Keeping good company: streamlining client onboarding with CDI – Part 2

This is the second of three reports by Chartis and Encompass that examine the challenges facing banks regarding client onboarding, and how to address them. The first report considered the pain points in onboarding corporate clients; this one explores how automated corporate digital identity (CDI) systems can help address those challenges. The third report discusses strategies and best practices banks can employ to implement successful, cost-effective and long-term CDI.

Part 2: Corporate client onboarding – the benefits of corporate digital identity (CDI)

The first paper in this three-part series explored the scale of the challenges banks face in onboarding corporate clients. Banks typically spend a significant amount of money and time – upwards of 90 days – onboarding a single client. Several bottlenecks in the process can mean that this is not a sustainable practice for many firms, particularly since recruitment, retention and training have become increasingly challenging.

By addressing their initial pain points with an automated corporate digital identity (CDI) system, however, banks can benefit from its immediate impact on the identity verification (IDV) step of the onboarding process, and from sizeable gains further downstream.

Targeting the core pain points

Given the scale of the challenge discussed in the first report, it is clear that there is an opportunity to streamline corporate client onboarding, especially with regard to the following pain points:

• No standard client identity. This a significant barrier to efficient onboarding and can have a knock-on effect much further downstream. Several banks have learned that not developing a standard, consistent view of client identity risk can cause significant issues during internal audit or reporting activities.
• Inconsistent global regulation.
• Complex ownership structures.
• Reliance on manual processes.
• Stale and disparate data.
• Legacy and siloed technology.

Figure 1 depicts a typical customer due diligence (CDD) operating model at a Tier 1 bank before CDI is installed, while Figure 2 shows the same model after CDI implementation. At the simplest level, two major changes occur: 1) a highly manual data collection and processing step is removed; and 2) as a result, additional manual research and investigations are significantly reduced.

As Figure 3 highlights, CDI can streamline the data input stage and the output stages (processing, manual enrichment and further investigation).

Positive impacts: bank and client

Time-motion studies from Encompass client engagements have revealed the time and effort saved and the downstream effects of automating the client IDV process.

In fact, every two minutes saved at the initial IDV stage can lead to a further minute saved later, during the onboarding process. Overall, this can lead to an average time saving of 32% across the end-to-end process.

This is because, in essence, a properly functioning CDI solution can provide a faster and more holistic view of any entity going through Know Your Customer (KYC) checks.

Figure 4 illustrates the time savings a CDI solution can generate across the client onboarding journey.

Areas where banks can see significant downstream efficiency gains include:

• Triage and risk assessment. By collecting data up front, analysts managing the triage stage can have a more complete view of risk, and more information at their fingertips to make crucial decisions.
• Outreach and profile completion. On average, 14% of CDI time savings can be realised across these two areas. By having most data about a customer up front, firms can reduce the number of times that an analyst or relationship manager needs to reach out to the client for information – which can help at the client’s end as well.

Institutions can best achieve this efficiency gain not by removing people from the onboarding process but by freeing up resources from repetitive manual tasks that can be automated. This allows analysts to focus on more complex tasks and analysis, and relationship managers on activities that generate value.

What is CDI?

CDI platforms provide a holistic view of client risk, including private and public data in real time, and generate client profiles on demand. They can enable fast and accurate validation of clients (so-called ‘gold standard’ KYC), while eliminating human error. CDI aims to achieve the corporate equivalent of the ‘360-degree view’ of individuals that banks strive for using relatively mature IDV approaches.

Put simply, CDI is a way to combine structured and unstructured data into a single and comparable risk identity that can be integrated into various stages of the onboarding and review processes (see Figure 5).

Who needs CDI and why?

CDI can help a variety of institutions use their KYC systems to gain a competitive advantage and leverage the value enterprise-wide. Firms that can benefit include:

• Commercial and corporate banks, notably Tier 1 banks that have issues with slow or inefficient corporate client onboarding. An automated CDI program can save upwards of 32% of people time across the end-to-end process.
• Institutions in which customer experience and lifetime value can be negatively impacted by bottlenecks in the onboarding process. More efficient onboarding that puts less of a burden on clients can be a significant competitive advantage – especially in markets where drop-off rates tend to be higher.
• Institutions that have encountered, or are encountering, challenges around staff retention, training and upskilling. Freeing up analysts’ time and giving them the tools (in terms of insight and platforms) to enable them to upskill can be a highly effective way to train staff on the job.

Automated CDI also reduces the administrate burden on relationship managers in carrying out manual outreach and other data collection, allowing them to carry out client work that will generate value for relationships.

Conclusion

In this three-paper series we are exploring the journey that a typical bank can go through in automating its corporate client onboarding using a CDI approach. Paper 1 outlined the levels of pain that banks are typically exposed to in onboarding corporate clients, with some areas creating vast bottlenecks. We have seen in paper 2 that there is a lot that can be done with relatively few steps to dramatically overhaul age-old painstaking processes and find tangible gains. The examples that this paper provides are robust and tangible and showcase that CDI is an evolution that is worth undergoing for any bank.

While the potential uplift could be almost 60%, we operate in a complex technology and decision-making environment. In paper 3 our attention turns to converting promise into practical action. We will provide readers with a checklist of what to consider in building a comprehensive ROI model. We will provide an example of an ROI calculation based on real data as a guide, and dive into the key elements and assumptions to help firms navigate the journey toward CDI implementation.