Servicing Of Commercial Banking Clients

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Automation in Onboarding and OngoingServicing of Commercial Banking ClientsStreamlining processes and costs withRobotic Process Automation (RPA) andcognitive technologies

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsContentsExecutive summary1Introduction1Current on-boarding challenges2Information gathering2Manual processing3Data validation3Addressing on-boarding challenges4Robotic Process Automation (RPA)5RPA and cognitive technologies5Automation adoption6Sustainable savings7Additional potential benefits8Other ibutors9

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsExecutive summaryThe process of on-boarding commercialbanking clients can be a long and expensiveone. Typically, it consists of an eight stepprocess: soliciting and confirming newclients, collecting account owner data,validating client data, setting up credit linesand limits, completing legal due diligence(including term negotiations), setting upaccounts, tracking and archiving data, andcompleting ongoing reporting and analyticsfor compliance and cross-selling purposes.[1]This process can take as long as 16 weeksto complete, often hampering the customerexperience.[2] Banks may end up investing asmuch as 20,000[3] - 30,000 to on-board anew client.While banks have traditionally neededa large workforce to complete the manymanual processes required for on-boarding,that need is quickly diminishing with thedevelopment of Robotic Process Automationand other cognitive technologies. Withthe capabilities to automate rules-based,repeatable processes and to process naturallanguage, Robotic Process Automation(RPA) and cognitive technologies align wellwith the on-boarding processes used tobring on new clients in commercial banking.And the financial gains can be significant.A company can realize savings to the tuneof five times the investment, a numberthat can also translate to 50% savings oncurrent processes.[2] These kinds of savingshave huge implications for on-boarding andservicing commercial banking clients.Our extensive research helped us producethe following illustrative example. Note thatactual savings depend on the individualorganization and its goals, automationrequirements, appetite for risk, and otherfactors. A typical bank has anywhere from100,000 to 400,000 commercial bankaccounts and typically brings in 3% oftheir existing customer base as new clientsyear over year; in addition, banks providea subset of services to 6% - 7% of theirclients each year who expand their creditand loan portfolios.[2] As such, a bank with125,000 existing customers that bringsin around 3,800 new customers a yearand expands services for another 9,000customers could see on-boarding costsof 200 million every year. With RPA andcognitive technology implementation, thisbank could realize up to 100 million insavings, or 50% efficiency. In addition toone-time on-boarding savings, a bank couldsee up to 100 million in savings everythree years from the automation of ongoingmonitoring processes.[2]Furthermore, banks could see the length ofon-boarding processing shrink to a fractionof its current timeframe, likely improvingoverall client experience.Implementation of RPA and basic cognitivetechnologies also sets the stage for lateraddition of more sophisticated automationtechnologies, i.e., intelligent automation,which can add even greater value to banks.Intelligent automation can recognizepatterns in unstructured data and duplicatejudgment-based tasks. And eventually,artificial intelligence will be able to workwith unstructured data sets to completehypothesis-based predictive analysis.With early investment, a return can berealized quickly. New technologies aredeveloping to help banks take advantage ofever-evolving, data-driven solutions.IntroductionThe process of on-boarding a banking clientrequires many steps, including gatheringcomprehensive financial and personaldata, verifying that data using approvedsources across government agenciesor industry standard third-party dataproviders, completing credit and legal duediligence and term negotiations, setting upaccounts, and conducting ongoing reportingand monitoring to ensure compliance.Regulations require banks to do a thoroughvetting process of potential retail customers,and stricter regulations on commercialclients require an even higher level ofscrutiny on those clients. Commercialclients can be required to provide certified1articles of incorporation, governmentissued business licenses, and partnershipagreements or trust formation records.[4]The process of bringing on highly-monitoredcommercial clients is typically a painstaking,cumbersome, and expensive process forbanks.At present, most of these on-boardingprocesses are carried out manually. Inrecent years, however, the rise of RPA andcognitive technologies has enabled manyprocesses to be automated, resulting in upto 50% reduction in on-boarding costs. Atypical bank with 125,000 customers, thaton-boards 3% new customers and expandsservices for another 6% - 7% of itscustomers each year, could see a one-timesavings of 100 million during on-boardingand could see another 100 million insavings every three years from automationof ongoing monitoring processes.[2]This paper outlines how the implementationof RPA and cognitive technologies – alreadyused at some banks – can be applied tocommercial banking on-boarding processes.Implementation of RPA and cognitivetechnologies in on-boarding processes hasthe potential to save banks time and money,reduce errors, allow employees to workon more engaging and higher value-addactivities, and help banks to build betterclient relationships.

