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AI can play a critical role in Client Lifecycle Management

Nancy Weir, Log in to subscribe to the Blog

Artificial intelligence (AI) remains a very hot technology across most industries, with analyst firms such as Gartner predicting the number of AI projects continuing to increase within the next year. In banking, AI has been most commonly used to assist with risk analysis. But we wanted to gauge banks’ perception of AI’s potential for more customer-centric service operations such as Know Your Client (KYC) and Client Lifecycle Management.

In 2019 Finextra and Pega surveyed senior business and technology managers from 54 financial and FinTech organizations around the world on the impact of AI on KYC, Client Lifecycle Management, and onboarding. What we learned was banking leaders continue to look to AI and other digital tools to streamline work and better leverage their customers’ data and address regulatory requirements that are specific to the banking industry.

AI is seen as a disruptor

Of our surveyed group, 81% of organizations expect AI to be disruptive or highly disruptive within the next one to three years.

Our respondents characterized this disruption as internal changes to operations rather than an external shake-up of the finance industry. Banks have been using AI for risk-related tasks and activities associated with prevention of financial crimes, however the study’s survey group saw AI, automation, and digital technology as disruptors to the way banks will manage larger front- to back-office operations. They also recognize that to achieve this level of integrated AI capability banks will need to develop an enterprise-wide AI strategy.

AI has potential to shape and improve compliance tasks, such as AML and KYC processes

According to 80% of our survey group, AI has the ability to influence how banks comply with AML and KYC regulations, and 50% of respondents think AI can be used to help specifically improve the overall process of onboarding a customer.

The speed at which a bank can accurately complete customer onboarding and activate new customers directly affects the bottom line. Using Regtech tools such as AI, it is generally accepted that onboarding times can be cut by at least 50%. That’s why banking leaders are bullish on AI’s potential in this space.

The top three ways in which respondents think AI can help onboarding are:

  • Supporting speed to market for services and products: Intelligently automating the execution of business rules and processes to complete onboarding more swiftly. AI can identify and route work automatically, adding both speed and accuracy to the process. For work that requires human review or judgement, AI can be used to recognize and route it to the correct persons.

  • Customizing offers for products and services to customers: Regulations surrounding financial product offers make it imperative that banks avoid any actions that could be construed as predatory. Applying AI to the monitoring and analysis of customer behavior, lifecycle patterns, and risk profiling can help banks determine suitability of new product offers.

  • Improved fraud and AML/KYC risk management: Risk models can use AI and machine learning to filter and assess data from a number of sources to detect patterns that might indicate money laundering or fraud then immediately alert to investigative teams of potential issues.

Challenges to implementing AI-based onboarding tools

More than half of the survey respondents said their financial institution is planning to implement AI-based solutions to improve onboarding, risk profiling of customer activity and behavior, and customer lifecycle monitoring, however they also realize the challenges inherent to applying AI to banking operations.

For example, the most important concerns of AI-enabled onboarding are the ability to demonstrate transparency and auditability of AI algorithms and outputs to satisfy regulatory scrutiny. Broken out by statistics, survey respondents listed the following reasons as “most concerning” or of high concern: how to audit AI algorithms (51%); ability to explain the decisions reached (50%); and lack of trust in the results (47%). To allay concerns enterprises will need to address each of them as part of an overall enterprise AI strategy.

But 44% of our respondents also tell us that the biggest obstacle to developing and implementing AI-based strategies for onboarding, KYC, and Client Lifecycle Management is a lack of AI-based skill and talent.

While these challenges are real, they are not roadblocks – and there are steps that banks can take now to mitigate these challenges and start taking advantage of AI’s capabilities for onboarding. Such as, to build out an enterprise-wide AI strategy, begin with existing governance structures for guidelines on data handling and management as well as the creation and application of data models. Then consider an initial deployment of AI into existing systems to handle tasks such as negative news screening and data collection.

Speed the adoption of AI with an enterprise-grade onboarding and KYC solution that offers the most complete suite of capabilities

Pega’s industry-leading Client Lifecycle Management (Pega CLM) and KYC (Pega KYC) applications are designed to help banks orchestrate front- to back-office onboarding and regular review processes, and comply with a host of regulatory requirements, including AML/CTF, FATCA, CRS, Dodd-Frank, EMIR, and MiFID II. They are also designed for rapid implementation. Plus, Pega CLM and Pega KYC can integrate with AI-based models to augment risk management and customer lifecycle value management.

Pega’s foundational BPM and automation capabilities, combined with industry-specific rules, provide a powerful platform for onboarding, KYC, and Client Lifecycle Management. We’re proud to say that analyst firm Chartis has recognized Pega as a category leader in enterprise-grade KYC for three years in a row and continues to rank Pega as an industry leader in financial crime risk management systems.

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Product Area: Onboarding Topic: AI and Decisioning Industry: Financial Services Challenge: Client Onboarding

About the Author

As Industry Principal and Product Marketing Director for Pega CLM, Nancy Weir uses her industry experience to help drive product strategy with our clients across the regulatory and operational landscapes.