Digital Onboarding in Commercial Banking

Commercial banking has traditionally been slow to adopt the latest technology. However, over the past few years, commercial banks have undergone so much transformation that they have now started using different technologies to complete different steps of the same process.

In order to foster automation and better adoption of technology, it is important to view automation as being process-oriented instead of it being technology oriented. The digital onboarding process which has been created by several leading commercial banks is a testimony to this approach.

In this article, we will see how commercial banks have combined the use of various technologies in order to ensure an improved customer experience while automating the process to a large extent.

Why Digital Onboarding is Important?

Onboarding is the first interaction between a commercial bank and its corporate customer. As a result, the commercial bank has the opportunity to make a first impression. Tragically, onboarding has also been one of the most inefficient processes at any commercial bank. This is because onboarding is a fairly complex process.

Different departments are required to closely work together in order to obtain information, share it and analyze it further. Also, the complication can be increased if the commercial bank or the corporate customer work across various jurisdictions.

The end result is that the onboarding process can be manually intensive, requires a lot of paperwork, and needs weeks or even months to execute. This leads to a higher cost of operations for banks. It also leads to a poor customer experience. Automating the onboarding process has been quite challenging for many banks since it involves many different functions.

Automating the Onboarding Process

The onboarding process at a commercial bank can be broken down into several steps. A lot of these steps require a different type of technological intervention. We will have a detailed look at these processes.

1. Know Your Customer: KYC norms are very important for commercial banks. Commercial banks tend to spend a large amount of time trying to verify the details provided by their customer. The objective is to ensure that the bank does not end up providing services to a customer which is associated with any illegal activities.

   Commercial banks have had to pay heavy fines for their association with clients who launder money or are involved in anti-social activities like the drug trade and terrorism. Many commercial banks have started deploying open banking APIs to speed up the KYC process. The transaction data about earlier banking relationships that the client has provided can be easily verified in a timely and automatic manner using the open banking infrastructure.

2. Risk Underwriting: Once the customer has been onboarded i.e. their basic account has been opened, the next step is to ensure that the customer has access to the required products and services. For this, the customers have to go through a credit check so that the amount of risk that the commercial bank is undertaking can be gauged. This step too has been largely automated since underwriting and credit risk scoring models can automatically provide the credit rating of the prospective borrower. They can do so in an automated manner since their systems are integrated with that credit risk scoring entities.

3. Contract and Commercial Negotiations: The next step is to create various accounts such as revolving credit facilities, term loans, etc for the customer. This step can also be automated from the bank’s end. The result of the credit scoring can be linked to smart contracts. These smart contracts can then provide the best offer to the clients in an electronic manner. Once the client accepts the offer by clicking on it, it becomes a legal contract. The paperwork can be sent to the client either digitally or via post based on their preference.

4. IT Integrations: Commercial banks have created APIs which help the banks' systems easily communicate with popular ERP software like SAP, Oracle, or Microsoft Dynamics. Since more than three-fourths of the prospective customers run this software, commercial banks can integrate their system with the customer with relative ease. The process of integration may not be completely automated. However, it can be reduced to a few hours or days as opposed to the months-long projects which were the norm earlier on.

5. Communication and Escalation Management: Once the onboarding has been done, the last step in the process is to establish a communication and escalation matrix. This too can be done in an automated manner.

   Commercial banks have been able to create chatbots. These chatbots are built using artificial intelligence and machine learning. This means that each time a chatbot resolves an issue, it adds to its learning. As a result, over time, most of the common complaints received by a commercial bank can be resolved in an automated manner.

   The chatbots can also be programmed to escalate the issues to successively higher levels within the organization if they are not solved within a given number of days.

The fact of the matter is that the onboarding process can be quite complex. Hence, a wide variety of technologies are needed to automate this process. However, integrating and managing the process can be quite challenging on its own. Since the benefits are larger than the complexities, commercial banks are taking a significant effort to manage the process.