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsCurrent on-boarding challengesThe process of on-boarding commercialbanking clients can be broken into eightsteps: (1) On-boarding Request, i.e. solicitingclient prospects, confirming client prospectsand submitting requests for on-boarding;(2) Document Gathering, i.e. finding andorganizing relevant client documents;(3) Background Verification, i.e. runningclient information through appropriatedatabases to confirm that all informationprovided is correct and that the clientis not a risk; (4) Credit Terms Setup, i.e.performing due diligence on client creditworthiness and assigning credit ratings; (5)Agreement Management, i.e. performinglegal due diligence and negotiating termsof legal agreements with the client; (6)Account Setup, i.e. opening the necessaryaccounts to cover the client’s bankingneeds; (7) Tracking and Data Archiving, i.e.real-time tracking and monitoring of clienttransactions for continued Know YourCustomer (KYC) and Anti-Money Laundering(AML) checks; and (8) Analytics and Crossselling, i.e. using data collected during theregular course of business for downstreamanalytics and identifying potential crossselling opportunities.[1] Figure 1 showsthese high-level steps and the three mostcommon challenges faced during theseprocesses: information gathering, manualprocessing, and data validation.Figure 1: On-boarding Challenges Related to Commercial Banking ClientsSource: Cognizant Data, Deloitte AnalysisInformation gatheringA variety of information must be collectedto properly on-board a commercial bankingclient. Required documents like businesslicenses, partnership agreements and credithistories must be pulled from many sources,requiring significant staffing investment,time, and training. Employees must manually2search for or collect the documents fromclients, verify them, and upload them intobank systems before any additional analysismay be completed. This process can takesignificant amounts of time and can delaythe on-boarding process.Additionally, while information gatheringmay appear to be relevant only during theon-boarding process, it remains crucialthroughout the client lifecycle. Banks mustengage in continuous client monitoring andreporting to ensure ongoing compliance.

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsManual processingCurrently, on-boarding a commercialbanking client requires engaging in asignificant number of manual processes.One of the outcomes of utilizing manualprocesses is that it takes significantly moretime to complete an on-boarding stepmanually than it does to complete a stepusing automation technology; completingsteps manually can also lead to errors.Typically, it takes 20-90 days to on-boarda new client,[5] but it can take as long as 16weeks.[2] The length of these processesposes challenges to banks bringing onnew commercial clients. Figure 2 highlightssome challenges, including potential loss ofclients that can result from using manualprocesses.Figure 2: Automation in On-Boarding and Ongoing Servicing of Commercial Banking Clients20-90 25,000Typical number of days it takesto on-board a new clientSource: Forbes; Deloitte AnalysisAll eight steps of the customer on-boardinglifecycle contain manual components thatcan significantly slow down the on-boardingprocess (see Figure 3). A few examplesfollow: (1) during the Document Gatheringprocess, bank employees must collect acompany’s formation documents, documentits source of funds, and compile informationEstimated maximum amount ofrevenue lost due to delay inacquiring customerson geographies served and products andservices offered; (2) during the BackgroundVerification Process, bank employees mustvalidate the information collected, screenthe customer for adverse events, conducta Politically Exposed Person screening, andassign the customer a risk rating; (3) duringAccount Setup many processes must also becompleted manually, including developingclient reporting. Additionally, processes thatneed continuing maintenance, like Trackingand Data Archiving and Analytics and Crossselling, require bank employees to conductongoing reviews that involve manualintervention.client data. The repercussions of havingunreliable client data can be significant.Erroneous or fraudulent information canlead to major difficulties like regulatory noncompliance or poor customer experiences.costly, slow, and can lead to inconsistentresults that have an immediate impact ona business’s bottom line. In the past, bankshave increased their workforce to addressthe high workload required during theclient on-boarding process. This approach,however, has proven to be a costly one, andmany banks are now looking for other waysto tackle this challenge.Data validationThe data collected during client on-boardingand subsequent client activities is usedby downstream processes like analyticsfor cross-selling and for performance ofregulatory checks. Since multiple teamsinteract with the client at different stages ofthe on-boarding process, there is significantroom for errors to be made, which couldlead to the possibility of maintaining flawed3Current on-boarding processes are plaguedwith information gathering, manual dataprocessing, and data validation challengesthat can lead to an overall process that is

