The value of automation in CLM, KYC and onboarding processing for banks

By Reetu Khosla | 16 March 2017

Reetu Khosla – Senior Director of Risk, Compliance, and Onboarding for Financial Services, Pegasystems

It is no new revelation that Client Lifecycle Management (CLM), onboarding and Know Your Customer (KYC) processes are some of the most time-consuming and costly steps that banks have to manage.

High-volumes of low-complexity manual tasks and multiple data collection points from due diligence tools and internal systems inevitably arise during client onboarding before a client can legally transact. And the time it takes to complete all of this? Anywhere between 100 and 200 days for institutional customers.

The cost of onboarding continues to rise and these delays become more damaging to a bank’s business model. The prime driver here is how regulatory scrutiny is intensifying with non-compliance fines hugely affecting a bank’s revenue and competitive advantage. For some banks it can cost upwards of $100m-$500m within stringent deadline conduct look-backs due to KYC regulatory findings. The costs for onboarding an institutional client can be around 30,000 euros each time. With every new regulation comes an added cost, and the process of client onboarding becomes an altogether unpredictable affair.

At the end of the day, banks are a cross line of business. Customers may engage with a bank across the institutional bank, and the same director could be a client in wealth or retail, but siloed systems and lack of transparency cause major gaps in servicing customers across lines of business. But clients expect a global experience across channels and lines of business, and so banks are struggling to provide this level of service with legacy systems, manual processes and no over-arching technology.

How should banks respond?

Some banks are looking at a new generation of regtech solutions. These promise a silver bullet solution for ending regulatory compliance causing log-jams of data and processes. But regtech needs to be supported by proven underlying technology and be part of a larger fintech and digital transformation strategy.

The appeal of regtech though is real and is something the industry needs at this point in time to help standardise systems, while also allowing for specialisation by line of business, geography and risks. While such technologies promise improvements with each new regulation, many of these technologies force the bank to add a new system that cannot scale, making it increasingly fragmented. Banks are left with dozens of different siloed systems in the back office. Truly robust regtech solutions needs to be solutions that provide optimised target operating models and transform the front to back office and, even more importantly, can easily be modified to address changing regulations without hard coding. Regulators expect some level of consistency across the organisation, and these silos have led to regulators scrutinising banks for KYC and other onboarding due diligence regulations around counterparty risk, tax and suitability.

Banks are reluctant to dispose of their numerous legacy systems: An application or technology should be able to be a larger part of Client Lifecycle Management and a large digital transformation strategy. Regtech must be part of a unified solution, a solution that has to scale to multi-jurisdictional and multi-product onboarding.

The idea of starting afresh with smaller regtech systems seems attractive. But, the reality of these solutions is that they aren’t designed to integrate and scale with the bank’s existing systems. They simply create more silos. Their introduction can lead to even more fragmentation.

This is where a robotic process automation (RPA) that is fully embedded in the CLM and KYC applications can step in , coordinating and automating how KYC and CLM processes work, and activating multiple data sources and applications in sequences that augment the work of the onboarding team.

When properly configured, RPA can capture data from legacy systems and across markets, pulling data from multiple internal systems and KYC utilities within the CLM and KYC application to form a single customer view across geographies and lines of business. Banks are turning to the robotic approach within the onboarding applications to reduce FTEs, cut errors to zero and speed time to implementation as the software works continuously. As client onboarding and KYC becomes part of a larger transformation strategy, there is a need to look at technologies that are proven, can scale and provide pre-built functionality, rules and processes based on industry best practices.

Banks can complete these tasks faster and more accurately to ensure rapid delivery and reduce time to transact with unified client lifecycle management applications, that cover sales, onboarding, KYC, operations, legal through to fulfilment and customer service. They can also reduce time to market and eliminate manual data entry errors in large-scale KYC remediation projects by collecting and normalising data from any external third-party data provider (screening engines, data providers, utilities) and internal system. User tasks from front to back office are streamlined by eliminating manual data entry and data gathering across sales, compliance, and operations in multiple systems. Finally, costs are cut an additional 20 to 50 percent by combining robotic automation with Pega CLM’s optimised target operating model and pre-built case structure, processes and pre-define regulatory rules (i.e. AML, CTF, FATCA, CRS, MiFID II, EMIR and Dodd-Frank) which allows global banks to provide the most efficient and transparent multi-jurisdictional, multi-product onboarding to complex entities through to wealth and retail.

Robotic automation is another feature within robust CLM and KYC applications that enables businesses to intelligently optimise how work gets done – by both humans and robots – across the enterprise from a centralised and globally scalable end-to-end solution. Unifying this robotics within CLM and KYC applications seamlessly infuses robotic automation within any bank’s global onboarding and KYC transformation. Organisations are able to run tasks unattended while mitigating risk and meeting regulatory mandates. Ultimately, these benefits make employees more productive while freeing them to focus on delivering better customer experiences.

With a complex web of regulations to manage, financial institutions can benefit significantly from robotic automation. This helps banks to not only meet aggressive remediation deadlines of millions of accounts but also streamline time to transact for what has traditionally been a manual and siloed process.

Customers want a global experience. The system needs to have all their information no matter where they are. By integrating this robotics into a CLM application suite to provide efficiency, banks can pull all the right data when it’s needed. Robotics combined with client lifecycle management and KYC technology signifies faster onboarding, competitive advantage, regulatory compliance, and, ultimately, customer centricity in a digital age.

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