Digitizing Documentation: The Missed Opportunity in Banking

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To keep up in an increasingly competitive world, banks have embraced the need for digital transformation, upgrading their technology stacks to automate processes and harness data to help them grow and find operational efficiencies.

However, while today’s community and regional banks are increasingly making the move to digital, their documentation and contracting are still often overlooked in this transformation – and left behind. This “forgotten transformation” means their documentation remains analog, which means their processes also remain analog, increasing costs, time, data errors and risk.

What’s more, documentation is the key that drives the back-office operations for all banks. Everything from relationship management to maintenance updates and new business proposals rely on documents. This is especially true for onboarding new clients.

The Challenges of Onboarding
Onboarding has been a major focus of digital transformation efforts for many banks. While account opening has become more accessible, it also arguably requires more customer effort than ever. These pain points are often tied back to documentation: requesting multiple forms of ID or the plethora of financial details needed for background verification and compliance. This creates friction at the first, and most important, interaction with a new customer.

While evolving regulatory concerns in areas such as Know-Your-Customer rules as well as Bank Secrecy Act and anti-money laundering compliance have helped lower banks’ risks, it often comes at the expense of the customer experience. Slow and burdensome processes can frustrate customers who are accustomed to smoother experiences in other aspects of their digital lives.

The truth is that a customer’s perception of the effort required to work with a bank is a big predictor of loyalty. Ensuring customers have a quick, seamless onboarding experience is critical to building a strong relationship from the start, and better documentation plays a key role in better onboarding.

An additional challenge for many banks is that employees see onboarding and its associated documentation as a time consuming and complicated process from an operations perspective. It can take days or even weeks to onboard a new retail customer and for business accounts it can be much worse; a Deloitte report suggests it can take some banks up to 16 weeks to onboard a new commercial customer. Most often, the main problems in onboarding stem from backend processes that are manual when it comes to documentation, still being largely comprised of emails, word documents and repositories that sit in unrelated silos across an organization, collecting numerous, often redundant, pieces of data.

While all data can be important, better onboarding requires more collaboration and transparency between banks and their customers. This means banks should be more thoughtful in their approach to onboarding, ensuring they are using data from their core to the fullest to reduce redundant and manual processes and to make the overall process more streamlined. The goal is to maximize the speed for the customer while minimizing the risk for the bank.

Better Banking Through Better Documentation
Many banks do not see documentation as a data issue. However, by taking a data-driven approach, one that uses data from the core and feed backs into it, banks transform documents into data and, in turn, into an opportunity. Onboarding documents become a key component of the bank’s overall, end-to-end digital chain. This can have major impacts for banks’ operational efficiencies as well as bottom lines. In addition to faster onboarding to help build stronger customer relationships, a better documentation process means better structured data, which can offer significant competitive advantages in a crowded market.

When it comes to documentation capabilities, flexibility is key. This can be especially true for commercial customers. An adaptable solution can feel less “off the shelf” and provide the flexibility to meet individual client needs, while giving a great customer experience and maintaining regulatory guidelines. This can also provide community bankers with the ability to focus on what they do best, building relationships and providing value to their customers, rather than manually gathering and building documents.

While digitizing the documents is critical, it is in many ways the first step to a better overall process. Banks must also be able to effectively leverage this digitized data, getting it to the core, and having it work with other data sources.

Digital transformation has become an imperative for most community banks, but documentation continues to be overlooked entirely in these projects. Even discounting the operational impacts, documents ultimately represent the two most important “Rs” for banks – relationships and revenue, which are inextricably tied. By changing how they approach and treat client documentation, banks can be much more effective in not only the customer onboarding process, but also in responding to those customer needs moving forward, strengthening those relationships and driving revenue now and in the future.

Best Practices for Onboarding New Directors

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governance-9-12-19.pngJoining a bank board can be a bewildering experience for some new directors. There’s a lot to learn, including new, confusing abbreviations and financial metrics specific to the banking industry. But with the right approach, bank boards and nominating/governance committees can make the experience easier.