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsAddressing on-boarding challengesThis is where automation comes into play;RPA and cognitive technologies can helpbanks address on-boarding challenges.RPA’s rules-based process automationcan be described as “a virtual workforceassigned to middle and back-officeprocessing centers” [6] and cognitivetechnologies “offer ways to transformbeyond traditional banking functions. tounderstand more about the enterprise,customers and competitors.” [7] Together,these technologies can strongly improvethe on-boarding process and potentially, abank’s bottom line. Deloitte has identified25 parts of the on-boarding process thatcan benefit from this advanced virtualworkforce. The processes highlighted belowin Figure 3 are on-boarding steps where RPAand cognitive technologies can be (and havebeen) applied in commercial banks.Figure 3: Commercial Banking On-boarding Value Verification 200 900AccountSetupTracking &DataArchivingAnalytics &Crossselling 200 1,500 400 1,700 300 1,400Run credit duediligenceNegotiate legaltermsOpen accountConduct periodicreviews – yearly forhigh risk clients, 3-5years for low riskclientsIdentify crosssellingopportunitiesAssign credit limitComplete legalagreementsEnable rm continuingKYC and AMLchecksPerform AML checks- validate companyownership structure,source of wealth,fundsPerform legal duediligenceNotify tradingdesk of clientreadinessSettle opentransactionsConduct PEP –politically exposedperson - screeningConfirm pricingDevelop clientreportingReview foroutstanding liens 300 2,700Solicit clientprospectObtain formationdocuments,beneficialownership forms,etc.Verify customerinformationClient prospectconfirmedDocument sourceof wealth andsource of fundsPerform KYC checks- validate nature andlocation of business,products servicesBegin newonboarding requestDocument additionalKYC related data e.g. geographiesserved, products,services offeredEnrich requestAgreementManagement 400 1,500 400 2,800 800 2,300CreditTermsSetupArchive customerinformationincludingtransaction detailManage newrequests froexisting clientRPA application observed in industryCognitive technology application observed in industrySavings from automation implementationBanks can see an overall savings of 30% - 50% with automation implementationSource: Cognizant, Deloitte AnalysisIt has become more common for companiesto use robots to complete businessprocesses as technology has evolved tomore successfully mirror human interactionwith software applications. These humanlike interactions are possible when RPAand cognitive technologies are used4together, as a team. Specifically, cognitivetechnologies such as speech recognition,natural language processing, and machinelearning build on RPA to enable automationof some tasks that would otherwise need tobe done manually. This team of technologieshas significant implications for the futureof banking operations and relationshipmanagement.[6]The following section explores RPA andcognitive technology implementationsolutions for common on-boardingchallenges.

