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Banks make a corporates’ first experience, the worst experience

We had an interesting dinner this week talking about customer onboarding.  The focus was on counterparty banks and corporate account opening processes, and the ongoing challenges therein.  In a nutshell, due to the documentary and regulatory requirements for proof of identity and trust, the account opening process is the worst part of banking and can take months for a corporate to get this done.  Once it is done, then all is tickety-boo but it is pretty clear that banks make their worst customer experience the first one.

The gist of the corporate view is that banks do not make this easy for a reason.  Banks have a corporate lock-in – hardly any of the corporates in the room had ever switched their banks – and maintaining this complexity is therefore perhaps in their interest.  Corporates would ideally like to have simplicity of systems, processes and controls, but instead have queues of banks who would rather talk about increasing their trade financing, working capital and loan facility.  None of the banks are queuing up to make it easier for them to switch.

However, the real bottom-line was that there has to be a compelling business reason to make the account opening and switching service more of a priority for both the bank and the corporate, and that business case does not exist.  For the bank, there are too many other priorities – regulatory change, ring fencing, compliance, AML and such like – and for the corporate, maximising treasury efficiency is about as high a priority as ensuring clean toilets in the office.


It’s important, but maximising sales is more important.

Now, obviously, these things are not separated and all things overlap.  The bank is not trying to be difficult and the corporate does recognise that maximising treasury operations is an important objective.  It’s just that there are too many other things taking place.

What struck me as we went through this discussion is that the financial industry has talked about simplifying corporate treasury processes ever since I started working in these markets, way back when.  Over the past twenty years, we have also seen many, many, many attempts to simplify services through standards.  FIX protocol, PORT, SWIFT messaging, TWIST, IBAN, BIC, eID, eBAM, eIPP, XML, ISO20022 and more have all been hailed as the new way to ensure ‘interoperability’.  If we had true ‘interoperability’, we could standardise everything and then we might find it easier to deal with onboarding. 

In particular, we have recently had further attempts to simplify onboarding, specifically the recent launch of KYC-Exchange and the SWIFT KYC Utility.  Both of these, and more, were meant to provide data marts of corporate and counterparty KYC so that no-one would have to fill in these entities in every vicinity for every account ever again. Well, that was the idea anyway.  Unfortunately, the reality is that we still do not appear to have simplified or standardised anything in this area, yet.

During the conversation last night, inevitably, the blockchain came up.  Oh the blockchain.  The blockchain is now being hailed as the panacea for everything.  It’s not just got use cases for securities settlements, land deeds transfers, smart contracting and such like, but the blockchain can even record our first agreement with the Mars Water Company Utility launch and Kim Kardashian’s buttocks jabs.  Whoops, sorry, I meant botox jabs.

C’mon.  The blockchain will solve some things, but let’s not believe it can solve everything.  It’s what people build and agree on the blockchain that will solve things and, like all the things I’ve mentioned before, it needs the corporate, counterparty bank and bank co-operative to agree a smart, shared ledger for KYC on the blockchain before any of that can really work and, as it hasn’t happened yet, will it ever?


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • My biggest bug bare is that the majority of the burden in the process of on-boarding has zero to do with regulation. Yes, we constantly hear bankers point the finger at tight regulation, but even the strict KYC/AML rules aren’t that bad. Banks themselves, particularly compliance, make up their own rules to cover the 1 in a trillion possibility that aliens might land on earth and try to open a bank account to fund the development of weapons of mass destruction.

  • Mr Blockchain

    Mr Skinner, I have the impression that you have no clue what a BC/PoW is or you don’t want to tell the potential power of the bitcoin blockchain to your audience … time will tell…but I understand your disbelieve.
    It took me over year to understand to full potential of a decentralized distributed blockchain and its network effect. I am also aware of the many potential problems and the many unknowns. At the end it is a protocol and platform that EVERYBODY in the world can use and build upon.
    People wake up and educate yourself and remain skeptical as long as you wish. Internet is here to help you with the transmission of all the data you need to learn (TCP/IP), the blockchain (BC/PoW) will extend it to the transmission of any VALUE you ever imagined. Thank you and have a wonderful life!

  • Chris Skinner

    Mr Blockchain
    You obviously don’t read my blog as you’d know I am a HUGE advocate of Blockchain technology. I’m just saying that it can’t make cups of tea or cut my hair, e.g. it doesn’t solve everything.