6 Key Elements to Power a True Bankwide Digital Mindset

The push for digitalization grows more critical than ever, and is underscored by the coronavirus' exposure of ineffective manual banking processes. But this time banks and credit unions need more than just apps. Here are half a dozen critical ingredients a truly global digital compliance strategy must include to solidify your competitive advantage.

The entire financial services sector has come to an inflection point. With COVID-19 now complicating what was already a powder keg of regulatory pressure and ineffective manual processes, financial institutions are looking for ways to boost efficiencies and cut costs. In a new era of financial services, the client experience must not be underestimated. The world we live in now is more globally connected than ever and the push for digitalization grows more urgent with every day. It’s time for financial institutions to finally pursue this in earnest.

Recent years have seen banks and credit unions adopt a more digital approach to engaging with customers — introducing apps, electronic signature capabilities and real-time identity verification technology — to ensure that clients can have the smoothest experience possible.

But what if the challenge demands more than just an app?

Operating across jurisdictions brings with it the challenge of managing nuanced regulatory requirements. Traditionally, financial institutions have solved this challenge with localized compliance teams for certain business lines or locations. This practice is rigid, costly and results in multiple siloes within the same organization, counteracting any sense of cohesion. The traditional means of solving compliance challenges do not leave much room for centralization or data re-use, which are paramount for delivering an optimal experience for clients.

So how can we solve the cross-border compliance challenge?

The answer is clear — for financial institutions operating on a global scale, a technology-driven, cross-border approach to compliance is long overdue. Financial institutions must go to the root of the problem and introduce a solution that strategically considers the operational processes in place, the workflows across departments, and the technology that can be enhanced to create a more streamlined experience, regardless of where and when.

Striving Towards Enterprise-Wide ‘Know Your Customer’ Practices

It is apparent, from the $8.4 billion worth of fines in 2019 and the current trends for 2020, that the approaches being used by global financial institutions simply aren’t good enough. Manual processes must be replaced with a digitalized approach to fight financial crime, manage compliance and protect financial institutions from damaging their reputations and their market share.

For financial institutions operating across multiple markets, the driving message is a single source of truth.

This is not to say that each market operates in the exact same way. A retail banking arm will never function the same as a wealth management arm. However, in an overarching entity, customers will look for a similar experience from the same brand with which they interact. That sameness and reliability of service can be facilitated by a bank-wide approach to compliance.

In this context, different lines of business within one financial institution are like siblings. They share core traits, a “biological” foundation, but have inherent differences unique to each business line to meet specific user needs. Meeting customer needs is not one-size-fits-all across all markets or locations —why should technology solutions be any different?

What Does a Bank-Wide Digital Approach Look Like?

Automation of processes, where possible, eliminates unnecessary manpower requirements, allowing resources to be allocated elsewhere, where they can do more good. It also creates a “humanless” consistency that is more accurate, secure and reliable.

There are many elements that work together to create that frictionless experience that customers are crying out for. These include:

1. Compliance by design. The main element that enables standardized compliance across any financial institution is a standardized regulatory policy complimented by automation. A centralized repository of sound regulatory rules that encapsulate AML/KYC, data privacy, investor protection, tax, and OTC derivatives are essential to consistent process in collecting data and documentation from clients, no matter the channel.

2. Re-usable data and documentation. An API-first ecosystem allows data, workflow orchestration and rules to be exposed to multiple channels. The re-use of data and data convergence is rules-driven to ensure compliance with data privacy and local data laws and to facilitate substituted compliance for other regulatory pillars. Centralized client data management maintains a single, consistent view of the customer, enabling re-use of data for further transactions. This creates a smoother client experience and can have a significant positive impact on the lifecycle value of the relationship.

3. External connection to KYC utilities. KYC utilities form one part of the technology arsenal that powers a digital end-to-end onboarding process. Centralizing customer data and documents from several financial institutions focused on the same population of customers should reduce duplication of work and content across the financial services sector, making compliance easier.

4. Technology and data ecosystem. Essential to a truly digital approach is not only one piece of technology but a cohesive ecosystem. A technology ecosystem is able to join up all data providers and external systems to create an end-to-end flow of data and documents throughout the client lifecycle. This also allows for new technology to interface with older legacy technology to boost efficiencies without extra cost.

5. Digital KYC. A rules-driven solution with a risk-based approach can leverage the efficiency of technology and the discernment of a regulatory expert, without the unnecessary headcount. KYC managed by exception reduces the need for manual intervention. Automated KYC refresh takes an event-driven approach, which allows real-time KYC refresh for high-tech, low-touch compliance.

6. Client/bank portals. Digital portals will be key for financial institutions looking to create a seamless, user-friendly journey. Whether hosted independently by the bank or via a third party, a client-facing portal can enable clients to self-serve and upload their own documents and data, without being mediated by a relationship manager, only once all other automated methods have been exhausted.

Taking a Hard Look at Your Current Program

For many financial institutions, the term “global mindset” may be used often, but the key question is: How global are your processes and technology stacks?

It is not enough to maintain a global brand image while still having disjointed client-facing practices or procedures for employees. Standardization, particularly within an area that causes such disturbance to clients during onboarding such as regulatory compliance, replaces friction with simplification.

By centralizing compliance rules and automating this typically manual process, the firm can establish consistency across all channels, in any country or line of business. This, ultimately, will let financial institutions stand on solid ground and serve their clients in a consistently streamlined fashion.

The digital client experience is becoming increasingly global. In today’s competitive market, it’s time for global financial institutions to solve the root of the problem and set themselves up for success going forward. Protecting your brand against regulatory fines and centralizing rules in a single repository future-proofs your firm and its regulatory compliance, for the next decade and beyond.

Read More:

Global Financial Institution Fines & Enforcement Report

Building a Compliance Backbone — Whitepaper

Centralized Compliance Client Case Study

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