Client Onboarding Move to Channel of Choice and Reap Rewards

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2013 Kofax Inc. All rights reserved. Reproduction of this report by any means is strictly prohibited.

Client Onboarding: Move to Channel of

Choice and Reap Rewards


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Client Onboarding: Move to Channel of Choice and Reap Rewards April 2013

2013 Kofax, Inc. All rights reserved. Reproduction of this report by any means is strictly prohibited. 2

TABLE OF CONTENTSINTRODUCTION .............................................................................................................................................. 4

METHODOLOGY ........................................................................................................................................ 5

THE CASE FOR MULTICHANNEL CLIENT ONBOARDING TODAY ...................................................................... 7

BARCLAYS LEVERAGES TABLET DEVICES TO DEPLOY SELF-SERVICE ONBOARDING .................................. 8BANKS' CURRENT ONBOARDING CHALLENGES AND IMPROVEMENT OPPORTUNITIES ................................. 9

RETAIL BANK ............................................................................................................................................. 9

WEALTH MANAGEMENT DIVISON .......................................................................................................... 10

MORTGAGE DIVISION ............................................................................................................................. 11

SEVEN ATTRIBUTES OF A MATURE AND CLIENT-FOCUSED ONBOARDING PROCESS ................................... 14

EFFICIENT: TARGET ACCOUNT OPENING CYCLE TIMES .......................................................................... 14

RETAIL DEPOSITS ............................................................................................................................... 14

BROKERAGE ....................................................................................................................................... 15

AUTOMATED WORKFLOW ...................................................................................................................... 16

RETAIL BANKS .................................................................................................................................... 16

WEALTH MANAGEMENT ................................................................................................................... 17

MORTGAGES ..................................................................................................................................... 17

MULTICHANNEL WORKFLOW ................................................................................................................. 18

THE BENEFITS OF MULTICHANNEL ONBOARDING TO THE WEALTH MANAGEMENT INDUSTRY ..... 20

CLIENT AWARENESS ................................................................................................................................ 22

EXTRACTS DATA FROM PHYSICAL DOCUMENTS ..................................................................................... 23

VISIBLE AND RESPONSIVE ....................................................................................................................... 24

CONSISTENT ACROSS BUSINESS LINES AND CHANNELS ......................................................................... 25

CONCLUSION ................................................................................................................................................ 26ABOUT KOFAX ............................................................................................................................................... 27

ABOUT AITE GROUP...................................................................................................................................... 28

LIST OF FIGURES FIGURE 1: SMARTPHONE AND TABLET ACCESS TO FINANCIAL INFORMATION, BY GENERATION ................. 4

FIGURE 2: MOST IMPORTANT BUSINESS DRIVERS SHAPING PRIVATE BANK TECHNOLOGY BUDGETS IN

2013 ...................................................................................................................................................... 7

FIGURE 3: BANKS AIM FOR TECHNOLOGY TO IMPROVE MORTGAGE LOAN ORIGINATION PROCESSING ... 13

FIGURE 4: BROKERAGE AND MANAGED ACCOUNT PROCESSING TIMES IN THE UNITED STATES................ 15

FIGURE 5: STATE OF WORKFLOW AUTOMATION IN U.S. BROKERAGE ACCOUNTS ..................................... 17

FIGURE 6: MORTGAGE-ORIGINATION PROCESS ........................................................................................... 18

FIGURE 7: AVAILABILITY OF ONLINE ONBOARDING CAPABILITIES FOR INVESTMENT ACCOUNTS .............. 20

FIGURE 8: BENEFITS OF PROVIDING ONLINE ACCOUNT OPENING CAPABILITIES THROUGH THE CLIENT

PORTAL: WEALTH MANAGEMENT FIRMS WITH ONLINE ACCOUNT OPENING VS. FIRMS WITHOUT . 21


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FIGURE 9: FINANCIAL ADVISOR APPLICATIONS AVAILABLE ON TABLET DEVICESU.S. FINANCIAL ADVISORS

............................................................................................................................................................. 22

FIGURE 10: CLIENT AWARENESS MATURITY LEVEL FOR ONBOARDING ....................................................... 23

FIGURE 11: ADVISOR FIRM SATISFACTION CORRELATES WITH HIGH ACCOUNT OPENING PROCESS

VISIBILITY ............................................................................................................................................. 25

LIST OF TABLESTABLE A: BARCLAYS ONBOARDING INITIATIVES IN EUROPE AND AFRICA ..................................................... 8

