How to streamline client onboarding in financial services without compromising on fraud checks
With the advent of Open Banking, FinTech and fast payments, customers have come to expect instant access to financial products and purchasing services. But along with the rise of this new, more customer-focussed, financial environment have arisen new challenges in the fight against fraud. How can you combat this effectively while reducing risk? How can you ensure that genuine customers are boarded without delay – which you need to do to protect your business in a highly competitive market, with all its tech-savvy new entrants? Is it possible to screen applicants in real time, without compromising the sophistication and accuracy of the checks and balances which apply to a slower paced approvals journey? "Banks must become more agile. New payment players and the likes of Google, Apple, Facebook and Amazon, collectively known as GAFA, know what their clients want and are able to adapt quickly." REAL TIME CUSTOMER BOARDING AND FRAUD ANALYSIS A changing financial environment... Open Banking means that customers want faster access to products and services The rise of FinTech (financial technology) start-ups is bringing new entrants into the market 93+ new challenger and start up banks and financial providers in just 12 months* Many offer instant decision on finance 26% of Gen-Z’s have opened a new challenger bank account in the last 5 years** Tech giants like Amazon, Google, Facebook & Apple are threatening to further disrupt the market “A 2018 executive survey found that nearly 80% of top executives feared that their firms were at risk of disruption and displacement from highly agile, data-driven competitors. Three quarters of the executive respondents represented the largest financial services firms.” Source: How FinTech Initiatives Are Driving Financial Services Innovation. July 10th, 2018 • 40% of banks list having to make decisions based on partial/non real time data as one of their main challenges for them and their clients.* • 32% intend to offer real time/instant payment capability in the next 12/18 months*. Source: Ovum 2017 Transaction Banking Survey. In a digitally-driven modern consumer environment, customers are looking for instant access to financial services. Many, especially the young, happily open a new bank account as easily as installing a mobile app. Monzo, for instance, had attracted 1,275,000 customers by December 2018, having only gained their banking licence in April 2017**. Like many of the new providers, they are fast, flexible and tech-savvy. That’s one of the main attractions for today’s consumers. And it’s not just personal banking which is changing. 80% of corporates are willing to change their banks for those that offer better servicing and products.* "Banks must become more agile. New payment players and the likes of Google, Apple, Facebook and Amazon, collectively known as GAFA, know what their clients want and are able to adapt quickly. Banks have to keep up, restructuring their business models to ensure that new products and features can be integrated quickly across physical and digital channels." Source: Whose customer are you? The reality of digital banking ©The Economist Intelligence Unit, 2018 There are significant opportunities for organisations who can deliver services which give them a keen competitive edge. The provider who can clear an application and bring customers on board fastest will often be the one which gains the business. So how can financial service organisations underwrite business competitively without compromising on the comprehensive fraud and risk processes that they have put in place to protect themselves from financial criminals? “FinTech and digital lenders have created new excellence in customer experience and have permanently changed customer expectations with regards to speed of credit decisioning and the choice and flexibility available with regards to range of offers and prices”. Ash Gupta, former Chief Risk Officer and President of Global Credit Risk for American Express. Source: How FinTech Initiatives Are Driving Financial Services Innovation. July 10th, 2018 The Challenge Despite wide spread agreement on the need to adapt systems to offer real-time availability of financial products to remain competitive, there remains many major challenges. One of these challenges is that underlying regulatory compliance and risk mitigation systems in most large banks were not designed to work in the digital age. Many of these back office systems were designed to usher in the age of the ATM and BACS transfers – which were all innovative in their day. However, these huge systems were not built to be agile and adaptable for the requirements of today’s demanding online real-time marketplace. So while some lenders may have been able to partially create a competitive platform by integrating their core legacy systems with third party data management systems to enable some kind of online offer - very often the supporting systems that allow a bank to engage its wider risk mitigation and compliance analysis just can’t keep pace with the demands being made on them to work in a real-time environment. This effectively creates a significant drag on competitiveness when it comes to expanding services or launching new products – where remaining regulatory compliant and not exposing the company to too much risk is a concern. Banks and finance providers in this situation have some important choices to make if they are to avoid becoming increasingly out of date or irrelevant to an increasingly demanding and less loyal customer base. "One thing is certain that procrastination in this area is no longer an option if banks and finance companies are going to avoid a significant erosion of their business in the next few years.” Do they completely overhaul their platforms, migrate to a third party completely or try to update some of their legacy compliance and risk mitigation solutions so that these services are no longer a drag on business competitiveness?
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