A report on digital onboarding by Deloitte has found that 38% of new banking customers will abandon account creation if the process was taking too long or if it was asking for information they were not prepared to disclose. Further, the report also found that 26% of customers prioritise ‘easy enrolment and login’ in deciding who to bank with.
Undoubtedly, we are now living in an era where customer centricity is essential in order to compete. However, for financial institutions, this is where it gets tricky. The example of digital onboarding above highlights a merger between compliance and customer centricity components. The question is, how can banks ensure that they fulfil both?
Let’s talk about the ‘3Cs’ of Regulatory Technology — Customer Centric Compliance.
First and foremost, what does Regulatory Technology — more commonly known as — RegTech represent?
In the financial industry these days, what RegTech represents in the development of a technology framework and standards to manage the cost and complexity of compliance with a specific regulation. In other words, technology that organises workflow and data in a smarter way to provide nimble and secure regulatory solutions.
After the 2008 financial crisis, regulators have become increasingly more rigorous with their inspection. Compliance officers are now expected to leave no margin for error, resulting in the due diligence process becoming overzealous. Compliance spending has never been higher. On average, banks are expected to spend up to 10% of their revenue by 2020.
Hitherto, customer expectations within the financial industry are also at an all-time high. In the last 2 years, digital banks have emerged out of nowhere in a relatively short period of time, owing a significant amount of their success to their customer centricity strategies. Leveraging innovative technology to confirm the identities of their customers whilst at the same time meeting ‘Know Your Customer’ (KYC) requirements, digital banks have transformed the financial services landscape. To win back the client game, banks have to adapt. It is essential that regulatory compliance become a largely automated and recurring process.
Conventionally, regulatory technology is seen as a useful tool that makes the compliance process for financial institutions less costly and more efficient. However, RegTech has the potential to be more than just that. If leveraged wisely, regulation can actually help provide a competitive advantage. For example, RegTech can be used to help banks build customer-centric and yet compliant onboarding processes. With the technology available these days, it is possible for banks to seamlessly link the compliance department to the consumer end, effectively making the user experience quicker and more enjoyable. The same goes for payment solidification. Previously, payment solidification was mandated to take place in-person. Now, advanced technology has made it possible to use a biometric element for identification verification.
With this in mind, banks need to start radically rethinking their service and product strategies. This includes:
- Strategy: service and product roadmap,
- Governance of processes, data, infrastructure, integration,
- Partner strategy: RegTechs, FinTechs, technology, integration partners.
Further, banks need to start researching what their clients prefer In digital banks. Is the main reason pertaining to:
- The low cost solutions and benefits of the branchless nature of digital banks
- The user experience that cutting-edge technology provides?
The answers derived then need to be integrated into compliance requirements as service components, with a customer satisfaction goal in mind.
In conclusion, regulatory technology holds tremendous potential and is a game-changer for the compliance industry. RegTech is not only mandated and used by regulators, but it is also a completely new way to conceptualise the financial market. Wide-spread implementation will likely result in the financial infrastructure being permanently transformed.
Interested in learning more about RegTech? We’re currently curating our new online programme on Regulation Technologies with leading industry experts. Register here to be at the front-line of learning about this.