TABLE B: NEW RULES AND REVISIONS DRIVE UP ONBOARDING COSTS, NO END IN SIGHT ........................ 11

TABLE C: MULTICHANNEL APPROACH TO ONBOARDING WORKFLOW ........................................................ 19


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INTRODUCTION

Bank customers have become used to accessing the information and applications they want

through their device and channel of choice. This same choice should be available when it comes

time for customers to apply for products and services at their bank. Many banks still continue to

require a branch-based or in-person application process, particularly on the investment andlending sides of the business. While requiring a customer or prospect to visit a branch to start

onboarding may provide the best outcome for the firm, from a sales and regulatory (i.e. Know

Your Customer regulations) standpoint, banks are likely to lose opportunities to competitors that

offer a more flexible onboarding process that fits a customer's preferred way of engaging with

their bank. For example, Generation Y customers are more likely than older generations to prefer

completing an application on a mobile device, particularly on a tablet.

In a December 2011 Aite Group online survey of 1,014 U.S. investors, almost all of the

Generation Y investors surveyed indicated using a smartphone to access financial information

and one-third did so using a tablet device. By contrast, only 11% of older baby boomers and

silent generation investors were accessing financial information through smartphones and 5%through tablet devices (Figure 1). Smartphone and tablet adoption for financial management is

much higher today, more than a year following the survey, but generational differences are

unlikely to have changed.

Figure 1: Smartphone and Tablet Access to Financial Information, by Generation

Source: Aite Group survey of 1,014 U.S. investors, December 2011

49%

25%

14%22%

5% 6%

30%22%

14% 14%

5% 5%10% 7%

12%7%

1% 3%5% 5% 6% 3% 1% 2%

iPhone Android Phone BlackBerry Apple iPad Other smartphonedevice

Other tablet device

Q. Through which smartphone or tablet devices do you access financial information?(1,014 investors holding at least US$25K in investable assets)

Generation Y (21 to 31, n=241) Generation X (32 to 46, n=302)

Yo un g Bo omer (47 to 57, n =227) Old er Bo omer an d Silent Gen. (58 an d o lder, n =244)


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Onboarding is a critical process in the client life cycle as it sets the stage for the rest of the

customer relationship. Banks that require too rigid an onboarding process may leave first-time

customers with a poor impression of the firm, thereby reducing their appetite to conduct more

business with the bank after the first account setup or loan approval. Past Aite Group research

has shown that more cross-selling takes place within the first 90 days of a client relationship

than at any other time in the client life cycle. Clients are more likely to be attentive to newproducts and services when they are already undergoing a change in their financial lives, and

delivering a positive onboarding experience to clients maximizes these revenue opportunities.

Providing customers with the ability to apply for bank and investment products through Web

and mobile devices is not only about adapting to customers' preferencesthese initiatives also

result in significant cost savings for banks in the form of reducing manual, low-value-added work

for sales and service representatives, loan officers, and financial advisors. Leveraging mobile

devices and Web forms to capture data and documents allows banks to convert essential

information and documents into an electronic format more quickly, thus speeding up the entire

onboarding workflow. Achieving efficiency during the onboarding process has become a

necessity not only to meet clients expectations and preferences, but also to comply with the

growing number of regulatory requirements which impact the onboarding process to protect

customers and firms from taking undue risks (e.g. product suitability requirements, FATCA, new

mortgage origination and closing documentation requirements etc.). In an ideal world, a

multichannel onboarding workflow would allow front-facing staff to learn of any errors,

regulatory risks, and sales opportunities within minutes of submitting client information,

allowing them to focus on delivering an optimal and tailored client experience immediately.

This white paper examines the strategic value of investing in mobile and Web-based onboarding

capabilities to achieve banks' current priorities of improving the client experience, restoring

profitability, and meeting regulatory requirements. The report reviews banks' current and

expected onboarding challenges (both for new-to-bank and existing clients) and illustrates the

components of a mature and customer-focused onboarding process.

METHODOLOGY

This white paper is based on ongoing, in-depth Aite Group discussions with senior management

at global banks from mortgage, retail, commercial, and wealth management departments. The

analysis is also based on the following Aite Group surveys and interviews:

Interviews with executives at 10 of the 30 largest private banks and wealth

management firms in North America based on assets conducted in Q1 2013

A global survey of executives at 54 banks with more than US$10 billion in assets, Q22012

Surveys of U.S. financial advisors, including one survey of 400 advisors conducted in

January 2013 and another survey of 515 advisors conducted in March 2012. The

financial advisor survey data discussed in this report has a 5% margin of error. Tests

of significance were conducted at the 95% level of confidence.


