Starting in May 2010, the UK government began implementing a series of regulations designed to lower barriers to entry for new banks, and in doing so it inspired a group of start-ups to challenge the incumbents. By 2015, eight new UK banks had been approved by regulators. The updated regulatory requirements, as well as resulting competitive pressures from “challenger banks” offering innovative, digital solutions, are now forcing big banks to get their digital houses in order.
In May 2015, the chief compliance officer of a UK retail bank (with about 4 million customers) needed help. The bank faced a common issue for services organizations: Poor (or absent) digital capabilities were causing problems in their customer management process and lifecycle. Financial service institutions are required by regulators to perform a series of “know your customer” checks before opening an account. The bank’s lack of digital acumen caused regulators to raise questions as to whether the bank could effectively execute its anti-money laundering (AML) controls and protocols.
Furthermore, as the bank took up to 90 days to complete their customer on-boarding process, largely driven by the time take to complete customer background checks, it was losing market share to new challengers that completed the same process in less than 10 days.
Long-standing, incumbent organizations often suffer from employee resistance to change, and this bank was no exception. The staff resisted using new technologies and implementing a new operational model built on a digital platform. But the biggest challenge wasn’t people, it was data quality.
Over the years this bank had grown through acquisition. In the most recent 15-year period, it had made a number of significant acquisitions that were not fully integrated. Each of the original “banks” maintained their own data model and processes, and new customers were screened through separate systems before a new account could be opened. Moreover, very few of the systems’ records were adequate. Many lacked basic data, such as parts of people’s names, dates of birth, or full addresses. Protiviti analysis revealed that only 2 percent of the bank’s customer records were complete, or so-called “golden,” records.
To be compliant with regulatory requirements and remain competitive with other quicker-moving banks, our client needed to completely redesign its approach to customer management. And the only way to make these new processes work was to feed them with consistently high-quality data.
In May 2015, Protiviti began assembling the business case for implementing new technologies to smooth the bank’s customer onboarding process, with the end goal of modernization. The whole concept of this forward-looking program represented a huge departure from current practices and mind-sets. Protiviti worked to help decision makers at all levels of the organization to understand the benefits, explain how the changes would tie in to operations, and, eventually, convince them to implement the required digital solutions.
By September 2015, Protiviti and the bank's leadership had created the design specifications for the new operating model and launched a small-scale pilot of the new processes that demonstrated how they would work and their benefits. Protiviti experts then handed the pilot over to the bank’s operations staff, which spent six months ramping up and refining the pilot processes. Although the vast majority of the implementation was managed by internal bank resources, Protiviti experts were available to answer questions and help the team over bumps in the road.
By January 2016, the bank had documented the success of the pilot, holding it up as an example to the rest of the organization of how it’s possible to onboard new customers the new (and digital) way. Nine months from the start of the project, the bank had transferred those processes throughout the organization and reduced the total time to open a new account from 90 days to below 30 days—a two-thirds reduction. During the remainder of 2016, the bank expects to fully integrate and smooth out processes, taking that figure down to under 20 days.
With the new technology and processes in place, the bank has enhanced its ability to meet regulatory requirements and target its marketing messages where speed is a selling point. It also cut costs; it was expensive to license and operate numerous screening systems, and by consolidating them into one, the bank pays fewer licensing fees. It has also reallocated human resources to more productive work in other parts of the bank; of the 50 people involved in customer screening and management, about 33 of them are now reassigned to other functions.
Today, there is still work to be done. But with a much better understanding of exactly who their customers are, the bank has laid a solid foundation for future improvements.