Onboarding new directors and more quickly acclimating them to the world of depository institutions is essential to ensuring banks have a functioning board that is prepared to navigate an increasingly changing and complex environment. It can also reduce potential liability for the bank by ensuring its members are educated and knowledgeable, and that no one personality or viewpoint dominates the boardroom.

Banking differs from other industries because of its business model, funding base, regulatory oversights and jargon. Directors without existing knowledge of the industry may need one to two years before becoming fully contributing members who can understand the most important issues facing the bank, as well as the common parlance.

Proactive boards leverage the chairperson to create an onboarding process that is comprehensive without being overwhelming, and tailor it to suit their institution’s particular needs, as well as the skill sets of newly recruited board members. The chair can work with members of the nominating/governance committee and executives like the chief financial officer to create a specific onboarding program and identify what pertinent information will best serve their new colleague.

Bank Director has compiled the following checklist to help strengthen your bank’s onboarding program.

1. Help new directors understand their role on the board.
New directors often come in with a background in business or accounting, skills that are useful in a bank boardroom. But business success in one industry may not readily translate to banking, given the unique aspects of its business model, regulations and even vocabulary associated with financial institutions. New directors can access insights on “The Role of the Board” through Bank Director’s Online Training Series.

Banks are uniquely regulated and insured. Directors should be able to appreciate the role they serve in their oversight of the bank, as well as the role regulators have in keeping the bank safe and sound, and ensuring prudent access to credit.

2. Provide an overview of the banking industry.
Directors often aren’t bankers and will need to be acquainted with the business of banking broadly.

With this overview will come the distinctive terms and acronyms that a new director may hear tossed around a boardroom. Boards should either create or provide a glossary with definitions and acronyms of terms, including the principal regulators and common financial metrics.

Click HERE to access Bank Director’s Banking Terms Glossary.

3. Provide an overview of your bank’s business model and strategy.
Directors will need to understand the bank’s products, including how it funds itself, what sort of loans it makes and to whom, as well as other services the bank provides for a fee. They will also need to learn about the bank’s credit culture, capital regime and its approach to risk management, including loan loss reserving.

4. Create a reading list.
There are a number of internal and external resources that new board members can access as they become acclimated to the ins and outs of bank governance. Internally, they should have access to recent examination reports, call reports, and quarterly and annual filings, if they exist. They should also access external resources, like Bank Director’s Online Training Series, the Federal Reserve Bank of Kansas City’s 2016 publication, “Basics for Bank Directors,” and “The Director’s Book,” published by the Officer of the Comptroller of the Currency.

Additionally, they should keep up-to-date with the industry through bank-specific publications, such as Bank Director’s newsletter and magazine.

5. Schedule one-on-one meetings with the management team.
A new board member will need to understand who they are working with and the important roles those individuals play in running a successful bank. Their onboarding should include meetings with the management team, especially the CFO for a discussion about the financial metrics, risk measurement and health of the bank. It may also be prudent to schedule a meeting with other executives who oversee risk management at the bank.

6. Schedule one-on-one meetings with members of the board and key consultants.
New directors should sit down with the heads of board committees to understand the various oversight functions the board fulfills. The bank may also want to reach out to the firms it works with, including its accounting, law and consulting firms, to chat about their roles and relationship with the company.

7. Emphasize continuing education.
Boards should convey to new members that they expect continued education and growth in the role. One way to achieve this is through conference attendance, which can provide intensive and specialized education, as well as a community of directors from banks in other geographic areas that new members can learn from. Direct new board members to events hosted by your state banking association, if available, or sign them up for annual conferences like Bank Director’s Bank Board Training Forum.

Look for conferences that offer information calibrated to a director’s understanding, starting with basic or introductory instruction suited for new directors. The conferences should also facilitate discussion among directors, so that they can learn from each other. As a director grows in the role, the board can seek out more specialized training.

