Have you ever gone for a doctor’s appointment with a terribly upsetting health report or have you projected a report card filled with C’s and D’s? If so, have you ever wondered about your bank’s report card and how it would look like? Banks until now could have passed off with a mediocre report card without having to worry about losing its customers. However, with the entry of neo-banks and non-financial payment hubs, traditional banks suddenly have a lot to lose. The C’s and D’s are starting to affect the bank’s ability to retain its customers. The financial health of banks is slowly teetering in a downward spiral and doesn’t seem so rosy anymore.

The Root Cause

One of the major dilemmas banks face in today’s age starts right at the beginning of the customer journey – the customer on-boarding process. Since this is the first set of interactions between the customer and the bank, it gives banks the chance to bring in their A-game. However, for the past few years, on-boarding a customer at a traditional bank has been really tiresome for the customer as well as for the bank.

You may ask – Why?

Well, the customer on-boarding process consists of several processes within itself such as – request and document approval, background verification, credit term setup and credit score calculation, risk assessment, agreement management, account setup, tracking and data archiving, initial evaluations as well as analytics to ensure accuracy of the initial recommendations. Each of these processes takes 2 to 3 days, sometimes even more. According to a Kofax report, general account setups take 21 days while high net worth account setups take up to 41 days.

How did we reach here?

Banks, until now have been immune to the impacts that technological innovations have had on the other industries. Moreover, customers have been more patient with banks when compared to other segments such as the retail industry. This has been mainly due to the levels of confidentiality of the information and customer data that banks have collected. It also deals with the fact that the competition in the retail industry was massive, with many more alternatives. It was either a make or break situation for them. However, banks off late, are feeling the heat. Why?

More than half of the world’s population is aged below 30 and in spite of the recovery of banks after the economic recession of 2008, 72% of the millennial crowd trust technology over traditional banks.

What makes this statistic stand out is the fact that customers have other digital and mobile friendly banks at their disposal. Trusted organizations like Amazon, Facebook, Google and Apple have also entered into the payments segment. Banking has diversified into P2P lending options, credit segments and instant loan approving financial institutions. This cluster consists of faster on-boarding of customers and hence customers can get on with their life much faster.

Which Areas Require Help? Are Banks Attending to those Areas?

Because of the ever evolving regulations and compliance that banks have to follow, the numbers of identity documents have increased in the verification process, which in turn has increased the duration of the process flow. Banks have realized this and made the move to increase the number of human resources within banks. However, adding extra employees has only been distracting banks from the real picture, i.e. to invest in intelligent automation, without which, banks can bid ado to their customer base. Slowly, the picture is turning brighter for banks. Hence 79% of banks and financial institutions, who had earlier stuck with their lengthy on-boarding process, are starting to turn to automation for their KYC process.

The Savior for Traditional Banks  

According to Deloitte, 89% of customers aren’t happy with the customer onboarding process and an approximate 13% leave their banks early in the journey due to it. So what’s the solution?

Robotic Process Automation (RPA) has gained a lot of air time on technological segments in different media houses. However, where does RPA fit over here? Well, automating your entire on-boarding process with intelligent automation is not just a genius move; it gets back its benefits almost as soon as the implementation is complete with most experts claiming that returns match the investment within 6 months.

According to Forrester, RPA will grow to a mammoth 2.9 billion dollar valuation by 2021. In comparison RPA was valued at 250 million in 2016. That’s more than a 1000% increase over 5 years.

Trust Your Bot, Train Your Humans

Banks have underestimated the capabilities of bots in the banking business. On-boarding requests are generated and approved within minutes, following which screening of the individual background and past activities are screened against thousands of sites, including government wanted lists, sanction lists and no-fly lists. There’s also the advantage where all of the known information can be obtained from the identity documents which have been provided. How else does RPA in the customer on-boarding process benefit your bank?

Manual costs are reduced by nearly 70% and the expenses can be diverted to train analysts and human resources, who until now have been working on mundane and repetitive tasks, can focus on more productive and intelligent tasks. Moreover, when customers are provided by top notch services, cross selling gets better with several customers opting for different high-value add services, which they hadn’t initially planned on subscribing for.

Final Thoughts

Customers on an average have 2 to 4 interactions for opening low and medium net worth accounts and have 8 interactions for opening high net worth accounts. However, banks need to follow a systematic and disciplined process. This starts by banks taking note of the processes during on-boarding that act as bottlenecks for majority of the occurrences. Understanding more of their current system and its impacts on the business model and customer satisfaction can help them to detect the areas that need help the most. Followed by this banks can aim to identity areas where RPA would bring in an impact. Forecast models can be drawn and predictive analytics could be used to measure the value of RPA in the entire customer on-boarding process. Once this is done, automation should be implemented across the core banking system, but in small segments. Following its release to the customer’s end and seeing its success rate, automation can be scaled up to ensure traditional banks can compete against the newer entries in the banking and fintech industry. However, the time to act is now; banks need to ensure they make the move before it becomes too late.  

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Ashish Ninan Cherian

Ashish Cherian is a marketing enthusiast who has an extreme interest in analytics and in studying customer behaviour. He wants to progress deeply in these areas and is keen on learning something new every day. He also loves to read, travel, and debate and is a huge foodie.
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