First impressions matter. First impressions set the tone of a relationship, they inform how an initial interaction may blossom into a mutually beneficial affair, or (god forbid), how it may fizzle into a regretful obligation mired by conflict and frustration.
The same logic rings true for financial institutions as they navigate the challenge of onboarding corporate clients with a view to bolstering long-term, headache-free relations.
However, this isn’t a simple affair. The corporate courting game is evolving with the times, and as institutional clients adopt the same expectations for digital accessibility and personalisation of services as retail consumers, banks must ensure their onboarding
processes are meeting the experiential needs of their current and potential clients.
Beyond the initial, high-level concerns that may be raised by FIs regarding pricing or KYC considerations which were once traditionally front of mind during onboarding, banks must now consider the overall experience of onboarding to make it as appealing
and friction-free as possible. The way in which they store, request and access client data is fundamental to this process and contributes to a comprehensive or 360-degree client view throughout their entire experience.
As digitalisation of onboarding processes is arguably the only path to achieve these objectives in a meaningful way, we look to the experts to address a number of the more technical aspects often confronted by FIs when planning or embarking on the digitalisation
journey for corporate onboarding.
How to know when it’s the right time
Despite the plethora of pandemic pressures being juggled by banks across the globe, Covid-19 has in fact underscored the need for FIs to turbo-charge their digital transformation strategies and onboarding is no exception.
Hong Kong Fintech Week, Noel Quinn, group chief executive, HSBC, spoke to the upheaval Covid-19 has had across the globe and how it lit a fire under the digitalisation of financial services.
“It has also required us to embrace the digital world even more than we were already doing as the pandemic continued to drive customers towards our digital channels: Over 80% of commercial customers in Hong Kong have adopted HSBC digital channels while there
were 1.36 million active users for the HSBC Hong Kong retail Mobile App as of the end of Sept 2020, up 45% YOY.”
Across HSBC’s business lines, Quinn explained that digital transactions in Hong Kong have increased: in the first nine months of the year, transaction volumes through its Business Express mobile app in Hong Kong grew by 80%, while close to 95% of its Hong
Kong retail banking transactions were conducted via digital channels.
These numbers are not unique to HSBC and demonstrate the significant shift toward digital by both retail and commercial markets throughout 2020.
That said, changing onboarding practices is no simple feat. Digital payment consultancy firm Innopay
explains that the challenges incumbents face are exacerbated by the fact that traditional financial institutions (as compared to their more youthful counterparts) hold a fundamentally different modus operandi.
Often built upon a plethora of legacy systems, flexible and scalable platforms are not always available which renders any integration of new features or technologies a challenging task to say the least. Further, incumbents typically need to cater to a wide
range of jurisdictions and countries across their client base, and meeting compliance requirements in such a heavily regulated industry means standardisation is often the most achievable approach. Standardisation is the enemy of a tailored client experience.
Despite customers being ready to adopt a digital approach, both banks and customers faced significant challenges when trying to on-board during Covid-19. With pandemic pressures set to continue indefinitely, how can banks improve this process today?
Tom Durkin, global product head for CashPro, Global Transaction Services at Bank of America explains that because the current global regulatory framework surrounding financial services is highly complex, companies must be aware of the regulations in the
regions and countries where they operate.
"Having familiarity – or partners who can provide that familiarity - with the local policies will help companies adapt more quickly to digital alternatives. We saw this play out most recently with digital signatures."
For instance, Durkin notes that some countries only allow e-signatures when they are matched by an image of the wet signature which reintroduces manual work to the process.
"Another area we think helps companies pivot is having discipline around their security framework. Companies could greatly reduce interruptions to business continuity by having good visibility and control on an end-to-end basis of who can perform what task,
such as who has the authority to review and upload documents. We encourage clients to take more proactive steps in this key area to benefit long term."
BofA have invested in digitisation of correspondence and building out their API connectivity, and increasingly its clients are using their CashPro Assistant for document upload and management.
Durkin furthers that “this has the compound effect of ensuring that any data captured can be reused downstream for future requests by the same client. APIs can additionally speed up onboarding by pulling data from clients’ systems, and push it back to the
client on demand.”
What does the ideal journey look like?
According to Magdalena Mielcarz, EMEA head of channel & enterprise services, treasury and trade solutions, Citi, the work undertaken to reinvent the bank’s onboarding program, CitiDirect BE, will make it the perfect example of a smooth digital onboarding
“Our strategy is the ideal, are we there yet? Not fully. We have full recognition that it takes overcoming a number of milestones to get to a state of nirvana. We are consistently executing each of these steps, but it is a journey and it isn’t going to be
completed over a month.”
