Commercial client onboarding as a competitive advantage

Financial institutions have consistently neglected and understaffed client onboarding and client life cycle management (CLM) activities, leading to suboptimal client experiences. While the outlook for mergers and acquisitions anticipates a soft rebound in the latter half of 2024, the banking industry continues to face significant margin pressure, increased competition, evolving regulatory expectations, and technological advances. Concurrently, impediments to a seamless process continue to emerge, from heightened know your customer (KYC), fraud, and anti-money laundering (AML) activities to increased transaction volumes and product complexity.¹

The surge of client onboarding activities has laid bare the increasing complexity and time-consuming nature of onboarding new clients. Banks are at an inflection point – digitise and improve workflow or lose market share to technology-savvy competitors. This blog will examine how financial institutions should view commercial client onboarding as a competitive advantage, not merely an administrative and compliance function.

What is the cost of onboarding commercial clients?

While it is difficult to estimate the true cost of onboarding commercial clients due to fragmented processes (e.g., sales, onboarding, compliance, credit, operations, etc.), Fenergo research indicates it can cost up to $25,000 per client. Key challenges include: 

1. Data quality – disparate data sources (systems of record) and data/process silos.
2. Client experience – multiple touchpoints, duplicative tasks, and semi-manual activities. 
3. Operational efficiencies - end-to-end onboarding life cycle, including the flow of information and tasks across various stakeholders and functions.

Additionally, an American Bankers Association survey found that commercial entities walk away from potential servicing institutions during the onboarding process due to the challenges of working with too many stakeholders and functions, higher than anticipated costs, process complexity, difficulty receiving timely responses, and piecemeal documentation requests.  

Financial institutions constantly grapple with how to simplify their onboarding process without compromising compliance and risk management principles. Significant profit and improved reputational opportunities can arise from reducing the complexity and resource/process-intensive nature of onboarding. CGI’s experience with global financial institutions has identified five focus areas that can yield onboarding and process improvements. 

5 focus areas for commercial client onboarding and process improvements

1. Efficient and effective end-to-end onboarding life cycle

A comprehensive workflow is critical to ensuring optimal client experience and alignment with compliance and regulatory requirements. Financial institutions should evaluate and implement digital enablers so clients can self-guide through various modules with simple and defined tollgates. The end-to-end process should also include system integration to reduce manual data entry and improve data quality. 

2. Consolidated data framework 

A centralised data repository is critical to ensuring accuracy and consistency. Financial institutions should ensure applications associated with onboarding are integrated with core systems to ensure consistency of client outreach and compliance activities. Additionally, firms should have transparent data point definitions to ensure consistency and accuracy of due diligence, identification, operations, and regulation activities. A well-defined and documented master data management framework for customer attributes, risk profiles, and regulatory compliance will ensure a more structured onboarding process and efficient client life cycle.² 

3. Data governance 

Financial institutions should implement a centralised document library to ensure compliance with regulatory requirements (e.g., AML). A centralised document library should integrate with the end-to-end onboarding workflow to streamline the process and reduce the duplicity of tasks and client outreach. 

4. Governance and oversight 

Management oversight (including appropriate policies and procedures) should not be limited to onboarding. Knowing your client and managing risk across the totality of the client life cycle is paramount to a strong risk-based approach that aligns compliance and regulatory activities with client experience without compromising either.³  Additionally, institutions should adopt dedicated teams across onboarding activities (e.g., KYC, credit check, client due diligence, legal, etc.) with defined roles and responsibilities and service level agreements (SLAs). This will assist teams in improving productivity, reducing operating expenditures, realising economies of scale, and improving the overall client experience.⁴  

5.    Global alignment 

Institutions should take a global approach to onboarding and adjust for relevant location and product-specific requirements. Creating a standardised template with baseline attributes will establish a consistent baseline for populating customer information profiles (CIPs) and can be augmented for country, product, and jurisdictional-specific requirements. Financial institutions with a “golden source” template eliminate the need for duplicative activities for clients that cross lines of business, products, and countries. Accordingly, firms reduce resource time, improve client experience, and appropriately manage compliance risk.⁵ 

Streamlining operations for banks

As banks look to streamline operations, improve cost metrics, and strengthen their regulatory and compliance programs, the commercial onboarding process creates an enormous competitive advantage opportunity. Financial institutions will be able to differentiate themselves to showcase efficient operations and enhance the onboarding process to emphasise a client-centric approach. Financial institutions can gain and win market share from less nimble competitors by embracing technology, centralising processes and governance, and focusing on digital enhancement.  

Partnering with CGI means having a tested and trusted partner to guide you through the nuisance of customer onboarding. With our technical, consulting, compliance, and onboarding optimisation experience, we can successfully provide subject matter expertise to improve processes and identify efficiencies. Contact us to understand more about our solutions, capabilities, and expertise to assist your institution in a competitive and evolving market.
 

¹ “The Future of Client Onboarding:” https://www.sifma.org/wp-content/uploads/2020/04/IHS-Markit-and-SIFMA-AMG-The-Future-of-Client-Onboarding.pdf, SIFMA, 2020.

² “Data: from KYC requirements to MDM’s golden sources, a vital flow across critical client-related controls and processes,” https://www.moodys.com/web/en/us/kyc/resources/insights/data-from-kyc-requirements-to-mdms-golden-sources-a-vital-flow-across-critical-client-related-controls-and-processes.html, March 28, 2024.

³ “For Commercial Banks, a Better Route to "All Aboard," https://www.bain.com/insights/for-commercial-banks-a-better-route-to-all-aboard, Bain & Co. May 10, 2016.

⁴ “Understanding Know Your Customer (KYC) Requirements for Banks,” https://resources.fenergo.com/blogs/understanding-kyc-requirements-for-banks. June 30, 2023.

⁵ IBID