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The evolution of corporate digital identity in banking

By Alex Ford | Mon 19 February, 2024

In financial services, digital identity has proven transformative, particularly in retail banking. However, when it comes to business entities, corporate, commercial and investment banks face greater challenges.

There are vast amounts of disparate information required to establish identities and meet regulatory requirements. The solution lies in embracing Corporate Digital Identity (CDI).

CDI takes a holistic approach, tailored to a bank’s regulatory and business needs, providing a single view of its corporate customers. The identity can be shared throughout the customer lifecycle, and across multiple divisions.

What is CDI?

Corporate Digital Identity (CDI) is a technology led approach to uniquely identifying and verifying a company’s exact identity. It combines corporate information and data attributes that are essential for due diligence. These attributes and information are from approved sources, via processes which are compliant with both regulatory and business requirements.

In the past, it has been possible to build a client database. However, doing it in a way which fully examines corporate structures, and associated parties, leveraging the compliance-approved documentary and non-documentary sources, has only ever been possible using manual human led approaches. Now with advancement in technology there is a whole new category of CDI solutions emerging.

Digital identity influences trust by enabling easier verification and secure transmission of corporate data.

While it shares similarities with individual digital identity, CDI meets the unique challenges facing verification of corporate customers. Frequent changes in corporate attributes and complex ownership structures across multiple jurisdictions being one. With 86% of financial institutions noting an increase in onboarding times when verifying cross border entities, CDI is the solution.

CDI delivers ready-made profiles directly into internal systems. Subsequently eliminating time spent manually gathering information. Instead, allowing banks to focus on business growth and revenue.

The profiles incorporate real-time data, and documents, from authoritative public sources and private information from the customer.

The current landscape

Traditional banking processes are labor-intensive. The bank relies on manual collection of information from a vast array of disparate sources, including the customer. Banks also face inconsistent global regulations, complex ownership structures, stale data, and high levels of customer outreach. In tandem with dealing with legacy technology, further hindering productivity and growth opportunities.

The challenge lies not only in the volume of data, but also in ensuring its accuracy, relevance, and security throughout the customer lifecycle. Identifying and verifying a company becomes a significant pain point due to scattered information across various sources, divisions, and jurisdictions. Even if an analyst can access these sources, aggregating the necessary information requires extensive effort.

In addition, ensuring there is a clear audit trail that illustrates where and when each critical attribute was sourced and verified, is rarely achieved.

The vision of CDI – more than just an identifier

CDI is a game-changer. It offers a comprehensive customer risk view configured to a bank’s specific regulatory and business requirements. Benefits include streamlined onboarding, enhanced customer relationships, reduced risk, robust regulatory compliance, operational efficiency gains, and new business opportunities.

Challenges addressed by CDI

  • Lack of standardization
    CDI provides a unified and standardized view of a corporate entity dependent on the bank’s own appetite to risk. Subsequently, eliminating the need for manual profile creation and reducing the number of errors, rework, and reviews.
  • Repetitive client contact degrades customer relationships
    Sourcing everything available in the public domain, before contacting the client, for the delta CDI ensures an ‘ask once’ and only for what’s needed approach.
  • Global regulation complexity
    CDI is customizable to jurisdictions, ensuring compliance with diverse and evolving regulatory requirements. It enables rapid implementation of new procedures in response to regulatory changes supported by a clear audit trail.
  • Ownership structure complexity
    CDI incorporates technologies like normalization and entity resolution for identifying ultimate beneficial owners (UBOs).
  • Reliance on manual processes
    Automation reduces manual workload, minimizing errors and operational costs.
  • Stale data and disparate sources
    CDI utilizes vast amounts of real-time public and private data. Resolving conflicts through data primacy rules reducing customer outreach and friction while providing a single source of truth.
  • Legacy and siloed technology
    Integration with internal systems breaks free from legacy constraints, promoting operational efficiency and reducing ‘swivel chair’

Holistic and reusable view of the customer

CDI provides an identity that can be reused within the bank. The identity can facilitate secure, and efficient, onboarding as well as Corporate Customer Due Diligence (CDD). Following onboarding, if a business opens additional accounts, the same trusted information can be seamlessly shared across the bank. Eliminating the need for redundant verification of the business’s legal name, incorporation status, beneficial ownership, and other essential details. While these capabilities are emerging in the market, the demand for an evergreen business identity is anticipated to rise. Particularly as the benefits in efficiency and cost savings become increasingly evident to banks.

How Encompass delivers corporate digital identity

Banks rated the importance of data freshness at 84% in a recent survey. Correspondingly, Encompass, with its access to multiple real-time data sources, leverages both automated global public data search with private data to deliver CDI.

Using normalization, entity resolution, corporate hierarchy mapping, Ultimate Beneficial Owner (UBO) identification, and integration with other systems, these processes collectively contribute to the delivery and maintenance of a comprehensive CDI profile. Additionally, banks are reassured of an audit trail that is complete with full data attribute lineage, source documents and corporate structure evidence.

Reshaping the future with corporate digital identity

The evolution of CDI marks a significant paradigm shift in the way banks approach identity verification for entities. CDI streamlines processes and enhances efficiency, but also paves the way for a more secure, compliant, and customer-centric future.

As banks embrace the vision of CDI, they position themselves to thrive in an era where digital identity is at the forefront of a sustainable and resilient financial ecosystem. Internal systems are powered with a unified and transparent source of truth which offers firm-wide benefits.

WEBINAR

Corporate digital identity: The future of customer centric banking

Join Alex Ford (Encompass), Ivar Lammers (ING) and FinTech consultant Alan McIntyre to learn how corporate digitial identity (CDI) will be crucial for KYC in the future.

 
Author: Alex Ford

Alex drives business growth in North America, working with customers, partners and the Encompass team to transform KYC with automation in financial institutions and other regulated entities. Joining in 2012, Alex has held Executive responsibility for business functions including Customer Success, Operations, Marketing, Product and Delivery. From 2015 to 2020 Alex was based in Glasgow with the launch and expansion of the UK operation, before taking up leadership of the North America business.

LinkedIn Profile | Alex Ford

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