By Alan Samuels, VP. Data & Product, Encompass Corporation
The speed of client onboarding can be the difference between winning and losing business with 87% of corporate treasurers admitting to abandoning a banking application at least once due to the length and complexity of a bank’s onboarding process. But it’s a continued challenge for banks, especially in the corporate and investment banking sector, where it continues to be a labour-heavy and expensive undertaking. It is crucial to understand why these difficulties exist and explore how emerging technologies and solutions such as Corporate Digital Identity (CDI) can solve them.
Recent research conducted by Chartis highlights budget and resourcing as two major factors in the inefficiency of onboarding processes. The research identified significant disparities in the resourcing of individual onboarding compared to that for corporations. For individual (retail) onboarding, a typical Tier 1 bank allocates 33% of spending to technology and data, with a 2:1 ratio of technology to manual processes. In stark contrast, corporate onboarding dedicates only 17% to technology and data, with a significant 83% allocated to manual processes, creating a nearly 5:1 ratio. A great deal of inefficiency stems from the complicated nature of corporate clients, the large amount of documentation needed to establish and validate their identity, and the monumental challenge of data management.
The main challenges in the client onboarding process
‘Know Your Customer’ (KYC) procedures form a core component of a bank’s client onboarding process, and requires strict adherence to regulatory guidelines. However, the process is often riddled with inefficiencies, due to the manual nature of corporate client onboarding.
Manual processes make onboarding longer and more cumbersome than it needs to be. Corporate client onboarding typically spans 90-120 days, with 51 hours of manual effort required to complete various tasks such as business identity verification, screening, and quality control. The time investment in onboarding is particularly high due to the need for manual processing at nearly every stage.
Additionally, the presence of duplicate, stale and inaccurate data poses a significant hindrance to the onboarding workflow. Not only does this increase the risk of errors, but it also wastes valuable time in rectifying these issues. It is also important to consider the corporate data that lies outside of core financial crime management systems. A significant portion of the data required for corporate onboarding resides outside the bank’s core financial crime master data management (MDM) systems, limiting analysts’ ability to access key information in a consistent and timely manner.
Collecting and managing private data in the financial services sector poses numerous challenges, including ensuring robust security to protect sensitive information against breaches, maintaining a seamless user experience to encourage client engagement, whilst ensuring compliance with data privacy regulations. Additionally, managing such systems across multiple banks increases complexity, requiring harmonisation of processes while maintaining trust with customers. Balancing these demands is critical to fostering innovation without compromising data integrity or regulatory compliance.
This all leads to an inefficient onboarding process that lacks a streamlined, technology-driven approach. Addressing this as a priority is crucial for banks looking to remain competitive in an increasingly demanding client and regulatory environment.
Addressing the onboarding problem
The onboarding process for corporate clients involves extensive due diligence and KYC checks that must account for a company’s structure, ownership, regulatory status, and other key factors.
This leads to processes that are significantly more complex and time-intensive compared to onboarding individual clients. According to recent research, the financial burden on banks is substantial with approximately $9.9 billion spent on customer due diligence, alongside an additional $2.8 billion for downstream investigations. These figures do not even account for the hidden, but spiralling, costs associated with maintaining manual and disjointed processes.
Tackling bottlenecks and inefficiencies
Inaccuracies and inefficiencies at the start of the process lead to bottlenecks in the later stages of the onboarding processes, particularly during enhanced due diligence (EDD) and investigations.
Retail banks have leveraged digital identity and processes to transform customer onboarding, but when it comes to corporate onboarding, this remains almost exclusively manual.
For example, in a typical Tier 1 bank, 33% of the spending on individual onboarding goes towards technology and data solutions. In contrast, only 17% of corporate onboarding expenditure is allocated to technology, with 83% devoted to manual processes. This imbalance highlights the need for banks to modernise their approach to corporate onboarding and leverage digital solutions such as CDI to close this gap.
The role of CDI
The growing complexity of onboarding corporate clients, combined with rising client and regulatory pressures, makes it essential for banks to adopt more efficient and automated solutions. CDI offers a comprehensive digital representation of a company’s identity, bringing together data from the public domain with that obtained privately from the client. This unified client profile streamlines the onboarding process by automating data management processes, reducing manual intervention, and ensuring a faster and more efficient workflow.
In this way, CDI addresses key challenges in corporate onboarding by improving data accuracy and enabling significant efficiency gains. By automatically combining data from various sources into a single digital identity, CDI eliminates the need for manual processes, significantly reducing the time and effort required, and minimises the risk of errors. By doing this, banks can ensure that they have an accurate and up-to-date view of their corporate clients and provide consumer-class service while maintaining robust regulatory compliance.
With regulatory requirements becoming increasingly strict, CDI simplifies and reduces the cost of compliance by providing banks with a unified view of all necessary KYC data. As competition in corporate and investment banking intensifies, banks with sub-optimal onboarding processes face a significant disadvantage. Implementing CDI allows banks to improve customer experience, enhance operational efficiency, and position themselves for long-term success in the marketplace.
Looking ahead
Corporate Digital Identity is essential to banks aiming to raise the bar on the client experience and simplify their client onboarding procedures. Recognising the difficulties inherent in existing onboarding methods is crucial for making educated choices that lead to more efficient and streamlined processes. This approach can help banks drastically lower their expenses, reduce manual labour, and improve both compliance and customer satisfaction, setting the stage for a more effective and future-ready strategy for corporate client onboarding.