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A survey of 1,014 U.S. investors conducted in December 2011

Executives contributing to our research have extensive business or IT responsibilities and titles

that include chief technology officer, chief risk officer, chief information officer, executive vice

president, vice president, senior vice president, and director. Also incorporated are results from

discussions with regulators and reviews of government reports, guidance, and industry surveys.


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THE CASE FOR MULTICHANNEL CLIENT

ONBOARDING TODAY

Banks have been challenged since the 2008 crisis with achieving revenue and profitability targets

in a low-growth economic environment. The limited funds that banks have available to invest intechnology initiatives are currently being channeled to meet the short-term objectives of

reducing costs and meeting regulatory requirements. Recent conversations with North American

private bank executives reveal that while the top strategic priority of these firms is to improve

the client and advisor experience, in part through Web and mobile initiatives, the dominant

business drivers of 2013's technology budget are reducing costs and meeting regulatory

requirements. Attracting and retaining clients comes only in second place at many private banks

(Figure 2).

Figure 2: Most Important Business Drivers Shaping Private Bank Technology Budgets in 2013

Source: Aite Group interviews with 10 top 30 private banks and wealth management firms.

As firms struggle with how to deploy limited funds to achieve the three key business objectives

of reducing costs, meeting regulatory requirements, and improving the client experience, they

must prioritize initiatives that can achieve more than one of these objectives. Leveraging mobile

and Web technology to improve onboarding process efficiency and the client experience can

meet all of three.

3 out of 9 firms

1

3

3

2

3

1

1

4

Leading businessdriver of 2013 tech.

budgets

Second most

impo rtant dr iver oftech. budgets

Q. Please rank the following business drivers based on their importance insetting IT priorities for 2013 in the full-service wealth management organizationor the private bank. (n=9 private banks)

Reducing costs

Meeting regulatoryrequirements

Attracting new clients

Retaining/attracting advisors

Retaining clients


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BARCLAYS LEVERAGES TABLET DEVICES TO DE PLOY SELF-SERVICE ONBOARDING

Barclays has recognized the importance of automating the onboarding process to achieve cost

savings and improve the client experience. In the bank's latest investor presentation on its

transformation plans,1

onboarding improvement initiatives were cited as top strategic cost

savings opportunities. Barclays has aggressive plans to reduce annual operating expenses byUS$2.6 billion by 2015 through investments of more than US$4 billion. One of the ways the bank

plans to achieve some of these cost savings is by increasing customers' ability to service

themselves through client-friendly tools and applications available across channels (mobile,

tablet, phone, and branch). The firm estimates that its European instant account opening

initiatives, which are based on using the iPad to open accounts with less staff involvement, can

generate up to US$60 million in cost savings. While the Portugal initiative described in Table A

still requires customers to visit a branch to open an account, distributing the iPad application to

the bank's general customer base will be a trivial undertaking from a technology standpoint.

Table A: Barclays Onboarding Initiatives in Europe and Africa

Barclays

onboarding

initiatives

Description Customer experience Benefits

Africa customer

onboarding

Deployed new customer

onboarding process in 800+

sites

Redesigned/automated

manual processes, e.g.,

identification and verification

through biometrics, image and

workflow, automated

document validation

Shortened home

loan approval cycle

to 4 days from 13

General customer

onboarding

reduced from 5

days to 12 minutes

92% reduction

in back-office

document

validation

times

Europe instant

account opening

In Portugal, deployed 200+

iPads with 200 additional

expected in Q1 2013

Spain and France gradual

rollout in 2013

UK planned for 2013

Onboarding cycle

time reduced from

90 minutes to 30

minutes

20% of accounts

opened within 15

minutes and 95%

in less than 30

minutes

More than 75%reduction in paper

80% reduction

in account

opening FTEs

Potential cost

savings across

Europe would

be up to US$60

million

Source: Barclays Strategic Review presentation, February 12, 2013

1. Barclays Strategic Review, February 12 2013.


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BANKS' CURRENT ONBOARDING CHALLENGES

AND IMPROVEMENT OPPORTUNITIES

This section summarizes the key business model challenges faced by banks today across the

retail bank, wealth management division, and mortgage department. These challenges comefrom the following:

