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The Future of Client On-boarding

Many of the largest financial institutions (banks, wealth and asset managers, insurance firms) in the world are currently investing a lot of money into their onboarding processes. Apart from wanting to avoid compliance issues due to new regulatory requirements (i.e. eIDAS, PSD2, GDPR) or meeting their fiduciary responsibilities, they also see the onboarding process as an instrument to streamline front-to-back processes and therefore save costs.

As we move towards an era of open banking, the future model of client on-boarding will utilize 1 or more of the following means of identifying a customer:

1. Digital identities: a unique electronic identifier that verifies that you are who you say you are. This is underpinned by The Electronic Identification and Trust Services for Electronic Transactions Regulations 2016, and would promote interoperability and transparency.

2. Biometrics : an inherent characteristic to recognize an individual based on his or her physical or behavioural traits (i.e. iris scanning, finger print, and voice recognition). This has already been introduced by some of the big banks (HSBC, Santander), as noted by the Financial Times and Financial Brand, but is yet to gain widespread accentance.

3. Strong Customer Authentication: authentication based on a combination of a customer’s

  • Knowledge –passwords, sign or a code

  • Possession – mobile device, rings, or even keys

  • Biometric – Iris, finger print, voice.

4. Blockchain: to build a distributed ledger which provides on-demand Know Your Customer (KYC) information. This enables identification and verification to be performed once for a customer, and distributed on request and approval rather than several times by different organisations for the same customer.

Today, collecting customer data, determining suitability and identifying risk profiles are part of the 'normal' onboarding process for many financial institutions. However, in preparing for the digital future, I believe that having a comprehensive picture of who your customer is and the beneficial owner, will be crucial for the success of financial institutions.

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