Tech­nol­ogy the way to go

Saturday Star - - P E R S O N A L F I N A N C E -

SOME things in life sim­ply scream “pa­per­work”. Sign­ing up for an ac­count at a bank, for in­stance, or orig­i­nat­ing an in­surance pol­icy. How about ap­ply­ing for a home loan, mov­ing to a new med­i­cal scheme or get­ting a credit card?

Al­most ev­ery­thing within the realm of fi­nan­cial ser­vices re­quires strin­gent checks-and-bal­ances at the start of the cus­tomer re­la­tion­ship.

And for good rea­son: fi­nan­cial ser­vices firms must sat­isfy sev­eral reg­u­la­tory re­quire­ments, care­fully man­age risks, and en­sure that they’re not en­abling any form of fraud, cor­rup­tion, ter­ror­ist fi­nanc­ing and money laun­der­ing.

They must also do ev­ery­thing pos­si­ble to pro­tect the iden­ti­ties, data and money of the cus­tomers that they’re look­ing to at­tract.

Un­for­tu­nately, all of th­ese dy­nam­ics can cul­mi­nate in frus­trat­ing cus­tomer ex­pe­ri­ences at the on board­ing phase, which just doesn’t set the right tone at the be­gin­ning of the cus­tomer re­la­tion­ship.

Fi­nan­cial ser­vices com­pa­nies would dearly love to make their on board­ing pro­cesses smoother and quicker.

GAME-CHANGER

In­stead of all the pa­per­work, ques­tions, and painstak­ing man­ual en­tries into data­bases, imag­ine a sce­nario where all the cus­tomer must do is tap a but­ton on his smart­phone, grant­ing ac­cess to a vault of en­crypted in­for­ma­tion, all stored se­curely with blockchain tech­nol­ogy.

Blockchain will be a gamechang­ing tech­nol­ogy in the area of cus­tomer on board­ing, with clear ben­e­fits for both the cus­tomer, the fi­nan­cial in­sti­tu­tion and gov­ern­ments:

For the cus­tomer, they al­ways re­main in to­tal con­trol over who has ac­cess to the dif­fer­ent as­pects of their per­sonal in­for­ma­tion – grant­ing and re­vok­ing ac­cess as they need – safe in the knowl­edge that data can­not be tam­pered with or al­tered in any way.

For the fi­nan­cial ser­vices com­pany, they’re able to dra­mat­i­cally cut down on the costs as­so­ci­ated with third party ver­i­fi­ca­tion checks (such as credit bu­reaus or Home Af­fairs), re­duce the amount of man­ual labour in­volved in pro­cess­ing new cus­tomer ap­pli­ca­tions, and im­me­di­ately pri­ori­tise the high­est value busi­ness.

For gov­ern­ments, reg­u­la­tors and po­lice, they’ll ben­e­fit from a sin­gle source of cus­tomer data, and clearer vis­i­bil­ity across all their dif­fer­ent re­la­tion­ships. Not only does this cre­ate a safer so­ci­ety at large, but also has other ben­e­fits, such as pre­vent­ing cus­tomers from be­com­ing dan­ger­ously in­debted by tak­ing out credit at var­i­ous dif­fer­ent lenders.

RE­DUC­ING FRIC­TION

So, just how does blockchain tech­nol­ogy work, in the con­text of fi­nan­cial ser­vices firms?

Blockchain records are im­mutable, so once a cus­tomer cre­ates their “mas­ter pro­file” within the blockchain ledger, fi­nan­cial in­sti­tu­tions can di­rectly ac­cess this data with high lev­els of con­fi­dence. All doc­u­ments are time-stamped and cryp­to­graph­i­cally se­cured. Of course, this in­for­ma­tion is in­stantly avail­able, which speeds up the on board­ing time to al­most zero.

With the cus­tomer’s per­mis­sion, data can be eas­ily and se­curely shared across dif­fer­ent bank branches and de­part­ments, or even to other fi­nan­cial in­sti­tu­tions. This could be a mas­sive help in those in­stances where two in­di­vid­u­als may have ac­counts at dif­fer­ent banks but are ap­ply­ing for a joint-mort­gage to­gether.

Thomson Reuters’ re­search paints a bleak pic­ture of the cur­rent state of Know Your Cus­tomer, as strength­en­ing com­pli­ance and reg­u­la­tory de­mands cause on board­ing costs to bal­loon and on board­ing times to ex­tend out­wards.

In South Africa, just the ma­jor fi­nan­cial ser­vices in­sti­tu­tions are spend­ing around R4 bil­lion to ful­fil their Know-your-cus­tomer obli­ga­tions each year. Across all ver­ti­cals, as many as 86% of South African com­pa­nies re­ported los­ing cus­tomers be­cause of the fric­tion of their on board­ing com­pli­ance pro­cesses. With blockchain, much of th­ese costs can be stripped away, al­low­ing fi­nan­cial com­pa­nies to in­vest more in cre­at­ing com­pelling of­fer­ings and nur­tur­ing long-term re­la­tion­ships, rather than ful­fill­ing reg­u­la­tory obli­ga­tions.

The po­ten­tial for blockchain is still un­fold­ing be­fore our eyes, and the ap­pli­ca­tion of the tech­nol­ogy will surely ex­tend well be­yond just the ini­tial on board­ing phase.

With the blockchain at the heart of ev­ery­thing we do in terms of data stor­age, ver­i­fi­ca­tion and trans­fer, we can imag­ine sit­u­a­tions where ve­hi­cle in­sur­ers could draw from ma­chine-gen­er­ated data cre­ated by your car, stored in the blockchain, and en­abling them to of­fer dis­counts on pre­mi­ums based on the na­ture of your driv­ing needs and be­hav­iours.

Or, a med­i­cal in­surer could draw from blockchain data from wear­able de­vices, hospi­tal records and fit­ness apps, to of­fer you tai­lored cov­er­age that fits with your unique life­style.

In all th­ese ex­am­ples, the blockchain en­ables com­pa­nies to move closer to their cus­tomers. The on board­ing process be­comes some­thing far more than a merely com­pli­ance tick-box – to be a value-adding process that ful­fils the prom­ise truly “get­ting to know” their cus­tomer.

Harkr­is­han Singh is di­rec­tor of global RPA prac­tice at IN2IT Tech­nolo­gies

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