Clients' changed preferences for how they want to purchase financial products and

manage their financestoday, across channels at any time and place they choose

Regulatory requirementsin particular, requirements that aim to protect consumers

from improper investment sales practices and those aimed at reducing poor

mortgage-origination practices

Profitability pressuresbanks have to meet both client needs and regulatory

requirements at a time when budgets and hiring remain modest

RETAIL BANK

Retail banks around the world, especially in Europe and North America, are facing

unprecedented challenges to their business model. In the face of these myriad challenges, retail

banks are looking to reinvent themselves. Many are trying to develop new operating models

based on the customer rather than the transaction, and it often starts with the onboarding

process.

Creation of a better onboarding online experience: The industry is seeing significant

improvements in the online buying experience of all financial services products. In

the past, the experience was often siloed or restricted by product type (depositsversus loans) and not differentiated or rewarded (by new relationships versus loyal

customers, for example). Other industries, such as the retail sector, as well as new

entrants to the banking industry have already impacted customer expectations and

set new standards in the area of online experience. Financial institutions need to

implement greater sophistication at selling via digital channels, enhance greater

cross-sell capabilities in countries where the practice remains limited (e.g., the

United States), and develop new lines of business and financial products altogether.

Banks in Europe are already trying to sell more products online, including more

complex products (e.g., investment products) that require deep customer

knowledge or extensive onboarding experience.

Transformation of the retail branch network: Banks are starting to transform the

branch from a place of transactions to a place for building relationships. The

onboarding process must follow a similar evolution and migrate from an account-

centric process to a relationship-focused one that can adapt to meet a customer's

expectations.


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Dramatic increase in the ability to use data analytics: In order to drive top-line

revenue, banks either have to acquire new clients (at a cost) or increase their share

of wallet from existing customers. Driving sales and managing customer

relationships across all channels with better integration is not possible without a

strong business intelligence product that works in conjunction with the onboarding

solution.

WEALTH MANAGEMENT DIVIS ON

Wealth management firms globally are challenged with meeting more stringent investor

protection regulatory requirements, including enhanced suitability requirements (FINRA 2111 in

the United States, the Markets in Financial Instruments Directive [MiFID II and III] in Europe, and

the U.K. Financial Services Authority's suitability guidance), and determining whether clients

must pay taxes in the United States (FATCA). These new rules have required firms and financial

advisors to gather significantly more information, about clients and prospects to better

understand clients tolerance and capacity to take risks.

In the United States, FINRA 2111 requires financial advisors to capture new information during

the account opening process, including age, investment experience, investment time horizon,

liquidity needs, and risk tolerance. The rule also requires advisors to consult this expanded set of

client information prior to making investment strategy recommendations throughout the client

relationship, implying that the information captured at the beginning of the client relationship

must be kept up to date and accessible through the customer relationship management systems

or the advisor desktop.

In the United Kingdom, the FSA has been very aggressive in examining suitability practices and

with publishing both the poor and the best ones. In early 2013, the FSA announced it had carried

out 231 "mystery shops" across six major banks and building societies which resulted in severalfirms taking immediate action to make improvements to their advice processes, including

establishing better controls around the new business process2. One of the study's key findings is

that advisors did not gather enough information about the client or prospect to ensure their

advice was suitable in 15% of the cases.3

Regulators and clients require financial advisors to invest more time and effort into

understanding their clients' holistic financial picture and ensuring that the products they

recommend are in their clients' best interest. This time and effort increases the cost of delivering

financial advice at a time when revenue has not yet recovered from the financial crisis. To

achieve this level of client focus, financial advisors need to spend less time on low-value-added

tasks, such as filling out paperwork and routing documents. Client-facing onboarding tools that

clients can fill out on their own, through Web or mobile interfaces, or in collaboration with

2. Mystery shopping is a tool used to gather information about an establishments products or servicesfor the purpose of assessing quality and/or monitoring regulatory compliance. The mystery shoppers

identity and purpose is generally not known by the establishment under review.

3. A mystery shopping review:Assessing the quality of investment advice in the retail banking sector,FSA, February 2013. http://www.fsa.gov.uk/static/pubs/other/thematic_assessing_retail_banking.pdf


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financial advisors through a user-intuitive device that can also image documents (e.g., tablet

devices with embedded cameras), give advisors more time to understand their clients and more

time to analyze the information clients provide.