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsRobotic Process Automation (RPA)RPA technology can be broadly appliedacross many of the manual informationgathering and verification processesrequired in the initial phases of on-boardingclients. For example, obtaining mandatorydocumentation can be simplified byrequiring clients to upload their documentsto a portal where they can be processedautomatically. Once documents areuploaded to a portal, RPA technology canscan and analyze documents, uploadthem to bank systems, and kick back anyexceptions that may exist. The time neededto complete many on-boarding tasks canbe significantly reduced when utilizingRPA capabilities like logging into web orenterprise applications and extracting datafrom reports and various documents. Otherprocesses, like confirming client prospectsand archiving customer information can beautomated using the capabilities of readingand writing to databases. Additionally, otherscreening processes can be automatedusing RPA’s “if/then” decisions and rulescapabilities.Consider a trucking company that wantsto get a loan from a commercial bank inthe US. To do this, the company wouldhave to collect and provide the bankwith many documents for complianceTasks that can be automated using RPAFigure 4: RPA Capabilities Opening emailsand attachments Filling in forms Merging data frommultiple places Copying andpasting data Following “if/then”decisions and rules Extracting andreformatting datainto reports ordashboards Extractingstructured datafrom documents Connectingsystems to APIs Reading and writingto databases Making calculations Scraping data fromthe web Logging intoweb/enterpriseapplications Moving files andfoldersSource: Deloitte Analysisand on-boarding checks like companyincorporation documents, businesslicenses, partnership agreements, andtrust formation documents. Currently, bankemployees would manually search thedocuments for required information andcross-reference that information with theappropriate databases. If this process wereto be automated, however, the client couldupload the required documents to a sharedsecured site. Then, a robot could scan thesedocuments to find relevant details andverify them across various databases. Oncethe details were verified, the robot coulddocument that the client’s KYC process hasbeen completed. As such, a process whichused to take weeks could be completed infew days, if not a few hours. In addition toidentifying and verifying client details, therobot could pre-populate the bank’s clientdatabase with the verified information, evenfurther reducing on-boarding time.The power of RPA is evidenced in the casestudy below:Prior to implementing RPA technology, abank used its skilled analysts to compilethe necessary information to begin theKYC process, which took two hours tocomplete. With the implementation of RPA,this information gathering was completelyautomated, reducing process time fromtwo hours to two minutes. In addition to thedecrease in time, the RPA processes allowedemployees to spend more time executingthe important analyses for which they weretrained, and RPA led to more informed andtimely decision making.[8]RPA and cognitive technologiesThe combined use of RPA and cognitivetechnologies can allow for powerful usesof automation in activities that need toreplicate human-like tasks, includingjudgment and prioritization. RPA canautomate the straightforward, rules-basedsteps of an activity, whereas cognitivetechnologies can automate the judgmentbased and predictive steps. Thesevaluable cognitive technologies includenatural language processing and speechrecognition, but they also include chat-botand computer vision technologies thatallow for the identification and structuringof information from speech audio, text,and images. And, learning capabilities allow5bots to find patterns and make predictionsabout outcomes, leading to prioritizationcapabilities.[6]Possible examples of RPA and cognitivetechnology teaming include using naturallanguage processing capabilities to takeclient-provided documentation, extract theappropriate data, and run a credit check.[6]Next, other cognitive technology could usethe findings from the credit check to assigna credit limit and a pricing schedule to theclient.Another possible RPA and cognitivetechnology use is monitoring and followingup on transaction activities. Considerthe trucking company from our previousexample. If the trucking company’s bankused RPA to monitor client transactionsfor unusual activities, it could also layer oncognitive technologies that could use theRPA-identified information about unusualactivity to create and send an inquiry to thecompany to gain clarification about thatactivity. Next, cognitive technology couldreceive and analyze clarifying informationfrom the client and forward it to the relevantcontact at the bank who resolves orescalates unusual activity issues. The bankwould then be armed with the informationnecessary to determine if additional actionis required.

