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 through its affiliates; the bank whose employees opened millions of fake accounts to meet sales quotas; the founder who mislead investors. In 2017, identity fraud set a record with 16.7 million victims.
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.
That’s because the cost of fraud isn’t limited to the loss itself. There are the visible costs, such as fines and the costs associated with remediation, labor and technology. What’s more, today’s organizations are subject to an 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.
Then there are the hidden costs. 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 priorities.
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.
These costs – both visible and hidden – far outstrip 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.
The customer onboarding opportunity
The most effective place to stop fraud is during the onboarding process, which of course is also the starting point for customer relationship building. 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) to 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.
A streamlined customer journey
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. To deliver a better client experience, the process needs to be as seamless and simple as possible. How might a streamlined customer journey exploiting intelligent automation look?
Using a mobile app, the client begins by scanning their ID document, 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 provides confidence that 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. The bank makes it easy for customers to upload additional documents, such as proof of residence or tax documents, which are needed as part of onboarding and approval processes, simplifying the engagement for all involved.
Software robots help the bank comply with regulations faster and without error, acting as a team of digital workers. They 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.
This streamlined onboarding process cuts the risk of fraud while keeping the client’s information secure and delivering a great customer experience. 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.
Companies that work like tomorrow build trust while saving time, money and resources by applying intelligent automation to reduce fraud, avoid fines, cut the cost of compliance and create valuable relationships with customers, partners and employees.
Tagged under Retail Banking, Risk Management, AML & Fraud, Cyberfraud/ID Theft, Feature3, Financial Research, Feature, Customers, Human Resources, Compliance, Security, Compliance/Regulatory, Consumer Compliance, Operational Risk,