Automation and managed services: the answer to customer onboarding processes?
Compliance procedures surrounding Know Your Customer (KYC) rules are putting financial firms under an increasing amount of pressure. According to a recent study, the average spend on KYC-related practices for large financial institutions increased to $150m USD last year, up from $142m USD the preceding year. The number of employees working on KYC adherence also increased dramatically from an average of 68 to 307 over the same time period. Yet despite this rise in personnel, some institutions maintain that a lack of resources still remains the biggest challenge in conducting KYC and customer due diligence processes.
KYC compliance pressure
When dealing with entities or individuals, asset and wealth managers face an even greater challenge; the ever-growing level of regulation means that an intensive degree of due diligence is now needed. The list of compliance requirements includes: KYC and Anti-Money Laundering (AML) procedures; financial sanctions lists covering all individuals and entities subject to sanctions measures imposed by jurisdictions worldwide; the Foreign Account Tax Compliance Act (FATCA), which necessitates financial institutions to report on accounts held by US individuals or entities, and; the EU’s MiFID II “Client suitability and appropriateness checks”, whereby suitability needs to be assessed against local regulatory restrictions, a client’s knowledge and experience, financial situation and investment objectives, to ensure firms continue to work in a client’s best interest.
This upsurge in KYC compliance demands has led to an increase in the time it takes to onboard new customers. The recent study concludes that average onboarding times grew by 2 days, taking 26 days on average to onboard a new client in 2017, up from 24 days in 2016. And these same institutions expect onboarding times to rise yet again in 2018. Corporate customers, on the other hand, claim onboarding takes an average of 32 days, and expect this to increase by 24% over the next year. A noticeable gap exists, therefore, between reality and customer expectation. Regardless, in this 24×7, “always on” world, taking one month to open an account (or verify constantly changing sanctions lists and client appropriateness), no longer seems a reasonable length of time.
Asset and wealth managers are up against a seemingly insurmountable task as they are confronted with a rising number of checks and regulations, versus the ongoing manual procedures that only slow the entire process down. With the ‘customer journey’ becoming more and more essential for financial services institutions, firms need to ensure client satisfaction with (as much as feasibly possible) efficient, automated onboarding processes in order to assure retention of prospective clients.
A wealth of onboarding experience
The enhanced due diligence required for wealth management clients means that some specialised solutions providers now offer a managed service combined with the majority of procedures being automated. NorthRow, for example, with its experience and enhanced due diligence developed in partnership with the UK’s Open Banking Implementation Entity (the ‘OBIE’), provides a high-speed verification process for users across the globe.
This exclusive Open Banking experience has provided NorthRow with the expertise to streamline processes around onboarding checks, making the application process much more effective and faster for customers. For example, the process of ID and document verification, and document management is automated, to the extent that this can now all be completed with a mobile device. For those clients liable for US income tax, W8 and W9 forms relating to FATCA can be auto-generated on behalf of clients.
NorthRow also provides an efficient managed service for those processes that cannot be automated, such as using postal verification to support core automated processes. Furthermore, partnerships with law enforcement agencies provide convenient and speedy access to government databases of compromised or fraudulent documents.
The need for speed
It is interesting to note that in a separate InvestOps survey, 91% of firms surveyed were seeking to reduce manual processes to decrease the cost of operations. This is precisely what efficient technology companies, such as NorthRow, provide best – automated solutions using the latest innovative technology, combined with a customised managed service built to suit a client’s environment. By using a managed service based primarily on automation, asset and wealth management firms have an opportunity to reduce operational cost and risk. For those interested in opening up new markets, remote onboarding tools provides the opportunity for organisations to grow more quickly.
For all of those firms finding themselves under pressure from the current KYC regime, managed service solutions can provide enhanced due diligence and onboarding processes, all in efficient time.
Paul Murphy (pictured) is chief commercial officer at NorthRow.