As banks and financial institutions continue to struggle with client onboarding, particularly in the corporate banking sector, it is becoming increasingly important to shine light on the challenges facing the industry and how to combat them. Alan Samuels, VP, Data & Product at Encompass Corporation, provides valuable insight into how evolving technologies and solutions such as Corporate Digital Identity can transform and streamline processes for financial institutions, particularly banks.
Client onboarding is a critical yet challenging process for banks, particularly in the corporate banking sector where it remains a labour-intensive and costly exercise. It is becoming increasingly important to shed light on these challenges and how evolving technologies and solutions such as Corporate Digital Identity (CDI) can transform and streamline this process.
Research conducted by Chartis emphasises the stark differences in resources allocated for individual versus corporate onboarding. This inefficiency is underpinned by the complexity of corporate risk assessments, the sheer volume of documentation required and the fragmented nature of corporate data.
The key pain points in client onboarding
Client onboarding in corporate banking forms a core component of a bank’s Know Your Customer (KYC) procedures, which require strict adherence to regulatory guidelines. However, the process is often riddled with inefficiencies, mainly due to the manual nature of corporate onboarding.
One key challenge is the time-sensitivity of the onboarding processes. Corporate onboarding typically spans 90-120 days, with 51 hours of manual effort required to complete various tasks such as 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 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 timely manner.
These pain points demonstrate the inefficient and fragmented nature of the current onboarding process, which is heavily dependent on manual resources and lacks streamlined, technology-driven solutions. Addressing these inefficiencies is crucial for banks looking to remain competitive in an increasingly demanding regulatory environment.
The scale of 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.
These processes require significantly more time and resources compared to onboarding individual clients. According to recent research, the financial burden on banks is substantial with approximately US$9.9 billion spent on customer due diligence, alongside an additional US$2.8 billion for downstream investigations. These figures do not even account for the hidden costs associated with maintaining manual and disjointed processes.
Addressing bottlenecks and inefficiencies
Corporate onboarding workflows often suffer from bottlenecks due to an over-reliance on manual processes and limited access to crucial data. The sheer complexity of corporate risk assessments further exacerbates these delays.
These bottlenecks add to the later stages of the onboarding processes, particularly during enhanced due diligence (EDD) and investigations. Banks face a clear disparity between corporate and individual onboarding, whereas individual onboarding benefits from significant investments in technology and automation, corporate onboarding 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.
CDI is the way forward
The growing complexity of corporate onboarding processes, combined with rising 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 various sources, including public domain information and proprietary bank-held data. This unified approach streamlines the onboarding process by improving data accuracy, reducing manual intervention and ensuring a faster and more efficient workflow.
CDI addresses several key challenges in corporate onboarding such as enhanced data accuracy, improved efficiency, streamlined compliance and competitive advantage. By combining data from various sources into a single digital identity, CDI eliminates the need for duplicate processes 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.
The automation enabled by CDI drastically reduces the time and effort required for identity verification, regulatory checks and risk assessments. Tasks that previously required extensive manual effort can now be completed more efficiently, allowing banks to onboard clients in a shorter timeframe.
With regulatory requirements becoming increasingly strict, CDI simplifies compliance by providing banks with a unified view of all necessary corporate data. This not only helps in meeting KYC obligations but also reduces the cost and complexity of compliance. As competition in corporate 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.
The road ahead
CDI is emerging as a critical tool for banks looking to streamline their client onboarding processes. It is important to be aware of the challenges present in current onboarding processes in order to make informed decisions toward more efficient and streamlined processes. By doing so, banks can significantly reduce costs, minimise manual effort and enhance both compliance and customer satisfaction – paving the way for a more efficient and future-proof approach to corporate client onboarding.