Successful onboarding should help new directors acclimate to the world of banking and become a productive member of the board. Boards should expect their directors to become comfortable enough that they go beyond thoughtful listening and ask intelligent questions that reinforce the bank’s strategy and its risk management.

Fix Your Leaky Onboarding Funnel

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onboarding-1-16-19.pngCustomer acquisition is top of mind for most banks and their boards.

This usually translates into new, slick marketing campaigns. These campaigns mean enlisting your advertising agency to cut through the clutter, which is increasingly difficult to do. Or you could look to mine more near-term customers right from your own website and the online account opening process.

More and more banks are onboarding new customers by enrolling them through their website. This process is rife with opportunity. According to The Financial Brand, 40 percent of online bank account applications were abandoned due to a long or complicated enrollment process.

Think about that. Only six out of 10 prospects who arrive at your site—with the intention of creating a bank account—complete the journey. That’s tragic. It makes more sense to fix that leaky funnel than to spend big on another advertising campaign in the hopes of driving significantly more website or branch traffic.

We know that there are a few places in the online account creation process where banks fall down. Let’s dissect some of these pitfalls.

Identity verification. Thanks to Know Your Customer and anti-money-laundering regulations, banks and credit unions need to impose more rigor to ensure the person creating the account is genuinely that person. Thanks to a steady barrage of data breaches and advanced malware, traditional methods of authentication, such as knowledge-based authentication and two-factor authentication, are no longer in vogue. Increasingly, banks are turning to online identity-verification solutions that require a government-issued ID and a selfie to more reliably verify digital prospects. These solutions can be pretty fast and are capable of completing the online verification process within a minute.

Simple messaging. Banks that provide simple, clear instructions, written in plain English, experience much higher conversion rates. This includes providing a clear rationale for why you’re asking online customers for their ID documents and selfie, and what you intend to do with that information.

Fewer screens. Obviously, the more hurdles you put in front of your customers, the less likely they will make it all the way through the account-opening process. So, if you can reduce the number of screens to identify a new customer from seven to four, that will have a material impact on conversion rates.

Go omnichannel. When it comes to establishing identity online, you want to open up the experience to as many channels as possible. Many identity verification solutions only offer a mobile experience, not allowing potential customers to use their webcams on their laptops or desktop computers. By disabling this channel, you’re eliminating a large swath of potential customers who either don’t have a smartphone or would prefer to complete the process from their laptop.
Being omnichannel also means supporting API-based mobile web and native mobile implementations. For companies looking to cast the widest possible customer acquisition net, including some older generations who may not be comfortable with newer technology, it just makes sense for your identity-verification solution to offer the broadest number of channels to your prospective customers.

No more maybes. Another cause of online abandonment are the longer wait caused by manual reviews. Several online identity-verification solution providers return a “caution” decision when they can’t easily confirm that the customer is who they claim to be.

Every “caution” or “maybe” requires manual review by a team of analysts. There are real costs to manual review. Jumio offers an online calculator to illustrate these expenses. These are real costs to your business, and they create real frustration for your customers.

So, if customer acquisition is job No. 1 for 2019, maybe it’s time to fix your sales funnel and plug the leaks with an efficient onboarding experience—one that optimizes and simplifies the identity-verification experience.

You can do the math. Spend big on advertising with iffy results. Or, create a great online experience that is designed for conversion. You’ll end up with happier customers—and a lot more of them.

Make the Most of Your Account Opening Process

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accounts-9-29-18.pngIt used to be that bank onboarding best practices included a firm handshake and maybe a stuffed toy or T-shirt. In 2018, it’s a little more complicated than that.

Today, customers have a long list of expectations that add up to nothing short of complete personalization across all the many moments — and micro-moments — they face. Customers may have picked this checklist up elsewhere, but they see no reason why those same rules wouldn’t apply everywhere, including when they open a new account at their bank.

