yet problems persist. These laws have complicated customer onboarding and are slowing it down to a painful crawl—frustrating potential new customers and leading to a bad first impression.
Adding insult to injury, penalties for non-compliance can be hefty and damage your reputation in the marketplace. Take note of AIB, a bank located in Ireland, who was recently hit with a massive Central Bank fine of €2.275m or approximately $2.5B USD for failing to check if they were being used for money laundering and tax evasion.
Increasing Onboarding Times = Increasing Costs
According to a Thomson Reuters survey, onboarding times are steadily increasing. In 2015, it took financial institutions 24 days to onboard a new client—22 percent higher than in 2014. Onboarding times went up another 18 percent in 2016.3
As stated earlier, the longer your onboarding times, the more likely you are to lose customers. Sixty-four percent of banks have reported lost deals and revenue due to problems with their onboarding.4 The top 100 financial institutions have a 25-40 percent rate of attrition, losing $400 in revenue from each customer.5
Taking the Complexity Out of Customer Due Diligence
To solve these challenges, banks are moving to newer, more cost-effective solutions that simplify compliance. Smart, agile technology automates identity verification checks, so you can process new accounts or loans more quickly and accelerate onboarding.
According to a Cognizant report: “A majority of client onboarding problems can be eliminated or managed better if banks focus on automation and reduce manual intervention. It will help ensure timely completion of the process and the availability of accurate data.”6
Your bank should consider a platform that provides easy-to-use software, end-to-end tools and an expandable architecture that eliminates manual tasks and enables you to adapt quickly to ever-changing regulations. You also want a solution that improves the customer experience across both your in-person and self-service channels.
Look for capabilities that allow your customers to scan their ID with a mobile device to jumpstart the account opening process and speed approval. And you’ll want the ability to engage with your customers across multiple channels, and in the manner they prefer, such as via smart phone, real-time chat or video.
So what business benefits are possible if your bank embraces smart technology?
Consider that banks that digitize their processes have seen significant improvements, such as an 80 percent reduction in onboarding times, 60 percent of manual steps eliminated and increased visibility of client status during onboarding.7
Leveraging RPA to Speed Compliance and Customer Onboarding
Robotic process automation (RPA) is fast emerging as a smart solution to ease compliance and expedite onboarding. RPA mimics the actions your employees take while performing repetitive compliance tasks in various applications, eliminating time-consuming, error-prone manual data entry. In essence, it creates a digital workforce that works side-by-side with your compliance officers to streamline KYC operations.
RPA can automatically check a customer’s background against thousands of sources–gathering and integrating data from sites such as the U.S. Treasury, Immigration and Customs Enforcement, the FBI, law enforcement agencies and credit bureaus. RPA queries all of these sources simultaneously, improving the quality of data and reducing the time to accurately verify that a customer is who they say they are.
According to the Institute of Robotic Process Automation, out of every 100 steps, a human is likely to make 10 errors, even when carrying out somewhat redundant work. As a robot never makes a mistake, RPA significantly improves your data quality, eliminating costly errors to deliver 100 percent accurate information while also providing complete audit trails that strengthen your compliance.
Your bank can also decrease processing times between 30 to 50 percent—and potentially up to 90 percent. Best of all, robots can perform customer due diligence around the clock 24/7/365 and never need to take a vacation, coffee breaks or call in sick.
Reducing Data Gathering Times by 92 Percent
One of the largest financial institutions in the Netherlands carries out more than 3,000 investigations per week to prevent identity theft and financial crimes. They relied on slow, manual processes with analysts spending hours daily on tedious data-gathering for CDD/KYC checks.
By deploying RPA, they reduced the time to complete data-gathering work from 25 minutes to just two minutes per investigation. This translated to time-savings of approximately 235 hours per week, while also improving data accuracy by 40 percent.
Most importantly, the bank has increased confidence that they are approving the right customers while delivering a better, faster onboarding experience that makes a good first impression.
The Cognizant report states: “As banks move forward to gain larger market share, the focus will be on a smart, flexible and agile onboarding process to stay competitive. The client’s experience in the onboarding process will be pivotal in determining the relationship with the bank.”8
Discover the solutions to reduce KYC/CDD complexity and speed your customer onboarding process. Download this whitepaper KYC Sparks an Automation Revolution with RPA to get started. Also, see The Top 5 Reasons You Need Robotic Process Automation for KYC infographic.
Find out how a South African bank increased new account openings by 50 percent, growing market share and boosting financial inclusion.
- Javelin Strategy & Research “Convert `Silent Attrition’ into Banking Engagement and Profits,” 2015
- Path Power Consulting, April 2017
- Thomson Reuters, 2016 Know Your Customer Survey, May 2016
- Forrester Consulting, Client-Centric Onboarding – Hopes and Realities for Global Banks,” May, 2014
- Digital Banking Report
- Cognizant, Efficient Client Onboarding: The Key to Empowering Banks
- pwc, Transform Your Bank’s Operations Model
- Cognizant, Efficient Client Onboarding: The Key to Empowering Bank