Keeping good company: streamlining client onboarding with CDI - part one of three
This is the first of three reports by Chartis and Encompass that examine the challenges that banks face around client onboarding, and how they can address them. This first report considers the pain points banks face in onboarding corporate clients; the second looks at how automated corporate digital identity (CDI) systems can help address these; and part three examines strategies and best practices banks can employ to implement successful, cost-effective and long-term CDI.
Part 1: The pain of client onboarding has long been a complicated and often cumbersome component of banks’ Know Your Customer (KYC) ecosystems, in an ever more competitive marketplace where non-optimal onboarding can have strong individual and commercial impact. And as sanctions increase, and economic and geopolitical events become more frequent and severe – alongside expanding regulatory oversight – client onboarding is becoming a wider focus area and a bigger challenge. In this report we aim to identify and contextualise the size of this challenge, and highlight some of the major pain points banks currently face when attempting to onboard corporate clients in this increasingly febrile environment.
The scale of the onboarding problem
Among the many processes that take place in banks, conducting due diligence and KYC on corporations remains one of the most manually intensive. While financial institutions gain much from assessing individuals against a number of risk signals (including biometrics) with a highly developed ID structure, the same cannot be said for corporate client onboarding and KYC. According to Chartis’ research, an average Tier 1 bank spends 4.5 times more on manual customer due diligence (CDD) and KYC processes than on technology and solutions to automate these. The cost for an average Tier 2 bank is little better, at 4.2 times (see Figure 1). In fact, banks spend more than $9.9 billion on CDD and a further $2.8 billion on investigations conducted further downstream. But even that figure is dwarfed by the ‘hidden’ downstream costs of managing investigations, auditing, reporting and other manual activities, which stretch to well over $20 billion.
Breaking it down: key pain points in client onboarding
Chartis and Encompass have identified key pain points in KYC and onboarding corporates compared to that for individuals. These are listed below and explored in more detail in the following sections. As we examine later in this report series, these can be addressed by effective use of automated CDI.
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? The amount of time taken to onboard a client.
? Onboarding/system bottlenecks.
? Duplicate data and processes.
? Corporate data that sits outside the core FinCrime master data management (MDM) system.