In a mobile-everything world, the one-size-fits-all solutions won’t work. New research from Deloitte shows customers want personalized, simple and complete communications. Essentially, they want you to know what they need, when they need it, so you can make it as simple as possible for them. They’re no longer willing to sift through generic self-service tools, and the more your institution can guide them with specific content that comes in their moments of need, the more you will win their loyalty — and dollars.

Meeting these new expectations is increasingly the only way to engage your customers — engagement that’s necessary for high Net Promoter Scores (NPS), revenue growth and profitability. The industry — and onboarding best practices — have started to change.

CX trends are changing onboarding best practices
For the financial services industry, the math is clear. The lifetime value of a promoter is 2.5 times higher than that of a detractor. At the same time, a detractor is 2.3 times more likely to switch to your competitor.

Delivering a positive experience is the best way to create more promoters, particularly during critical moments like your bank’s account opening process, which is the bank’s first impression.

A 2017 Deloitte study makes plain what people are looking for in onboarding programs for banks. The 3,000 customers surveyed who had recently opened bank accounts said they wanted improvements in two fundamental areas, during and post-account opening:

  • Speed
  • Communications

Overall, digital customers say the opening process was unclear and took too long. Worse, once they had opened an account, they felt abandoned. Many banks didn’t follow up with basic information customers felt they needed. That silence was one of the biggest causes of customer dissatisfaction, forcing customers to follow up on their own or forgo information they wanted.

How to apply best practices to your bank
So, we have two main directives for improving the bank customer onboarding process: speed and communication. And we know how customers want that communication to feel: personalized, simple and timed to their needs.

Now you just need to deliver it.

While banks are worried about sending too many communications, customers are asking for guidance. The second they open an account, you have an opportunity to start a relationship by delivering clear and concise instructions that notify them of missing information and next steps to help them complete the process. Then, when the account’s open, you can stay in touch, and help them become familiar with their account and the services your bank can provide.

Data shows this approach works. Leading student lender Citizens Bank increased new accounts by 10 percent and decreased time to completion by 40 percent using automated mobile engagement with its digital customers.

The right communications — timed to arrive when customers reach specific points in their journeys — can improve the customer experience. If you deliver personalized solutions on day one, you can answer customer questions before they ask, offer information about their accounts, recommend new products or services, and point them to tools and content that help them complete actions quickly and easily. This kind of prescribed, proactive approach to service reduces customer effort and builds trust along the way.

The benefits of a better onboarding strategy
Customer surveys like Deloitte’s clearly show an increasing emphasis on easy and convenient interactions. If you want to win customer loyalty, you need to deliver an effortless customer experience now. Not only will a better onboarding experience create stickiness and turn your customers into promoters, it will set an expectation of useful communication. When your customers start their relationship with personalized mobile communications — rather than generic emails, or worse, having to hunt through your website — it teaches them they should pay attention when you contact them.

By meeting that expectation, the potential value for that account can stretch as big as your offering. You can promote additional products, suggest expansions on the products they have and offer rewards when they recommend a friend. As long as you continue to make those experiences personalized, useful and easy, you can continue to nurture your customers and realize maximum value.

7 Things Bank Boards Should Focus on in the Year Ahead

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board-9-10-18.pngThe world of corporate governance today has a brighter spotlight on boards of directors than ever before. While bank regulatory relief has provided a long-awaited respite, bank examiners seem to be zeroing in on governance, director performance and board succession. Here are 7 things directors should have on their radar screens in the year ahead:

