In a recent post by Fenergo, the company outlined how digital transformation is changing the way people open accounts.
In the financial sphere, digital transformation is altering the way we establish accounts, driving an evolution of account opening and verification processes. FIs are integrating digital technologies seamlessly into their infrastructures to enhance customer experiences and streamline operations.
Account opening is a pivotal process where a client establishes a new account with a financial institution. This can include a variety of account types, such as checking or bank accounts. The processes involved can differ among organisations, encompassing aspects like product selection, data collection, risk assessment, and identity verification. With the adoption of digital-first strategies, most FIs enable clients to expediently complete these processes through online channels.
Modern digital identity and verification (IDV) solutions, alongside Know Your Customer (KYC) solutions, are pivotal to this transformation, enhancing security, improving efficiency, and ensuring regulatory compliance. This is a crucial element of the digital revolution that the finance sector is experiencing. In order to ensure compliance, manage risk and provide customers with a seamless experience across diverse platforms and channels, FIs have to constantly evolve.
A key regulatory requirement for FIs is establishing and verifying their customers’ identities. This part of their overarching compliance framework, which also includes anti-money laundering (AML) and countering the financing of terrorism (CFT), is vital to risk management associated with accounts and adherence to all regulatory stipulations.
The account opening procedure has several important steps, including identity verification, data and document collection, risk assessment, and product selection. These steps are vital to FIs’ compliance with KYC and AML regulations. IDV solutions analyse ID documents provided by customers, verifying their authenticity against established databases and helping to deter fraudsters. Collecting relevant information about the customer allows FIs to understand their clients’ financial positions and fulfil monitoring and reporting obligations. By conducting risk assessments and ensuring effective risk management, FIs can avoid fines, reputation damage, and financial losses.
With digital onboarding, the tedious manual collection of customer data has been replaced. Instead of handling paper documents and email attachments, FIs are leveraging digital channels to make the process less costly, more efficient, and more streamlined. These advances have led to a growing preference among customers for digital channels to open accounts, allowing them to avoid physical bank visits and complete the process at their convenience.
The role of AI in the digital onboarding process is an exciting development. Technologies such as AI and machine learning (ML) are vital to data collection and analysis, as evidenced by an International Monetary Fund paper in 2021. AI and ML, when paired with natural language processing (NLP) tools, can significantly streamline the digital onboarding process.
By adopting AI, ML, and NLP, and institutionalising new technologies like optical character recognition (OCR), FIs can reduce errors and expedite the onboarding process. A 2023 survey by Regula revealed that a successful IDV implementation can enhance customer experiences and streamline the onboarding process.
Since the early 2000s, maintaining a robust compliance framework has been a priority in the financial sector. The digital transformation in this sphere is undeniable. By embracing technology and revolutionising traditional banking methods, FIs are paving the way for a new era of digital-first solutions that cater to evolving customer needs.
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