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsThese technologies can help reduce largeIT infrastructure investments and the needto re-engineer processes. Implementingautomation tools is a faster, easier, and lessexpensive alternative to building IT systemsto support dedicated platforms.[6]Cognitive technology can also help toidentify cross-selling opportunities.Cognitive technologies could analyze acompany’s current investments and accountactivity to identify any potential gaps in thecompany’s needs and current services,thereby helping the bank determineadditional products that may be pitchedto the company. And finally, anotheropportunity would be to use cognitivetechnologies to analyze accounts for lowactivity and cleanse any old accounts if needbe.It is possible to achieve greater customersatisfaction, increase the bottom line, andlower client turnover with the help of RPAand cognitive technologies. Using cognitivecapabilities enables banks to utilize availabledata to perform sophisticated analysisand offers an opportunity to providevaluable insights. These insights can betailored to each customer and allow for amore targeted product sales approach.Additionally, a deeper understanding ofyour client base as a whole can lead tooperational and organizational efficiencies.[7]The case study below provides a tangibleexample of how cognitive capabilities wereused to achieve operational efficiencies:In a constantly changing, multi-jurisdictionalregulatory environment, one financialservices firm adopted cognitive technologiesto stay ahead of the game. A proof-ofconcept implementation was carried out bythe firm for a cognitive platform designed toreview thousands of regulatory documentsusing technologies like natural languageprocessing to identify regulatory obligations.With a self-learning capability, thetechnology worked to improve accuracy andrecorded an accuracy rate as high as 72%.This same solution could also help reducecosts while ensuring regulatory complianceand for regular required KYC/AML.[7]It is also important to note that the future ofautomation is expected to grow to includeArtificial Intelligence, whose capabilities willinclude the ability to work with unstructuredsuper data sets and hypothesis-basedpredictive analysis. With ArtificialIntelligence, solutions could increaselearning capabilities and be able to self-learnand continuously rewrite rules to improveperformance. These potential capabilitiescan have huge savings implications forcommercial banks.Automation adoptionSo, how does a bank begin its automation journey? Deloitte has identified the following six-step process to help banks get started:1. CompleteCurrent StateAssessment2. IdentifyAutomationTargets3. Choose aTechnologyPartner4. CompletePilot Program1. Current State Assessment2. Identify Automation TargetsThe first step to automating client onboarding processes is to complete acurrent state assessment. Banks needto have a strong understanding of whattheir processes look like, which steps takethe most time, which steps cost the mostmoney, where any bottlenecks lie, andwhere friction exists with customers. Whilethere will be general areas of improvementthat apply to all banks, each institution willhave its idiosyncratic issues that must beidentified and targeted for automation. Apinpointed approach will allow for a quickerand more effective implementation.Once a bank has an understanding of itspain points, it’s time to decide which stepsto automate first. One way to identify theseprocesses is to group them by complexity.A bank can do this by applying a number,from 1 to 3 (or on any desired scale), toeach process based on complexity, numberof internal and external systems that theprocess needs to access, the kind of actionthat the process performs (i.e. does theprocess do a simple read of data, access asystem and upload or download data – or,does the process need to apply rules andlogic to modify data?), volume of work, andtime it takes to complete the process.65. Go-LivewithAutomation6. Scale UpAutomationActivitiesOnce each process has been classified intoa low, medium, or high complexity category,it should be easier to prioritize projects andthe timelines on which these processes willbe automated. Banks should start with theautomation of low complexity processes andwork toward automating higher complexityprocesses as resources allow.3. Choose a Technology PartnerAfter a current state assessment has beencompleted and candidates for automationhave been identified, a bank needs to findthe right technology company to helpmake those plans a reality. There are manycompanies in the automation space, and