  1. Defining Innovation. Digitization and innovation are the buzzwords, but truly embracing the transformations taking place all around us can be daunting.  Pondering how technology has altered our client relationships and acquisitions means thinking out of the box, which may be a challenge for some directors and bank executives. A refresh of the bank’s website is not an innovation—it is table stakes.  True innovative thinking requires more proactivity and planning, and likely some outside perspectives as well. Boards should encourage management to craft a plan to address to these challenges, which are key to remaining relevant.
  2. Talent Management. Historically, boards viewed talent management as the purview of executive leadership and the CEO, except when it came to CEO succession. In today’s talent-deficient environment, though, boards need to hold the CEO and senior team much more accountable for developing the next generation of leaders and revenue generators. If your bank wants to perform above the mean, then the senior team must be composed of very strong players well suited to execute your strategic plan. A true linkage between the business strategy and human capital strategy has never been more critical for success and survival.
  3. Revisiting Compensation Strategies. Balancing the tradeoffs between enhanced compensation packages and performance/accountability has become a significant challenge for compensation committees and CEOs. In this competitive talent climate, banks need to make sure that their compensation practices properly reflect the bank’s market and goals, motivate the right behaviors, and incentivize key players to both perform, and remain, with the institution. Fresh board thinking in this area may be appropriate, particularly for banks that have been less performance driven with their incentive programs, or do not have the currency of a publicly listed stock as a compensation tool.
  4. Enhanced Accountability and Self-Assessment. Just as boards need to truly hold their CEO accountable for institutional performance, boards need to hold themselves accountable as well. Governance advocates are pushing for boards to assess their own performance, both as a group and individually. Directors should have the fortitude to evaluate their peers—confidentially, of course—to identify areas for improvement. Directors should be open to this feedback, and work to improve the value they bring to the institution.
  5. Onboarding New Directors and Ongoing Training. Plenty of data reinforces that new executives as well as board members contribute more rapidly when there is a formal approach to ramping up their knowledge of the company. Expectations of new directors should be clear up front, just as any new employee. A combination of information and inculcation into the institution provides context for decision-making; clarifies the cultural norms; and often reveals the hidden power structures, including the boardroom. A strong onboarding program forms the foundation for ongoing board education. There should be an annual plan for each director’s education to maintain currency, refresh specific skills, and to stay abreast of leading governance practices.
  6. Board Refreshment. Are we truly building a board of diverse thinkers with the range of skills needed to govern appropriately today? Age and tenure have become flashpoints around continued board service, in reality they avoid dealing with declining contributions and underperforming directors. Every board seat is a rare and precious thing, and needs to be filled with someone who broadens the collective skills and perspectives around the board table. Board nominating and governance committees need to manage accountabilities for existing—and particularly for prospective—directors, and be willing to make the tough calls when needed. Underperforming directors should be encouraged to raise their game or be asked to step aside.
  7. Leading by Example. In today’s information-driven society with endless social media channels and instant visibility, C-Level leaders and board members are under the microscope. Lapses in judgment, breaches of policy or inappropriate behavior, once validated, must be dealt with quickly and decisively. The company’s brand reputation and credibility are always at risk. The board itself—along with the CEO, of course—must set the standard for ethics and compliance and lead from the front. Every day.

Bank Boards will continue to be under scrutiny no matter the environment. More importantly, a bank’s board must be a strategic asset for the institution and provide strong oversight and advice. The expectations of good governance have never been higher, and successful boards will raise their own performance to ensure success and survival.

Winners Announced for Bank Director’s 2018 Best of FinXTech Awards

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awards-5-10-18.pngThe cultural and philosophical divides between banks and fintech companies is still very apparent, but the two groups have generally come to agree that it’s far more lucrative to establish positive relationships that benefit each, as well as their customers, than face off on opposite ends of the business landscape.

The benefits of collaboration in the fintech space, which manifest themselves in the form of improved efficiency and profitability, has led to a growing number of partnerships between banks and fintech firms. This year Bank Director and FinXTech selected 10 finalists in three categories—Best of FinXTech Partnership, Startup Innovation and Innovative Solution of the year—for its annual Best of FinXTech awards. The three category winners highlight some of the most transformative and successful partnerships between banks and fintechs that have improved operations, experience and profitability for both.

The awards were presented at Bank Director’s FinXTech Annual Summit, held May 10-11 at the Phoenician resort in Scottsdale, Arizona.

