Improving the due diligence process in banking: Building a case for automated due diligence

For banks, the ability to conduct due diligence quickly and effectively can be the difference between winning and losing valuable customers. In this article, we focus on building a strong case for automating the due diligence process in banking.

With customer experience an increasingly important differentiator for gaining a competitive advantage, a seamless digital process is now a must. Lengthy and difficult Know Your Customer (KYC) will no longer be tolerated, as highlighted by Encompass research, which found that 38% of UK businesses deliberately abandoned an application for banking services in the last year due to slow due diligence processes.

With companies often completing applications with a number of providers when looking for new financial services or products, the bank that can offer the quickest and most efficient onboarding has a better chance of success when it comes to securing business. This is where automating the due diligence processing in banking comes in.

The importance of efficient due diligence for banks

We know that due diligence is complex, particularly as the scope of a bank’s customer base widens. To be effective, the due diligence process in banking must be robust yet flexible enough to quickly adapt in line with regulations and any changes to risk profile or geographical footprint.

In global financial institutions, making these changes can be a long and challenging task, largely due to the reliance on manual systems. Performed manually, the process is prone to error and slow. It can also take analysts away from business-critical tasks that require their attention, proving inefficient business-wide.

Banks must also set aside budgets to acquire information necessary for due diligence. At many institutions, the productive life of these assets ends with the completion of KYC checks. This practice is wasteful. When there is pressure to get results quickly but regulations and best practices are constantly evolving, due diligence can be relegated to a tick-box exercise. However, it is imperative that business people within financial services appreciate the importance of proper KYC, which is something often still not realised, as the implications of not doing so – both operational and reputational – can be costly.

Benefits of Encompass for automating the due diligence process in banking

With the level of urgency heightened by the implications of the COVID-19 pandemic, digital transformation initiatives have risen to the top of the agenda for financial institutions worldwide, and the value of automation as part of robust due diligence has become increasingly evident.

By bringing transparency to complex corporate structures and identifying ultimate beneficial ownership, Encompass delivers accurate and comprehensive KYC due diligence on demand. Let’s outline the key benefits of the Encompass platform for automating and streamlining the due diligence in banking.

With Encompass, information uncovered at this stage is given the opportunity to find new, highly valuable life as an asset used in multiple areas of the business, for overall benefit.

When digital data flows from Encompass into CLM and CRM systems, banks automate their account opening processes. Then, as digital data flows from the middle office into the front office, business development teams quickly gain the full picture of a client’s corporate structure. This allows them to offer geographically-relevant products and services to other entities related to their new customer, providing the opportunity to expand business reach and, crucially, influence.

When digital data flows from Encompass into data lakes and data warehouses, banks use business intelligence and machine learning to create new understanding that drives informed business decisions.

Automating and transforming the due diligence process on corporate customers delivers immediate improvements in customer service while guarding institutions against risks of reputational damage.

By rendering information on customers as digital assets, institutions choosing to automate bring additional benefits to systems and operations downstream from their compliance teams in the middle office.

Learn more about the benefits of automation for banks with our ebook

This article has outlined the role of automation in improving the due diligence process in banking and the various benefits to banks and financial services. Get our free ebook on the benefits of automation for banks post-Covid and the growing need to digitize due diligence processes.