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Customer Onboarding

Stop Fraud From the Start: How and Why the Onboarding Process is the Key

Chances are good that you, or someone you know, has been a victim of fraud. In 2018, the U.S. Federal Trade Commission processed 1.4 million fraud reports totaling $1.48 billion in losses. Credit card fraud was most prevalent in identity theft cases — more than 167,000 people reported a fraudulent credit card account was opened with their information.  

Overall, global fraud loss costs businesses $1.5 trillion per year – almost as much as the entire GDP of Canada. In fact, every dollar lost to fraud costs businesses 2.5 times that, according to a report by Lexis-Nexis. Fraud has become so pervasive in the digital age that it seems anywhere we look, we find examples: the global company accused of laundering money; the bank whose employees opened millions of fake accounts to meet sales quotas or the founder who mislead investors.

There are, of course, both visible and hidden costs to fraud that extend beyond the initial act. Common visible costs include fines and the expenses associated with remediation, labor and technology. Then, there’s the increasing number of rules and laws related to fraud. Regulators regularly issue new guidance on relevant fraud regulations such as Know Your Customer (KYC) and anti-money laundering (AML) laws. This makes it tougher for banks to manage customer due diligence (CDD) efforts effectively. 

The hidden costs also take a toll. Even as banks shore up their defenses, inefficiencies in processes abound. Banks lose opportunities when employees spend more time handling instances of fraud and their repercussions than they do on strategic initiatives that can help grow the business.

In addition, the way in which an organization implements and manages customer due diligence can have far-reaching consequences. Slow, delayed or error-prone processes reduce client retention, raise labor costs and potentially hurt revenue and profit margins.

It’s clear the visible and hidden costs of fraud far surpass the costs of complying with federal and state regulations. Protecting people and organizations against fraud is worth it. Further, the value of creating a low-risk relationship with your customers, partners and employees dwarfs the cost of compliance.

Stop Fraud Where it Starts

The most effective place to stop fraud is at the starting point of your organization’s relationship with your customer: during the onboarding process. It’s the most crucial touchpoint for protecting the business from fraud and for establishing a stellar customer experience. 

Although every financial firm spends significant sums annually on KYC, AML and customer onboarding, numerous processes are inefficient. Employees still manually execute many of the steps in customer due diligence. As a result, onboarding often takes longer. The typical time to onboard a new customer is now 32 days, up from 28 days, and it takes even longer – 41 days – to onboard a high-net worth customer. Further, the process is more prone to error, especially as some employees lack the skills required to detect fraud. 

But firms that work like tomorrow use intelligent automation to transform the client experience, accelerate onboarding and avoid human error and compliance risk. With intelligent automation (IA) and process orchestration, top-performing financial institutions use artificial intelligence, cognitive document automation and robotic process automation (RPA). These technologies extract and understand information from captured documents, databases and other sources in any form (structured, semi structured and/or unstructured), at the same time eliminating the need to retype information from one system to another.

Delivering a Smooth Customer Experience

To deliver an exceptional client experience, the onboarding process needs to be as seamless and simple as possible. Consider the client who’s applying for a loan from a bank. During the approval process, the bank must comply with KYC and AML requirements. This includes verifying the applicant’s identity information against numerous external watchlists and public record databases, as well as collecting and integrating the necessary external data with internal systems. 

Let’s take a look at an example of a smooth, streamlined customer journey leveraging intelligent automation:

The client downloads the mobile app and scans an ID document, such as a driver license, passport, or similar. Mobile ID capture technology prefills required forms, and ID verification technology determines if the ID document is authentic and unaltered. Then, facial recognition software determines if the applicant in possession of the ID is the person whose image appears on the ID document. These three levels of ID checks help ensure the integrity of the bank’s processes, improve compliance and reduce risk of fraud. Customers can easily upload additional documents, if needed, such as proof of residence or tax documents.

RPA is a valuable tool to help the bank comply with regulations faster and without error, acting as a team of digital workers. These software robots automatically verify the applicant’s background against perhaps thousands of disparate sites, internal and external (including sanctions lists from sources such as the U.S. Treasury and Immigration and Customs Enforcement), running these repetitive, rules-based checks more rapidly, accurately and transparently than a human team could.

After bank approval, the customer signs digitally on their mobile device to complete the process. To meet the needs of different types of customers, the bank offers a variety of ways for the customer to sign – including biometric, click-to-sign, photo or handwritten signatures. Bridging the physical world and the digital economy, the bank serves multiple customer demographics in an adaptable onboarding process that provides an experience appropriate to each customer.

Facial recognition, biometric signatures, digital tampering detection, and multifactor authentication – these are all technical words that disguise a positive impact: Building greater trust and reducing business risk.  A streamlined onboarding process leveraging intelligent automation keeps the client’s information secure and delivers a great customer experience. The company saves time, money and resources by avoiding fines, cutting the cost of compliance and directing resources to business growth initiatives. That’s the power of working like tomorrow, today.

Learn more about the path to smarter onboarding.