Startup Innovation:

Radius Bank and Alloy

Radius, an $1.1 billion asset bank headquartered in Boston, has been on a dedicated track to become an online-only retail bank since Mike Butler took over as CEO about 10 years ago. But Butler and his executive team knew that Radius’ customer acquisition and onboarding process was inefficient. The demand was there, but the bank’s internal onboarding processes couldn’t keep up, and the attrition rate was high.

Overhauling that process led Radius to Brooklyn, New York-based Alloy, a firm still in its relative infancy. Butler and the Radius board of directors knew that this was a risky play because Alloy was still a young startup company and they would be entrusting it to digitize its customer onboarding process, a critical move that aimed to make the process more efficient and reduce drop-offs. The bank had to bring together several departments, from data to marketing, and get them all on the same page.

It had to be just right to make their model succeed—and so far it has worked. The bank has reduced its technology cost to open an account by 50 percent, and seen a 30 percent increase in its application conversion rate. Radius also has seen a steep downward trend in fraudulent account openings, an issue that’s become increasingly prevalent with online banking.

But even with significant technology investments and improvements, there was still considerable human productivity invested in some of the bank’s core functions. Some 30 to 40 of every 100 incoming retail account applications were being tapped for manual review. With some 1,000 applications coming in each week on average, the calculus there is pretty clear about the expense the bank faced with reviewing those applications. Alloy’s technology automates much of the review process using decision engines, and has reduced that manual review by 98 percent.

Alloy’s technology automates most of the process and has reduced dropped applications on the consumer side and the human capital expense for the bank. Now, just three or four of every 100 applications on average are pinged for manual review.

Most Innovative Solution of the Year:

CBW Bank and Yantra Financial Technologies

Who would have thought a former Lehman Brothers executive and her husband with a technology pedigree that includes a stop at Google would somehow elevate a tiny bank and fintech firm in rural Kansas to national prominence?

While maybe not a possibility completely in the left-field bleachers, the partnership between CBW Bank and Yantra Financial Technologies has drawn significant attention from both the banking industry and the tech world. Suresh Ramamurthi, the CEO of Yantra and chief technology officer for the bank, and his wife, Suchitra Padmanabhan, the president and CEO of CBW, together turned the near-failing bank around after they purchased it in 2009, mostly with personal savings.

The bank, with just $33 million in assets, has maintained is rural core deposit base in the tiny town of Weir, but also launched a revolutionary global marketplace for some 500 application programming interfaces, or APIs, that enable tech firms and other companies, like those in the health care space, to experiment with finding efficiencies and maintain compliance at the same time.

Using Ramamurthi’s technological expertise, the bank developed the APIs whose application can range from developing new products that are compliant with regulatory requirements to helping the institution or fintech scale up their operations, or simply improving the bank’s core operating system.

The APIs were also applied to CBW’s own digital banking platform, which has drawn nationwide clients, including popular fintech firms like Moven and Simple, as well as companies in the health care industry.

The bank then published the APIs publicly, working with Yantra in the Y-Labs Marketplace. Common APIs results in streamlined interoperability, like a payments solution, for example, between multiple businesses in multiple industries. More than 100 companies have signed up with the Marketplace to use the APIs, including other fintechs and companies outside of financial services.

It has also allowed the bank to enhance its own digital offerings, which Ramamurthi says will result in a new app later this year that will reshape how mobile banking works.

Best of FinXTech Partnership:

Citizens Financial Group and Fundation

For two decades, Citizens Financial made business banking loans using a manual process that was heavy on the paper. But this is an extremely inefficient way of doing business and the bank’s leaders wanted a faster and less costly way of underwriting loans, particularly with new fintech marketplace lenders coming into the market—whose technology gave them a big competitive advantage.

Providence, Rhode Island-based Citizens, one of the country’s top-20 banks at $152 billion in assets, worked with Fundation, a Reston, Virginia-based credit solution provider, to reinvent how it makes small business loans, rolling out in March a new credit delivery process for small-business loans and lines of credit up to $150,000.