Automation in On-Boarding and Ongoing Servicing of Commercial Banking Clientsit’s important to choose an appropriatevendor. When choosing a vendor, banksshould consider not only cost and RPA andcognitive functionality, but also ongoingvendor support, vendor experience, anddevelopment (i.e. what technology can beimplemented, how – and by whom – willthe technology be maintained, and whowill be responsible for development of anyadditional capabilities?.) In addition, it’simportant to account for integration withcurrent architecture.4. Complete a Pilot ProgramOnce a technology vendor has been chosen,it’s important to start small. Running a pilotprogram is a good way for banks to seewhat an automated system would look likeand the kind of system access needed toautomate the identified processes. A pilotprogram allows the bank and technologypartner to create a mutually agreed-uponprocess design document and solutiondesign document detailing the process flowsto be automated. And, since running a pilotprogram also involves unit and functionaltesting of in-scope processes, banks can seehow effective bots will be in a live productionenvironment.By implementing automation technology in acontrolled setting for a short period of time,banks can better understand the resultsthey can potentially expect to see, and theycan scope the next phase of the projectaccordingly.5. Development and Automation GoLiveAfter successful completion of a pilotprogram, banks can begin automationSustainable savingsRPA and cognitive technologyimplementation gives banks the opportunityto do the same work for a fraction of thecost, time, and labor. Integration costsare typically reasonable; a company canautomate a process within weeks, and thepayback period is often short. With RPA,companies can realize up to 50% in costreduction while reducing process time frommany minutes to a few seconds.[2]Figure 5: Potential RPA Benefits and ROIFurthermore, these savings don’t justoccur after the original implementation,but rather, they can be realized over manyyears. Regulatory-related client informationmust be updated yearly for high-risk clientsand every 3 to 5 years for low-risk clients,providing many opportunities to realizeadditional savings.Source: Deloitte Analysis7implementation on entire processes. Thisimplementation can be carried out in aphased manner following detailed “as-is”and “to-be” process documents prepared bythe technology partner and approved by thebank. After future state processes are laidout, the technology partner will develop, testand modify code, and bots can be deployed.6. Scale up Automation ActivitiesThe work of the bots deployed in theprevious phase can now be analyzed, andmore bots can be deployed elsewherein the bank. In addition, more complextechnologies may be layered in toachieve greater efficiencies and savings.As technologies evolve, so can a bank’sautomated workforce.

Automation in On-Boarding and Ongoing Servicing of Commercial Banking ClientsAdditional potential benefitsIn addition to saving time and expenses,other potential benefits are possiblefrom implementing RPA and cognitivetechnologies in client on-boarding activities.These technologies can help banks toprovide a better client experience. Aclient, on average, will have eight differentinteractions with a bank during the onboarding process [9], and it’s important thateach interaction is smooth. An inefficienton-boarding process can be devastating toa client relationship. In a survey with 800financial institution respondents, 89 percenthad poor on-boarding experiences withtheir banks and 13 percent of respondentsswitched banks as a result.[9] With anincrease in speed, decrease in cost, andreduction of errors, there should be lessfriction in the on-boarding process, whichcould result in lower risk in the on-boardingprocess.It should be noted that decreasing frictionin the on-boarding process and increasingcustomer satisfaction has the potentialto lead to the sale of add-on services andproducts. Cross-selling may become evenmore likely given the digitized set of clientdata created when using automation duringthe on-boarding process.Finally, implementing RPA and cognitivetechnologies could help banks with staffingchallenges. Finding and retaining employeesskilled in regulation best practices is ahuge concern for banks.[9] It is hard to findcandidates with the right skills, especially inan environment where regulations changeregularly. Reducing or eliminating manymanual and specialized tasks in on-boardingcan also reduce the need to find moreregulatory-trained employees.Other considerationsChange management will be necessarywhen introducing automation technologyinto the workplace, and can help banksrealize greater potential for cost savingsfrom an RPA or cognitive technologyimplementation. It will be important forbanks to bust the myth that bots will takethe place of employees. Without the supportof employees, a large scale implementationcannot take place and automationbenefits cannot be realized. Banks need toprioritize communicating RPA and cognitivetechnology benefits to employees, trainingemployees on new systems and thoughtfullyidentifying high value-add tasks to directemployee efforts to when specific onboarding tasks become redundant.standardized digital format that can be usedfor cross-selling products.see a significant increase in the accuracyof work completed. All of this can be donewith the ability to scale up or down basedon need – potentially making the risk ofimplementation low and the possiblerewards high.ConclusionCommercial banks currently spendmuch time and money on-boarding newclients, and new and modified regulationsaround on-boarding require banks tospend even more time and resourceson these processes. RPA and cognitivetechnologies have the potential to helpbanks save time and money as well asreduce errors by automating processes.In addition, automated client on-boardingenables ban

diligence and term negotiations, setting up accounts, and conducting ongoing reporting and monitoring to ensure compliance. Regulations require banks to do a thorough vetting process of potential retail customers, and stricter regulations on commercial clients require an even higher level

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