Challenger banks established & Establishment challenging

When reviewing how to automate onboarding processes it's key to look at the bigger picture. Regulatory environments are ever-changing, so building a flexible solution to manage risk is key to driving down future cost.

Posted by: 
Oliver Malmed
May 22, 2020

May 22, 2020

It’s pretty exciting to see how financial services has opened up, particularly in banking. The challengers are established, the establishment is challenging and there are still new entrants being licenced. I know there’s lots to worry about at the moment – plenty of things are uncertain – but there are definitely opportunities too.

I’ve been thinking about how banks capitalise on these opportunities, and it boils down to 2 major themes:

  • Flexibility
  • Speed

Flexibility in that all banks need to be more agile than ever before. Not just because of the competition, or the financial crisis for that matter, but because the only thing we can all be certain of is change. Being able to adapt quickly delivers advantage.

For example, it’s no cinch for a bank to onboard a new corporate client (understatement of the year). There are multiple entities involved, UBOs to trace, jurisdictions and regulations. The shopping list of data to satisfy KYC/KYB onboarding checks can be exhausting to trawl through.

Which leads me onto time, the one thing banks don’t have on their side when it comes to onboarding.

Neither the bank nor the corporate client wants the process to take any longer than necessary and everyone wants it to take minutes ideally. Banks want to start making money, clients want access to funds or to start taking and process payments. The shorter the timeframe for everyone the better.

Automation helps shorten time to revenue for the bank and time to account for their clients, but there are issues of flexibility with larger, enterprise solutions used in onboarding.

Legacy KYC/KYB platforms are robust in the data collection stakes and in creating processes, undeniable. But they aren’t flexible and they are costly in terms of resources, time and money.

With a legacy KYC/KYB platform, the start and end point of a client onboarding journey are meticulously mapped, taking into account the nuances of the relevant regulation, accounting for different entities, UBOs – their PEPs, any sanctions - and so on until the “happy path” is finished.

Then, the regulation changes. All that time, money and effort spent mapping this happy path is unhappily wasted. With this approach to compliance, onboarding processes need to be re-engineered again…and again…and again.

According to an article by KPMG "…some banks spend up to US$500 million each year in an effort to improve and manage their Know-Your-Customer (KYC) and Anti- Money Laundering (AML) processes. The average bank spends around US$48 million per year."*

Some of that has to be due to the fact the process is never complete – the investment is ongoing.

Perhaps it’s also time to say that risk management in corporate accounts doesn’t begin and end at onboarding. Regular reviews and renewal checks are a must.

So, what if onboarding journeys, risk reviews/renewals and implementation of compliance policies are built around a risk-management engine rather than a linear process that has a start and end point?

You create flexibility through an onboarding workflow and into your approach to risk management, plus you save precious time and money, and ultimately drive down your customer's time-to-account.

Think of these flexible, dynamic elements (the different checks needed to onboard a corporate customer for example) as blocks in a workflow. If one of those blocks needs to change because there’s a regulatory update around anti-money laundering for instance, you take that block out, the rest of the flow continues, you update it and put it back in. There’s no need to take the whole thing apart, brick by brick, and re-build from the bottom up.

Yes, PassFort supports robust risk management and compliance structure, but it doesn’t make it rigid. The process is flexible and can be changed when regulation changes or when technology evolves; when the client enters a new jurisdiction; when there’s a change of ownership.

Yes, automation speeds things up, as does being able to update a policy within a day. But when manual review is needed, which it frequently is on complicated corporate onboards, KYC or Compliance teams can make risk-based decisions and keep the process moving.

And yes, it goes back to the old adage - if you fail to prepare, then prepare to fail. Which is so true when the only thing we can all be ready for is more change.

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If you would like to know more about how PassFort supports speed and flexibility in onboarding, please get in touch - I'd love to hear from you.


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