Citi’s path to digital onboarding took several stages. Prior to launching their onboarding platform, the bank undertook a monumental reassessment of its documentation processes and reduced the number of redundant clauses in their client documentation by
a whopping 400%, reducing their documentation from a couple of thousand clauses across different jurisdictions to just under 50.
Citi’s platform allows the bank to hold a 360-degree view of its clients, and re-use documentation ensuring that the bank doesn’t request multiple copies of the same documentation – one of the largest pain points flagged within the onboarding journey.
Importantly, it also allows potential clients to initiate and remain in control of the pace of their onboarding journey. They have a clear view of what the bank requires for a given application and what information the bank has already pre-filled.
CitiDirect Digital Onboarding Portal is currently live for its institutional clients in 49 countries and digital signatures, such as DocuSign, are currently accepted during account opening process in 50 countries.
Durkin caveats that as we don't live in a 'perfect world' the area must be approached with "constant diligence and adjustment in order to stay in step with regulatory obligations. Considering important steps like customer due diligence, identity verification,
and KYC we have begun to insert additional technology opportunities with biometrics, e-signature, and APIs."
How should banks avoid time-consuming technical inefficiencies that stall the onboarding process?
Looking to the expertise of Silicon Valley Bank’s senior product manager, Tristan Blampied addresses further technical challenges faced by banks in their attempt to streamline their onboarding strategy.
“One way is to make available their development environment (sandbox) to customers during the channel on-boarding, so customers can effectively test themselves independently, and self-certify before going live,” explains Blampied.
But an even better way to achieve this, he argues, is for the banks to invest time and money into working with the enterprise resource planning (ERP) / treasury management system (TMS) / accounting system providers that service large numbers of their clients.
“This allows templates for the multiple payment types in question to be pre-validated with the corporate’s systems provider, meaning any customer specific integration is hugely reduced when the customer is ready to onboard with the bank. Effectively, the
bank and the application the client uses are pre-validated to speak to each other making it a smoother and faster process.”
As clients' expectations for greater ease of doing business continue to grow, improving the digital interaction with banks has become a competitive differentiator, Durkin elaborates.
"We host regular client advisory boards with all our different client segments, and whether a small business or large multinational, every one of them wants more digitization, not less. For banks, digitization offers both cost saves from reducing manual
intervention as well as quicker time to revenue from speeding up the onboarding process."
How should banks handle the potential for message data or information loss when mapping between standards, and what about the likely loss of non-repudiation?
Echoing the sentiments raised by Innopay, Blampied notes that banks should have a thorough understanding of the differences between the standards and any local or regional variations which could affect them.
“They should closely follow the many industry guidelines for mapping between standards. For example, there is a guide for Bacs to ISO 20222 mapping that should be conformed to across the industry, rather than different banks using different mappings. Enhanced
reports, notifications and acknowledgements including over email can sometimes be effective in compensating for data loss.”
By way of example, Blampied points to Bacs clearing which can only currently support 18 characters of remittance information. However, standards like ISO 20222 - and indeed the banking channels themselves - can support much more than this nowadays.
“So, if banks have supplementary mechanisms such as those mentioned to report information back, this can ensure customers still receive the full remittance data.”
Durkin furthers that banks can better ensure data integrity and compliance with industry mandates by adopting ISO 20022 standard for high-value payments.
"This is an international standard to create consistent message standards across payment-related business processes among banks, corporates, and clearings. Furthermore, various self-service data validation tools could also assist clients to test in real-time
their file uploads with a bank’s system."
What are the differences between challenge mapping and enterprise resource planning (ERP) support for integration?
Papa Faye, CashPro product director, Global Transactions Services at Bank of America believes that SWIFT for Corporates could help facilitate and streamline a company’s multi-bank experience, providing a single connectivity and offering a single industry
standard/format. "As more banks integrate their APIs with ERP providers, the clients they share will stand to benefit from a more streamlined ecosystem that will lead to faster onboarding.
Blampied concludes that although progress on industry level harmonisation of the messaging standards should continue, “if the banks pre-agree their formatting requirements with the ERP vendors, then this should considerably reduce the impact of potential
differences in data required by the banks. This is because even if the requirements are not identical, the subtle differences would have already been accounted for in the bank / ERP pre-validation exercise.”
If the current
inertia toward digitisation of corporate onboarding is ever to come to an end, it is hard to imagine a more fertile context than 2020 to put down digital roots. If carried out with a view to long term, 360-degree client management, it’s likely that banks
will not only see satisfied clients, but an infrastructure that exists to pre-empt needs and evolve in step with the clients it serves.