Financial institutions (FIs) have seen a significant pressure to evolve and innovate their client lifecycle management (CLM) in the past few years.
What started off as a set of disparate, largely manual processes across back-office, middle-office, and front-office teams, usually targeted to a specific business line and jurisdiction, has started to move to a more, global, automated, and holistic, end-to-end process.
The current landscape is changing based on several key drivers, including:
- Increasing costs due to regulations
- The lengthy process for account opening with the resultant delays in revenue generation for customers
- The disconnect among the various stakeholder parts of the organization
- Competition among FIs and fintech providers
- The accelerating digital agenda of most FIs, which is often held back by the inability to rapidly drive new products and services in the market
The shift in focus
While dealing with regulatory compliance, FIs have been focusing on audit, evidence, and documentation of the risk management approach taken for each of their customers. However, the tide is turning, and FIs are now placing the client and the business at the heart of the process.
Effective CLM is recognized in the market as the key enabler to drive regulatory compliance, achieve client and employee satisfaction, improve business growth and revenue creation, and create a consistent view of the client across business lines and jurisdictions. FIs recognize that they need to make significant progress toward simplifying processes and creating more visibility across the client's overall lifecycle.
Use of technology in the CLM landscape
For a long time, the CLM landscape has implemented new and emerging technologies to achieve immediate cost-cutting targets and headcount reductions, rather than being valued as key requirements for CLM’s overall strategic direction. These technologies have been bolted on to broken processes rather than serving as the foundation of a robust, sustainable solution.
Several technologies have been incorporated into solutions as a part of a suite of technology tools in the regulatory space, now commonly known as “RegTech.” These typically have helped to solve a portion of the problem, but often act as point solutions on the broader customer journey and require an orchestrator to tie all pieces together into an effective “whole.”
RegTech has provided innovative enhancements to CLM; however, processes continue to be very manual, siloed, and labor intensive, leading to poor client and employee experiences. As technology evolves, FIs have been forced to re-evaluate current CLM processes to stay ahead of the competition and drive value.
Key drivers for change and challenges
The need for CLM transformation across the industry is no longer only about regulatory compliance; it’s much bigger. While regulatory compliance is still in the picture in the current environment, the need for CLM transformation arises from globalization, new market entrants, new business approaches, the shift of focus from product to customer-centricity, and at the same time, rising costs.
In this global marketplace, customers now expect to be able to do business anywhere, anytime, in any market, and using any channel they prefer. Client expectations have shifted immensely and the FIs now need to focus on delighting their customers rather than putting hurdles in their way when they want to do business.
FIs need to create an omni-channel environment for their customers, and at the same time, have all the documentation and data in place to evidence regulatory compliance wherever the customer wishes to do business. At the same time, this has driven the need for a robust framework for customer identification and verification to enable online customer interactions.
In short, FIs need to define and implement a strategy for CLM with a strong foundation, focused on innovation, and using the best of the emerging technologies to satisfy the needs of all stakeholders, starting with clients, and continuing to their employees, regulators, and shareholders.
The changing stance of FIs
Historically, the drivers of change to innovation have been reactive, with a focus on cost savings and increasing regulatory demands. Recent trends show that the FIs are taking a more proactive stance and accelerating innovation to appeal to a broader customer base and grow the business.
Regardless of the challenges faced by FIs to kick-start their digital transformation for client lifecycle management, the organization should make all efforts to at least start the journey. This may begin in one line of business, one customer journey, or one digital channel to build a foundation and drive a broader digital strategy incrementally.
It’s also crucial to keep user and customer priorities in mind and focus on building a strong and flexible foundation that can be incrementally enhanced without the need of rebooting it every five years.