For digital transformation to be a success, collaboration is crucial. While technology enables new ways of working, collaboration is the key catalyst to moving the dial on digital transformation programme success. Digital-first, customer-centric financial institutions that have achieved harmony between digital transformation and collaboration share common characteristics including next-generation technology adoption, collaboration and openness, and integration with third parties for agility.
However, a recent Fenergo CLM industry trends study shows that more than 20% of banks rank themselves as mediocre (between one and five on a scale of 10) for collaboration across the client lifecycle.
As businesses globally move towards a customer-first approach to compete in the digital economy, banks and financial institutions are lagging. Large-scale corporate and institutional banks are being held back by siloed stacks of data and technologies, poor collaboration, and even conflict between departments and legacy systems.
The result is a bank heavily reliant on costly, manual processes, with customer and counterparty data stored disparately on a range of spreadsheets, legacy applications, core trading systems and third-party data providers. These operational silos and absence of a single customer view have a detrimental effect on the end-customer experience throughout the client lifecycle.
The Amazon effect
Banks and financial institutions are prohibited from collaborating effectively due to their historical operational models. Business lines and branches are often commercially competitive and as a result operate within Chinese walls. Widespread merger and acquisition activity results in the infrastructures of the different banks being moulded together creating a Frankenstein effect on processes and data management.
For disruptive organisations such as Amazon and Google that have evolved in the digital-first economy, the opposite is true. These brands harness data as a commodity and as a result are acutely attuned to their customers’ needs. Data is their very lifeblood and the same is true today for banks and financial institutions. Yet, alarmingly, 17% of banks confess that data is not centralised anywhere in the organisation.
Most banks surveyed (38%) rank themselves as intermediate in the maturity of their CLM digital transformation strategies, with 22% having just started.
On a collaboration scale of 1-10, with one indicating working in complete silos and 10 indicating a fully collaborative model, commercial banks performed the worst across the sector, with a third of firms ranking at five and below. This is significant considering how 88% of chief data officers believe that visibility and collaboration between internal teams would help speed up onboarding times for clients.
Often the most painful processes of onboarding is customer due diligence (CDD), a necessary evil for know-your-customer (KYC) and anti-money-laundering (AML) compliance. Every financial institution knows that streamlining this process can significantly improve the customer experience across the entire relationship lifecycle, thus, increasing the lifetime value of the client.
Effective data management is a vital first step toward improved collaboration between business lines and functions while streamlining compliance. The ability to combine all data and documentation together to achieve a cohesive view of the client that is both accessible and reusable across functions, business lines and jurisdictions (data privacy laws permitting) holds many advantages for teams.
By making data and information easily accessible, in the correct format, financial institutions can be confident they are meeting regulatory obligations.
Moreover, the ability to integrate with a host of AML, KYC and industry data providers further enhances the ability to create a single view of the customer that precisely measures the level of risk the client presents to the bank. This also reduces the need to perform unnecessary outreaches to customers for information, creating a smoother customer experience.
Value outweighing inertia
Despite its importance, the onboarding process remains an area that many banks struggle to integrate effectively.
Unpicking where the barriers to progress may be, it is clear that having technology solutions in place does not automatically change behavior. Our survey found that the majority of C-suite executives within banks (87%) cited an absence of senior management buy-in as being a major barrier to CLM adoption.
Rapid disruption and evolving regulation provide financial institutions with no choice but to digitally transform operational and technology functions to compete in the digital economy. By fostering a culture of openness from the top down and realising the value of a centralised data strategy, financial institutions can begin to dissolve political and operational silos. Automating client data and document collection and promoting re-use of existing client data and documentation across multiple business units and jurisdictions will make collaboration inherent. These key characteristics will form the building blocks for financial institutions seeking to radicalise CLM strategies for enhanced, frictionless customer journeys.
To find out more, download the report.