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8 November 2022

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Aurora’s Business Analysts Alexander Arezina and Cerys Stone explore what the future could have in store for the onboarding process - and if it's even viable to be making big predictions at all.

Aurora’s Business Analysts Alexander Arezina and Cerys Stone explore what the future could have in store for the onboarding process - and if it's even viable to be making big predictions at all. 

What do you think the world will look like in 2040? Do you think we’ll be living in a Black Mirror style dystopia? Maybe you’re a little more optimistic. It’s tricky enough to predict what the future might hold in many cases, let alone within such a fast-moving field such as technology. Trying to imagine what the client onboarding process may look like in five years time would still be speculative to an extent, but looking beyond to 2040 would be extremely uncertain, not helped by the unpredictable nature of the world we live in.

The client onboarding process is one of the earliest opportunities for a business to give off a good impression to prospective clients. In some cases, a convoluted onboarding process will see potential clients take their business elsewhere. There are growing expectations that onboarding should take minutes or hours, not days or weeks, something which digital challenger banks have been able to deliver and has already begun to set both a precedent and an expectation from customers. 

Other financial institutions will soon find themselves also having to adapt their approach and processes, while at the same time navigating the regulatory and compliance-centric challenges they are faced with. These institutions are now also being met with the demand from clients for a swift and simple onboarding process, one that involves requests for information being kept to a minimum. Improving the speed of the process could be achieved in several ways. Let’s take a look at some of these avenues.

The non-human approach

Onboarding in its current form is still very much a manual process; employees of an institution’s onboarding team will be filling out the required information, keeping in contact with the prospective client, and reviewing the data as they go. This is done with the contribution of several teams within the company which means there are handovers, possible delays, and ultimately inefficiency. 

Robotic Process Automation (RPA) would see AI being utilised in conjunction with a rules engine to automate these previously manual tasks. This would not only see an increase in process efficiency, but it would also see a reduction in cost for the company. After the initial setup process, the machine can be left to conduct the required stages of the onboarding process without the need for constant supervision. 

By removing the human input from the equation, you also eliminate the problem of human error which leads to a lower exposure to risk and makes it more likely to comply with regulations. In turn, Financial Institutions will avoid costly fines for falling foul of regulations. The drawback is that you do lose that human touch if it is a machine that is carrying out the onboarding process from start to finish. The potential for relationship building with your client during this phase is eradicated and it would need to be developed after they have been onboarded, if the client does decide to go ahead.

The power of blockchain 

The gathering of required data and documents is another aspect of the onboarding process that could prove cumbersome to both the financial institution and the prospective client. Data that is required can include: ID verification, screening, sanction status, and ownership and control. At present, companies use a combination of manual procedures and online services, of which there can be several. The use of a Distributed Ledger Technology (DLT) such as blockchain is one way of removing the need to keep requesting information from the prospective client. 

With DLT, there is no need for a central administrator to ensure the data is not being manipulated and the information stored is secure and accurate through the use of cryptography. This system could allow clients to have control of their digital records and how their data is used, while financial institutions are able to utilise this client data for their onboarding process. It avoids the duplication of gathering information from a prospective client and can enable financial institutions to complete the onboarding process with minimal, if any, need for interaction with the client. 

For sensitive client data, a single version of the truth now exists which is automatically verified by the blockchain platform. The information can’t be altered on a whim. Application Processing Interfaces (APIs) are already used to good effect when it comes to sharing data. There may also be national identity schemes implemented which will contain all the required data that can then be accessed, with permission to speed up information gathering.

Every financial institution has its own unique onboarding process. However, in the future, it is entirely possible that there will be one standardised onboarding process that complies with all regulations and can be adopted within each specific country. Cooperation between countries can lead to a more consistent application of regulations which allow for the onboarding process to be similar across multiple jurisdictions. This is also something that could vastly improve the customer experience since a one-size-fits-all approach means the client will know exactly what information they need to provide and can then use that should they wish to onboard with multiple financial institutions. Convenience for the prospective client is an essential aspect of a successful onboarding process

2040 and beyond

"While it is impossible to say with absolute certainty what the process of client onboarding will look like in 2040, important components of it can be drawn out and looked at in more detail."

Looking ahead to 2040 and what the onboarding process may look like paints a far less clear picture, so a more theoretical approach is required in order to make predictions. There needs to be a shift from looking at the developments of onboarding today, to assessing potential changes in the environment that the onboarding space operates in. The predicted changes to the environment can either help or hinder the progression of onboarding systems. Significant technological advancements can vastly improve the efficiency and automation of client onboarding whilst changes in the geopolitical landscape can complicate onboarding processes.

It could be that data is obtained instantaneously and the prospective client never needs to be contacted at all after they express a desire to do business with the company or financial institution. It may all be done entirely with machines and using AI without human input anywhere to be seen and no relationship building along that portion of the process. It is also possible that the inherent concept of onboarding may not exist. There could be a metaverse in which all business is conducted into which you are just automatically enrolled and have access to any service you want. 

Conversely, there could be an even greater number of regulations that must be adhered to, or stricter data privacy laws that could impede some of the efficiency gains mentioned previously from technological advancements. The geopolitical sphere can impact client onboarding through a changing regulatory space. Movement by governments, either towards or away from cooperation, through multinational organisations such as the European Union (EU) can shape the environment in which CLM operates in. Fragmentation and nationalism lead to a more disjointed regulatory space which can hinder global trade and make the process of onboarding much more difficult and complex. The recent appointment of far-right Italian PM, Giorgia Meloni or the popularity of Marine Le Pen in France, can indicate a shift towards right-wing populism that tends to steer away from cooperation and loss of autonomy brought about by institutions such as the EU. If this populism spreads and strengthens over the next two decades, Europe could be faced with the collapse of the EU and the removal of the regulations which they provide.

Undoubtedly, the biggest concern facing the world in 2040 and beyond is climate change. The consensus that has been reached by experts globally is that environmental forecasts produce a near-apocalyptic view of the future if the current generation fails to act. The climate crisis has created a coordinated effort to reduce the impact of industries on the environment. The global recognition to tackle the impact of climate change has moved into the financial sector where financial institutions are having to be more aware of the role they play in financing and servicing unethical and environmentally damaging clients. The EU has taken the first step toward creating regulations to monitor the environmental and ethical impact of entities that use banking services. Just as with the geopolitical sphere affecting regulations, the push towards greater environmental awareness can also create a stricter onboarding process that will need to be adhered to by prospective clients. Given all these external factors, it is simply not possible at this point in time to definitively predict exactly what the process will end up looking like.

While it is impossible to say with absolute certainty what the process of client onboarding will look like in 2040, important components of it can be drawn out and looked at in more detail. Technological advancements will certainly bring about greater efficiency and reduce the time taken to complete the process, while also making it less of a burden for the prospective client. However, it remains to be seen whether or not client onboarding as a concept still exists in 2040, or if technology, which is currently helping to improve and streamline it, has brought about its demise.

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