“This is the future,” says Jack Murphy, president of Business Banking at Citizens. The new system has automated nearly all of the decision-making for the bank, which Murphy says makes it easier on both bankers and customers alike. Bankers aren’t spending hours reviewing applications, and customers can complete the application on their own time, even in the car, Murphy jokes. The bank still controls the credit policy, which ultimately determines if a manual review is necessary.

But the partnership didn’t come about overnight, and took many months of due diligence and conventional vetting before it was finalized. The bank took a deliberate approach to ensure it was making a good decision.

“There’s not a bank today that’s not thinking about fintech and what are the right ways to go about executing a strategy around digital technology,” Murphy says.

Finalists

The following partnerships were also recognized among finalists for the three top awards:

  • MVB Financial Corp. and BillGO
  • TCF Bank and D3 Banking Technology
  • U.S. Bank and SpringFour, Inc.
  • USAA and Clinc
  • Seacoast Bank and SmartBiz Loans
  • ChoiceOne Bank and Autobooks
  • Pinnacle Financial Partners and Built

Regtech: Reaping the Rewards

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regtech-4-24-18.pngAs it evolves, regtech is uniquely poised to save banks time and money in their compliance efforts, and has become a common topic for many in the banking industry. If you’re ready to realize the promise of regtech at your institution, here are a few key steps to take before you start parsing through providers or sending out requests for proposals.

Consider changes to your organizational structure that would place oversight of both legal and compliance transformations under one department. In Burnmark’s RegTech 2.0 report, Chee Kin Lam, the group head of legal, compliance and secretariat for DBS Bank, pointed to his authority over both legal and compliance functions and budgets as a key to the Singapore-based bank’s ability to work with regtech companies.

At first blush, a change to your bank’s internal structure seems like an extreme measure for a precursor to a technology pilot, but that perception misses the big-picture implications of implementing a new regtech solution. If a bank intends to engage meaningfully with regtech, Lam pointed out, there’s a need for an overarching framework for onboarding new technologies to make sure they “speak to each other at a legal/compliance level instead of at an individual function level—e.g. control room, trade surveillance, AML surveillance and so on.”

What’s more, legal and compliance functions are already tied closely together, and any regtech solution would likely impact both areas of the bank. Central management of these two functions can help ensure efficient regtech implementation.

Create a solid, detailed problem statement before you ever look for a solution. Lam suggests identifying the top legal and compliance risks your bank is facing, and working from there to identify pain points for your employees and customers when they interact with that risk area. One way to go about this process is to utilize design thinking, which looks at products and experiences from the point of view of the customers and employees who utilize them.

By seeking out pain points and working through the design-thinking process to find their root cause, bank leadership can identify specific, actionable areas for improvement. As tempting as it can be for an institution to attempt a total overhaul of its regulatory processes, banks should pursue modular regtech solutions to solve specific, defined problem statements instead. As Peter Lancos, CEO and co-founder of Exate Technology, points out in RegTech 2.0, “[f]ragmentation makes a regulatory strategy impossible—especially due to geographic spread and banks having separate teams set up to deal with individual regulations.”

Leverage outside expertise. The risks of implementing regtech can be daunting, so bank leaders need to use every tool in their arsenal to get deployment right. Banks should involve regulators in the conversation early on in the process of working with a regtech company. According to Jonathan Frieder of Accenture in The Growing Need for RegTech, “[r]egulators globally have continued to accept and, ultimately, to embrace regtech” making 2018 “a pivotal year.”

In addition to getting regulators on board, banks should consider enlisting outside assistance from consultants or other regulatory experts. Such experts provide assistance with assessing problem statements or potential regtech vendors. Lancos states that he feels “it is essential for banks to have regulatory expertise support to actually write the rules that go into the rules engine of regtech solutions.”

Regtech implementation is a lot more involved than an average plug-and-play fintech product. However, when a bank considers the cost efficiencies, improved compliance record and decreased customer and employee frustration, the upside of regtech can be well worth the planning it requires.