Future-Proofing Customer Lifecycle Management Technology Implementation Programmes
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July 30, 2024
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Three ways financial services firms can ensure expensive customer lifecycle management (“CLM”) systems deliver lasting benefits and strike the right balance between regulatory compliance, operational efficiency, and customer experience.
CLM is the engine of financial services operations, governing the entire client journey through prospecting, onboarding, servicing, monitoring and offboarding clients. While consumers increasingly expect streamlined digital journeys, many firms now find themselves with a patchwork of creaking legacy systems introduced to meet evolving regulatory requirements. Despite financial institutions investing heavily in compliance technology (over 40% of their financial crime compliance budgets in some cases), onboarding times remain high, averaging 120 days for commercial banking clients.1 This inefficiency can lead to a backlog of reviews, frustrated customers, and high employee turnover. But with the right foundations in place, technology-enabled CLM transformations can unlock significant improvements to onboarding times, risk identification, and revenue growth through improved client retention and understanding of client networks. In this article, FTI Consulting’s Financial Crime Compliance team highlights three key areas of focus to help firms maximise the likelihood of a successful technology-enabled CLM transformation.
Build or Buy — The CLM Technology Dilemma
Bespoke solutions that allow firms to build CLM in house may reduce overall outlay. Even so, without sufficient specialist expertise on hand, this can result in a protracted process which culminates in further technical debt. And while numerous on-premises and cloud-based software as a service (“SaaS”) solutions have emerged offering scalability and flexibility, this “buy” model carries its own challenges. These solutions offer impressive features “off the shelf,” but procurement costs can be high, and configuration, organisational change, and integration with other systems is always required.
With either model, organisations face huge complexity because CLM cuts across so many processes. For example, a corporate banking onboarding workflow must facilitate efficient handoffs between coverage and product; know your customer (“KYC”); tax; credit; environmental, social, and governance (“ESG”); and legal teams across multiple jurisdictions with varying requirements. Technology implementations, therefore, demand challenging operating model changes, requiring operations, compliance, information technology (“IT”), and data functions to work in lockstep.
In our experience working with several leading financial service firms, three key areas of focus can help firms maximise the likelihood of success.
Devise a Solid Data Strategy to Facilitate Data-Driven CLM Processes
A robust data strategy is the cornerstone of any CLM transformation. Increasingly, financial crime is perpetrated via complex international networks, requiring firms to maintain a holistic view of client risk across markets and products. CLM software providers offer extensive functionality to help, but this serves little purpose without the ability to capture, orchestrate and recycle data across business functions. Data is often duplicated across multiple systems, creating inconsistencies and leading to unnecessary client outreach (a recent survey of corporate treasurers in the UK and U.S. revealed that 93% of customers are asked multiple times for the same information).2 This redundancy presents significant obstacles to obtaining a single customer view (“SCV”) — a comprehensive picture of an entity’s legal hierarchy, risk profile, and interaction networks across products and relationships. It is, therefore, crucial to set a strategy covering external data usage, master data management, data quality, data governance, SCV, and client hierarchies. Done effectively, this strategic approach can unlock the potential of the many technologies available — including artificial intelligence, machine learning, robotic process automation, optical character recognition, rich reporting, and advanced application programming interfaces — to minimise manual data gathering and drive intelligence risk analysis and identification.
Align Standards Globally With Callouts for Local “Top-Ups”
CLM technology solutions are heavily reliant on rules engines to group and distil legal and regulatory requirements and codify workflows in different scenarios. These “out of the box” rules rarely address the significant variation between organisations though and require extensive configuration to reflect the firm’s customer base, risk appetite, policy requirements, and internal processes. Policy harmonisation is therefore crucial to establish the minimum requirements applicable across all geographies and product areas and highlight the local deviations or top-ups required to meet all relevant regulatory obligations. These necessary factors must be codified into the workflow with any deviations, escalations, and access privileges managed accordingly. Firms often fail to achieve such alignment, deterred by the painstaking internal negotiations required, which resulting in limited rollouts and inconsistency across locations. However, by securing consensus, firms can dramatically simplify their policy governance, expedite technical requirements drafting and create opportunities for centralisation (e.g., of periodic or transaction monitoring alert reviews).3
Focus on The Client and Colleague Experience
With the rise of challenger banks, consumers have come to expect streamlined customer journeys with features such as self-service portals and personalised omnichannel communications. Yet many organisations still suffer from slow, depersonalised and inefficient CLM processes, causing customer satisfaction rates for financial services firms to lag behind other sectors like consumer goods or technology.4 Employees endure similar frustrations: the lack of automation in CLM processes increases workloads (often with repetitive tasks), leading to higher staff turnover. A recent survey found that enhancing customer and employee experiences were immediate priorities for financial crime compliance executives (85% and 80%, respectively).5 To achieve this, financial services firms should begin with an interrogation of real user journeys to understand pain points, then follow with extensive workshops to map target journeys in different scenarios, setting aside the constraints of current state processes. The outputs from these workshops should include a prioritised list of change initiatives (including “quick wins” like reducing duplicative compliance checks or consolidating outreach requests) which are then used to define clear business and functional requirements.
FTI Consulting Can Support Your CLM Transformation
FTI Consulting is a trusted partner to some of the world’s leading financial institutions. We have extensive experience designing, implementing and assuring CLM transformations, including CLM target operating model design, controls enhancements and systems implementations. A truly independent advisor, we have helped clients develop bespoke CLM systems, built solutions ourselves and advised on the implementation of products from leading fintech providers. Moreover, as advisors to several regulators across Europe, the Middle East and Africa, we also bring an in-depth view of the financial crime compliance landscape you can trust.
Footnotes:
1: Fenergo, 2023, “Customer Onboarding Expectations vs. Reality”
2: Encompass, 2024, “How Does the KYC Process Impact the Customer”
3: iMeta, 2023, “Mastering Complexity: The Key to Success in Capital Markets Onboarding”
4: Customer Gauge, 2023, “Financial Services NPS Benchmarks”
5: Lexis Nexis, 2023, “True Cost of Financial Crime Compliance Study”
Published
July 30, 2024
Key Contacts
Senior Managing Director, Head of UK Financial Crime Compliance
Senior Director