Chartis and Encompass: Transforming corporate client onboarding

Chartis and Encompass’ collaboration on a three-part series addresses the critical issue of corporate client onboarding in the corporate banking sector. The series explores the challenges banks face, addressing these through CDI, and best practices for successful CDI implementation.

Streamlining customer onboarding with corporate digital identity (CDI)

Part 1: The pain of corporate client onboarding

Onboarding is a crucial, yet complex part of a bank’s know your customer (KYC) ecosystem. Here we contextualize the major pain points banks encounter during corporate client onboarding.

The scale of the onboarding problem

Conducting due diligence and KYC on corporate clients remains a heavily manual and intensive process. Unlike individual onboarding, which benefits from advanced ID structures and biometrics, corporate onboarding lags significantly. Chartis’ research highlights the financial strain on banks, with Tier 1 banks spending 4.5 times more on manual processes and people compared to technology to onboard corporates. Mid-tier banks face similar inefficiencies. The total costs are staggering, with over $9.9 billion spent on customer due diligence. With an additional $2.8 billion on downstream investigations, excluding the hidden costs of managing these processes.

Key pain points in client onboarding

Chartis and Encompass identify several critical pain points in current onboarding processes:

• Time-intensive onboarding: It typically takes 90 to 120 days to onboard a customer, including 51 hours of manual people time. Key stages such as identity verification, triage, screening, profile completion and quality control contribute to these delays.
• Onboarding/system bottlenecks: Bottlenecks arise due to the unique requirements of corporate vetting, reliance on manual processes, misalignment of resources, and the complexity of corporate risk assessments.
• Duplicate data and processes: Duplicate and inaccurate data can infiltrate the process, complicating the workflow and increasing the risk of errors.
• Corporate data outside core FinCrime master data management (MDM) systems: Much of the necessary corporate data sits outside the main financial crime MDM systems, limiting analysts’ access to crucial information.

Addressing bottlenecks and inefficiencies

The onboarding workflow for corporate clients is often lengthy, fragmented, and under-resourced at the initial stages. Subsequently resulting in costly and time-consuming manual processes further downstream at the enhanced due diligence (EDD) and investigation stages. Unlike individual onboarding, which leverages automation and data amalgamation, corporate onboarding relies heavily on manual interventions.

Causes of bottlenecks

According to Chartis’ research, when it comes to individual (or retail) onboarding, 33% of the spending we see at a typical Tier 1 bank is on technology and data (a ratio of 2:1 tech vs. people and manual processes). Contrast this with the figures for corporate onboarding: only 17% is spent on data and technology and 83% on people and manual processes – a ratio of almost 5:1.

Also worth considering is the limited access to corporate data. Analysts may not have access to necessary corporate data sources, hindering the onboarding process yet further.

CDI is the way forward for corporate client onboarding

Onboarding in banks is becoming increasingly complex and resource intensive. The lack of structured data, numerous risk indicators, and the intensive nature of corporate due diligence underscores the need for a more efficient system.

CDI addresses these challenges by providing a comprehensive digital representation of a company’s identity, including its corporate structure, ownership details, and regulatory status. This unified and accurate view of corporate clients brings together data from the public domain and privately held data from within the bank. CDI not only streamlines KYC processes and due diligence but also reduces the time and effort required for regulatory compliance. As competition intensifies, banks with sub-optimal onboarding processes face a significant disadvantage. By adopting CDI, they can enhance data accuracy, improve efficiency, and deliver superior customer experience, positioning themselves for long-term success.

The next report in this series will explore how banks can close these gaps by implementing automated CDI systems, aiming for a cost-effective and long-term solution to streamline client onboarding. Look out for part two, where we dive into the benefits and implementation strategies for CDI.

Read the first report in our series with Chartis

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