Traditionally transaction banking has been a sticky business – it can take up to six months for a corporate client to change banks because of the multitude of IT systems, documents and processes they have to grapple with in order to create a new relationship. It is no wonder that many customers are daunted by the prospect and stay put.
However, this situation is gradually changing. At the large corporate end of the spectrum, customers are shifting away from using bank proprietary technology, which is one element of the ‘stickiness’. Despite banks rolling out their own host-to-host channels with unique file formats, connectivity protocols, etc, today many corporates are moving to industry standard formats and connectivity. Corporate access to SWIFT will also make things easier if customers want to change financial providers in the future as a bank agnostic solution.
Because technology developments are enabling greater client mobility, it is now time for banks to take a closer look at the documentation and processes that surround client onboarding, which contributes to the inertia around moving financial services providers. By looking at these two aspects, a bank can shorten the onboarding lifecycle, as well as making it more efficient for the customer and itself.
Onboarding Documentation: A Real Pain
For many corporates, establishing a new relationship with a bank can be a painful and long, drawn-out process, mainly because the documentation surrounding client onboarding tends to be very complex, voluminous and written in ‘legalese’ that favours the bank.
In order to improve the customer experience, first a bank needs to completely overhaul the onboarding documentation – it is not good enough to just tweak the current documents, as banks have tried this for years with very little success. It is important to start from scratch, as if the bank was just starting up, and determine what documentation is actually needed. This will reduce the number of documents a client has to deal with.
Second, a bank needs to write the documents in more commercially balanced terms, as close to plain English as possible, because both banks and customers waste a lot of time simply understanding what a document says, rather than actually negotiating the terms.
Ultimately, the aim of the documentation overhaul process should be to establish one document that covers customer onboarding globally. The benefit to the client, particularly complex corporate customers who are operating in multiple countries, is that they only have to review and negotiate the terms and conditions of that bank relationship once. When they want to add new countries, or new products and services, it is a very simple process because there are no additional legal documents to review.
Due to the simplification of the documentation, the initial onboarding experience is quick, efficient, and much less onerous for the customer. Plus, adding new countries and products to expand the depth and breadth of the relationship becomes a streamlined process.
The difficulty in creating one global document lies with varying legislation in different jurisdictions. From the outset, a bank needs to do the legal due diligence and research on a central basis. The next step is to do the due diligence at a country level, so that the bank can ensure that what it produced will be applicable and enforceable in various countries. A best practice approach would be to also involve the customer in the development process for the end documentation.
Not Just for New Clients – Existing Clients Can Also Benefit
In terms of onboarding documentation, Deutsche Bank has developed three options for its existing customer base:
1. Carry on using ‘legacy documents’. Some customers choose this option because there may be an extensive relationship in place where the customer has gone through a long negotiation process on documentation over the years. Plus, they may have tailored their own internal processes to handle the documentation requirements that the bank has in place.
2. Re-paper the existing solution. In addition to using new documents for new solutions, the customer can re-paper the existing solution so that everything is covered by one set of documents. Because it is streamlined, it is easier to use and much less onerous in terms of updating documents and adding new solutions.
3. Use new solutions governed by new documents and old solutions governed by the existing legacy documents. In essence, there would be two sets of document that would co-exist for the customer solution.
The third option is seen as the optimal solution because it means that the customer can leave in place what it already has, but it can use the new documents for an expanded solution going forward. However, one client that chose option 2 said they did so because they were not completely aware of all the documents they had signed with the bank over the years – re-papering their documents meant that they could gain visibility of all their agreements.
Improved Processing: The One-envelope Approach
Re-structuring the documentation is one important aspect of the journey to an improved customer experience, but looking at how these documents are processed is equally important. A bank can be very good at processing the wrong thing or very bad at processing the right thing, but either way it doesn’t end up where it wants to be in terms of the customer experience.
Therefore, after streamlining and simplifying ‘what’ it processes, a bank needs to look at harmonising ‘how’ it processes. Many customers experience frustration when dealing with the same bank that has different processes depending on the country, making them follow different procedures depending on where they operate.
Once a bank has streamlined its client onboarding process and has made the experience consistent across the many jurisdictions, it can then put in place a ‘one-envelope approach’. In many cases this is a virtual envelope that includes information on account openings, delivery channels, and available products and services. Clients can see the status of documents or receive reminders to prompt them to do something.
The customer benefits from this delivery mechanism because they can manage the project and their time as they choose. The headache of documentation stems mainly from the number of people that are required to sign documents from different entities and in different capacities. By providing all the documentation in one envelope, the customer can better organise their time rather than receiving documents in a trickle fashion. It helps the customer be more efficient and ensures that the bank has packaged together everything the customer needs.
In addition, the virtual envelope can store the many documents needed to manage a client relationship. For example, from a regulatory perspective, a bank will need a copy of a customer’s passport in order to be able to open a bank account. If the bank already has a copy of that passport, it can be electronically filed in the customer’s documentation envelope so that the bank doesn’t need to continually ask the client for the same piece of information.
This allows the bank to better manage its knowledge of the customer, but it also reduces the process burden on the customer because they don’t have to seek out the managing director or chief finance officer (CFO) and ask them for the n’th copy of their passport.
A bank can also introduce parallel processing to cut down on the wait time. In the past, many activities were done sequentially, which meant they took longer. Using parallel processing, the bank can begin to process documents and set up accounts, banking channels, etc after receiving electronic copies, such as a scanned image of a signed document. This can be done while waiting for the original copies to come back, which, unfortunately, most jurisdictions still require. The customer can gain access to the solutions more quickly, which is an objective for all concerned.
A streamlined approach to client onboarding can lead to in excess of a 20% reduction in the cycle times for implementations, as a result of the both the process re-engineering and the introduction of new documents. For example, Deutsche Bank was able to take one week out of the onboarding cycle time of normally five weeks for setting up new customers on its internet channel in Spain.
Re-engineering the documents and the processes will give the bank productivity gains because it will be able to take on customers in a very cost-effective manner. It is also about client self-enablement where the client is less reliant on the bank. The ultimate goal is a situation where a client can go into a banking application and open a new account in Singapore just by clicking a couple of buttons. Having a single set of documents, a single system and a single process is some way along that continuum.
This methodology will deliver many benefits to the bank, but should be driven by a passion to deliver the best-in-class client experience, which is a sustainable competitive advantage. The main objective is to make it easier for clients to conduct business with their bank right from the start and throughout the entire lifecycle of the client relationship.
Find out more about Deutsche Bank at their gtnews microsite.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
Despite all the automation and improvements that digital banking has the potential to achieve, customers and their needs still form the very core of the banking sector.
Banks might feel justified in victim blaming when fraud occurs, but it does little for customer confidence.
Politicians have united in urging the Reserve Bank of Australia to lend its backing to the digital currency by officially recognising it.