How banks can power revenue with Corporate Digital Identity

A guest editorial by Alex Ford, president of North America, Encompass Corporation

The complexities of compliance and evolving customer expectations that exist today present significant challenges for banks when it comes to operating with the speed, agility and efficiency needed to deliver in a way that enables them to continually grow their business. 

From a customer perspective, the implications of failing to meet these expectations, particularly when it comes to onboarding, were laid bare by new research from Encompass. This showed a staggering 87 per cent of corporate treasurers have abandoned banking applications for their business due to lengthy and inefficient onboarding processes. To make matters worse, 86 per cent of treasurers have witnessed their businesses lose revenue because of a bank’s slow and disjointed approach to acquiring customer information.

So, banks are not just losing customers as they vie to balance competing obligations, they are also losing revenue – and solving this issue demands a fresh approach to Know Your Customer (KYC).

Corporate Digital Identity (CDI) offers a solution to the cumbersome and time-consuming process of verifying corporate customers’ identities that is often behind the dissatisfaction in question. Not only that – it is also a game-changing support to efforts to increase revenue.

Defining CDI

But what is CDI? Representing a fundamental shift in approach to customer outreach and verification, CDI combines authoritative public data with private information directly from customers to build a complete KYC profile. With these profiles, banks are presented with a unified source of truth and comprehensive visibility into potential risk.

Until now, without this unified picture, banks have been forced to build their own profiles from a mass of disparate data to conduct KYC. When tackled manually, this is expensive, with processes open to the risk of human error. Banks have also tried to build their own technology solutions, but these complicated and extended projects often stall, or halt completely, due to limited resources, a lack of skills or competing business priorities.

The inefficiency of this means that many businesses wait up to 120 days for access to accounts and services, which often leads to them abandoning a friction-filled application process. The result? Applications totalling $3.3trn are abandoned every year.

CDI, on the other hand, facilitates a smoother, faster onboarding process, which, in turn, allows banks to increase customer satisfaction, reduce abandon rates and reap a multitude of broader business benefits.

One of the main issues highlighted by corporate treasurers within Encompass’ latest research is that many – 93 per cent – have been asked by a bank for the same information multiple times. And this isn’t a one-off as 56 per cent of treasurers have had this experience on several occasions. Failure to address inefficiencies in outreach and management processes could lose customers’ engagement and, ultimately, business. CDI, which eliminates unnecessary outreach hampering customer satisfaction, is the way forward.

Supercharging revenue with CDI

KYC is traditionally seen as a cost centre, and to date digital transformation in this area has been geared towards cost-saving measures. Now, CDI enables firms to go beyond this, with the focus on maximising revenue generation as a core objective.

By leveraging technology to streamline onboarding and verification processes, banks can better retain customers, as well as attract new business. The adoption of CDI unlocks new revenue streams for banks by reducing friction in KYC onboarding and throughout the client lifecycle, preventing churn and making it far easier to scale compliance processes.

The data imperative

Robust and dynamic data is central to the effectiveness of CDI, which seamlessly integrates public information with private data provided by customers.

CDI leverages advanced technology to obtain as much information on a customer as possible from the public domain to reduce unnecessary outreach. Gaps in data drive a targeted outreach request, leveraging best-in-class security to maintain data privacy and compliance when sharing information. As a result, the KYC burden on customers is minimised, which in turn speeds up access to products and services.

Having reliable sources, in terms of data availability as well as data quality, is essential for corporate and investment banks, as they grapple with greater complexity in identity verification in comparison to retail banking.

All the while, each bank must align its framework with specific regulatory requirements to ensure compliance and mitigate risk. This can become particularly tricky when considering the matter of ultimate beneficial ownership (UBO) for corporate customers as multiple layers of ownership can obscure potential risk. CDI iteratively uncovers ownership relationships, calculating shareholding percentages and determining UBOs, in accordance with a bank’s compliance policies.

A critical aspect of KYC is the ability to demonstrate consistent compliance with internal policies and procedures. CDI provides full transparency and audit trails to show what data and decisions have driven customer outcomes – critical in the event of an audit or investigation.

CDI as the future of customer-centric banking

As banks embark on and accelerate digital transformation journeys, CDI should be a central focus. By placing these digital identities at the heart of operating models, banks can simplify and streamline processes to find enormous cross-business gains and become truly customer-centric.

As an additional consideration, CDI also offers a reusable solution, breaking down technology silos and providing a unified platform across an entire customer base. Once a customer is onboarded, the same trusted information can be easily accessed throughout the bank, in accordance with data protection restrictions. This streamlines any subsequent interactions requiring verification, increasing the advantages to banks.

As our digital-first landscape continues to evolve CDI is critical when it comes to maintaining competitiveness, offering the best in customer experience, and navigating regulatory requirements effectively.

CDI will become a necessity in unlocking new avenues for growth, innovation, collaboration, and sustainable competitive advantage.

Image: Encompass Corporation

Related news: Encompass Corporation has appointed Nynke Postma head of business development for Asia and the Middle East.

Guest Editorial This article was produced specially for Fintech Intel by an expert guest contributor.