Failing to get client onboarding right can cost firms eyewatering financial fines, reputational damage and long-term client avoidance. These are not new threats for traditional banks, which also face increasing competition from challenger banks, so why have they not sorted out how to get onboarding right?
Entity – or client – data quality, which is key to successful onboarding, remains the biggest problem for running models that are heavily dependent on manual processes and less so on technology. A lack of strong data governance, data ownership and a clear and shared definition of data required for onboarding also mean operations can falter or, in some instances, fail.
An early audience poll during a recent A-Team Group webinar on client onboarding and how developments in tech and automation can help optimise entity data management and improve KYC processes, showed 85% of respondents saying the key challenge of KYC and client onboarding at their organisation is too much manual intervention. Some 68% cited poor data quality, 43% inadequate data management, and 13% lack of required skills. Just 3% reported no challenges.
Responding to these statistics and teasing out potential solutions, Bill Hauserman, senior director of compliance solutions at Bureau van Djik, said too much manual intervention wastes time and poor data quality just isn’t good enough. He commented: “You need to get the data right inbound. You can make technology smarter and smarter, but you need to make the data smart too.”
Automation is key here, with many banks turning to third-party vendors such as Bureau van Djik to provide accurate entity datasets that are maintained on an ongoing basis and can be used to automate client onboarding and sanctions screening to the greatest extent possible.
Building the business case, however, is not always easy as firms often spend mostly on data consumption. Webinar speaker George Skordilis, senior vice president and head of master data management at Northern Trust, suggested an argument for investment in KYC and onboarding could be built on the potential of getting client risk ratings wrong and attracting unwanted regulatory fines and reputational damage.
Alternatively, the benefits of getting data right for client onboarding could form the basis of a business case. Chor Teh, head of client lifecycle management at Investec, said this can provide significant value add to the business, including a single view of clients, cross selling opportunities, and the possibility of extending risk tolerance of individuals on the basis of knowing how this could impact the business.
A final poll summed up audience opinion on the benefits of improving entity data quality and automating onboarding. These were reduced manual intervention, decreased risk, improved customer satisfaction, a better handle on financial crime, and fewer false positives.