Six top trends that are making banking compliance teams rethink customer onboarding strategies in 2023
Time-to-revenue is an increasingly key metric for banks, whether they be traditional, challenger or neo. But banks are operating in an incredibly fast-paced, complex, and rapidly evolving environment, which can have significant detrimental impacts on the speed and efficiency of corporate customer onboarding processes.
The equation is simple - the longer onboarding takes, the slower the time to revenue.
With McKinsey’s Global Banking Annual Review predicting that corporate customers sit at the heart of a predicted 9% increase in global banking revenues over the next two years, delivering a fast, efficient, and compliant customer onboarding process is more critical than ever before. Get it right, and banks can enjoy competitive differentiation, greater efficiency, and revenue growth.
But what does getting it right look like?
Here are 6 key trends impacting the evolution of customer onboarding strategies in 2023:
1 - Regulation
Regulators are tightening controls in an attempt to make it harder for criminals to find weak links in the defence mechanisms of banks. It’s a constantly evolving regulatory landscape that presents a huge drain on resources and expertise. But with huge fines and reputational damage at stake compliance is non-negotiable.
As AML and other regulatory frameworks tighten, customer onboarding strategies must also evolve so that they can adapt to developments. The risks of not doing so includes creating compliance gaps, increasing costs, and overburdened teams.
But banks must also balance this against customer experience…
2 - Customer experience
Complex onboarding processes for new corporate clients can take up to 100 days. This can lead to significant dissatisfaction and abandonment, which is costly – banks are literally losing millions every year due to poor onboarding experiences.
Corporate banking customers want a service that’s fast, efficient, and frictionless. KYC processes present the most significant bottleneck to achieving this. Onboarding delays and frustrations typically result from the vast amount of data and documentation banks require for compliance.
Customer onboarding strategies must therefore review how data is acquired, processed, verified, and risk assessed if they are to deliver the seamless experiences customers demand.
3 - Identity verification
In today’s global banking environment, identity verification is tougher than ever. Banks must access real-time identity information across a wide range of national, international and government data sources. In addition, that must undertake watchlist screening against both local and global sanctions, and politically exposed persons (PEPs).
When rethinking their customer onboarding strategies banks must ensure that their identity verification capabilities meet both regulatory requirements and customer expectations for speed and convenience, as well as ensuring they have the inbuilt agility to remain compliant as the geopolitical and regulatory landscape evolves.
4 - Understanding complex corporate structures
Increasingly complex corporate structures and fragmented ownership data obscure a complete view and prevent banking compliance teams from effectively assessing risk, which in turn creates more friction in the onboarding process.
Complex corporate structures, often by design, do not lend themselves to ease of analysis. Identifying who owns and exercises control is incredibly time consuming, expensive, and fraught with inaccuracies that expose banks to both regulatory and reputational risk.
Customer onboarding strategies that can map out and visualise corporate ownership will be able to manage risks in the most accurate and cost-effective way possible.
5 - Environmental, Social & Governance (ESG)
Banks are under pressure to expand customer due diligence (CDD) procedures to include risks posed by ESG factors when assessing prospective customers. Whilst the intersection of ESG, KYC and onboarding is new, integrating ESG into onboarding processes is now a necessity. ESG is increasingly part of the scope of regulatory activities, presents legal and reputational risks, and is a top agenda item for investors, customers, and the public-at-large.
As a bare minimum customer onboarding strategies need to be cognizant of customer ESG practices and how prospects manage the social and environmental risks those pose. But best practice moving forward would be to incorporate new abilities to include ESG specific risk factors based on a customer’s potential risk exposures including the nature of their industry, countries of operation, sources of funds/wealth, as well as proactive measures such as adverse media screening.
6 - Emerging payment fraud risks
Authorised push payment (APP) fraud is one of the fastest growing types of scams, one that has seen banks lose £145 million in the first half of 2023 alone. From 2024 a new Confirmation of Payee service will help banks ensure payee names and account details match before undertaking transactions, but in the meantime, advanced KYC verification methods during the onboarding process can help prevent fraudsters from entering the system
Accessing detailed financial and historical company intelligence (shareholders, group structure, ultimate beneficial owners and more) from verified and validated sources, contextualised and mapped ensures nothing is missed at any stage of the onboarding process. Likewise, identify key events like CCJs or Gazette notices immediately, by checking potential customers/merchants against global PEP and sanctions lists can help banks prevent payment fraud and keep bad actors out.
How FullCircl can help banks evolve next-generation customer onboarding strategies?
FullCircl is a game changer in onboarding acceleration.
It’s a Customer Lifecycle Intelligence (CLI) platform that allows banks to overlay policies and risk appetite across trigger changes in their customer base. It also uses automated data collection and checks and connects data points to expose potential risks across networks of people and businesses.
The overall impact is to helps banks accelerate onboarding; rapidly reduce compliance challenges and financial risk; acquire validated customer data; and drive consistency and transparency. These factors help speed up time to revenue.
Want to revolutionise your customer onboarding strategy in 2023? Get in touch to discuss your needs.