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?