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The Balancing Act: Customer Experience & Financial Regulations

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The aftermath of the 2008 Global Financial Crisis caused major concerns regarding regulatory compliance. According to experts with ample financial compliance in 2008, people’s estates, retirement funds, and pensions could have been salvaged with a decrease in the overall magnitude of the recession. In today’s digital age, when customers seek fast and convenient banking, banks and credit unions struggle to maintain the ever-growing and highly complex regulatory regime at the same time. Financial institutions are thus at crossroads. Additionally, with the global pandemic crisis disrupting the financial services industry, it has now become essential for financial institutions to cater to both causes.

As compliance-related risks arise and expenses grow exponentially, financial institutions need to prioritize allocating their resources mindfully to help mitigate risks better and remain compliant. A failure to do so will result in paying hefty fines, penalties, and punishments that might cause an adverse impact on the reputation of the business. Thus, financial institutions need to prioritize maintaining compliance restrictions along with customer expectations for fast, seamless banking with the help of a calculated strategic digital plan.

Complex Regulatory Framework and Increasing Cost of Compliance:

Financial institutions today are facing a surge in complex financial regulations including new regulatory requirements, customer disclosures, and fair lending laws with risks of default, fraud, and cybersecurity on a continuous high. This has led to an increase in cost to financial institutions,as the percentage of overall operating expenses with the costs of compliance disproportionately impacts smaller institutions.

Mergers, Acquisitions, and Competition from the Big Tech:

With an increase of burden and the cost of regulatory compliance, mergers and acquisitions have simultaneously increased in the financial sector over recent years. Hence, the alliance of multiple businesses has raised complexities in data storage and access. Banks and credit unions store data in disparate silos across multiple legacy systems and servers. Therefore, it has become difficult to access such data for business needs such as planning, reporting, regulatory compliance, and customer service.

In today’s industry, the rise of new entrants into the financial service marketplace has also complicated the response to evolving demands. The current scenario has been additionally intensified with the entry of the Big Tech firms and pushing incubating start-ups towards faster innovation. With challenger banks, non-bank institutions, and mega-tech firms also influencing such incumbents, the stakes have risen even higher for all institutions in providing value to customers.

Building a Customer Focused Banking Operations Interface:

The key to bridging the gap between fast banking capabilities and compliance to regulatory framework is pairing the correct data management and analysis strategy with a flexible infrastructure, allowing adjustments to varying regulations and expectations. Banks and credit unions must have different approaches towards their business by analyzing the increasing customer demand for a faster and convenient banking experience. Customers demand instant access to their funds, anywhere and anytime. This requires a seamless digital experience across all platforms and touchpoints – online, mobile, calls, or visiting a branch. Keeping in mind, KYC, loan applications, credit scores, and deposit account opening experiences must be smooth and frictionless as these are the customer’s significant interactions with the bank.

Financial institutions of all sizes must leverage emerging technologies such as AI/ML, cloud banking, enhanced data management, and maintenance strategy to adopt a flexible approach to product development, and compliance and risk management. By combining the correct strategy and technology, fast banking can in place enable better regulatory compliance during these challenging times. For these two functionalities to exist in harmony, organizations must first understand the growing regulatory complexities and encompass the business value of risk management. Next, they should assess their customer’s expectations for streamlined banking and then plan a digital map for deploying technologies allowing flexibility, scalability, and ease of implementation such as cloud and SaaS offerings.

Deploying new age cloud-based solutions like Salesforce Financial Services Cloud &nCino Bank Operating System offers several advantages over the earlier route to compliance management. A well-established CRM tool essentially built for the banking world,integrates the bank’s core systems with customer relationship management, loan origination, customer engagement, and real-time analytics and dashboards.

With the ever-increasing regulatory requirements across the BFSI industry, banks, insurance companies, and wealth and asset management firms must deploy these solutions to manage repeatable, visible, and compliant collaboration. Cloud banking solutions enable restructuring operations while improving customer experience and helping financial institutions effectively manage internal and external regulatory compliance at the same time.

(The author  Prasoon Gupta is Consultant – Customer Experience at Brillio and the views expressed in this article are his own)

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