MORTGAGE DIVISIONSince 2008, banks have viewed mortgages, and more importantly compliance, as a major

disruptor in any attempt to automate or initiate self-serve opportunities for customers involved

in refinancing an existing residential real estate loan or in a new home purchase. Regulators have

crafted and changed rules with depressing frequency, modifying guidance almost as soon as it is

implemented. The worst for some lenders is the uncertainty of what the "final" guidance will be

along with tight implementation deadlines.

Documentation requirements in both origination and closing processes, policy changes in

underwriting, and distribution requirements to both servicers and secondary markets have

elongated the adjudication process and kept IT resources engaged with little time for

discretionary projects. Table B demonstrates the explosion of final rules that impact themortgage loan application and decision process produced in just the first three months of 2013.

Table B: New Rules and Revisions Drive Up Onboarding Costs, No End In Sight

Final rules issued Q1 2013 Process changes required

Loan originator compensation

requirements under the Truth in

Lending Act (Regulation Z)

Revision to license and compensation requirements for

mortgage loan originators and financing of single premium

credit insurance

Appraisals for higher-priced

mortgage loans

Creditors must obtain an appraisal or appraisals meeting

certain specified standards, provide applicants with a

notification regarding the use of the appraisals, and give

applicants a copy of the written appraisals used

Disclosure and delivery

requirements for copies of

appraisals and other written

valuations under the Equal Credit

Opportunity Act (Regulation B)

Provide applicants free copies of all appraisals and other

written valuations developed in connection with an

application for a loan to be secured by a first lien on a

dwelling, and notify applicants in writing that copies of

appraisals will be provided to them promptly

Real Estate Settlement Procedures

Act (Regulation X)

New wording in RESPA documents addresses servicers'

obligations to correct errors asserted by mortgage loan

borrowers, to provide certain information requested by

such borrowers, and to provide protections to such

borrowers in connection with force-placed insurance

High-cost mortgage and

homeownership counseling

amendments to the Truth in Lending

Act (Regulation Z)

Expands the types of mortgage loans that are subject to the

protections of the Home Ownership and Equity Protections

Act of 1994 (HOEPA), revises and expands tests for coverage

under HOEPA, and imposes additional restrictions on

mortgages that are covered by HOEPA, including a pre-loan

counseling requirement


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Final rules issued Q1 2013 Process changes required

Homeownership counseling

amendments to the Real Estate

Settlement Procedures Act

(Regulation X)

Imposes certain other requirements related to

homeownership counseling, including a requirement that

consumers receive information about homeownership

counseling providers

Ability to repay and qualified

mortgage standards under the Truth

in Lending Act (Regulation Z)

Requires creditors to make a reasonable, good faith

determination of a consumer's ability to repay any

consumer credit transaction secured by a dwelling

(excluding an open-end credit plan, timeshare plan, reverse

mortgage, or temporary loan) and establishes certain

protections from liability under this requirement for

"qualified mortgages"

Escrow requirements under the

Truth in Lending Act (Regulation Z)

Requires establishment of escrow accounts for higher-

priced mortgage loans secured by a first lien on a principal

dwelling; the rule lengthens the time for which a mandatory

escrow account established for a higher-priced mortgage

loan must be maintained; also exempts certain transactions

from the statute's escrow requirement

Sources: 2013 CFPB publications

In addition, lenders report lengthy decision times and high costs to banks and borrowers due to

the inability (or unwillingness) of most mortgage processing groups to automate either the loan

origination or the onboarding process. Aite Group's 2012 CIO survey revealed that well over half

of bank CIOs are unsatisfied with their mortgage loan origination technology capabilities

mortgage loan origination IT capability has the lowest satisfaction ratio (35%) for credit

processes (Figure 3). At the same time, banks have impetus to move ahead in the next two

years. Over half of bank CIOs seek to be "stellar" with mortgage loan origination and almost half

of CIOs surveyed see IT spending in the area of mortgage loan origination increasing over a two-

year periodmore than any other segment of consumer credit.


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Figure 3: Banks Aim for Technology to Improve Mortgage Loan Origination Processing

Source: Aite Group's global survey of banks with more than US$10 billion in assets, Q2 2012

Yes No

Be

good

enough

Be

stellarDown Flat Up Build Buy

Out-

source

Bring

in-

house

Hire IT

services

vendor

Consumer loan

origination39% 61% 53% 47% 3% 60% 37% 43% 43% 10% 7% 17%

Mortgage loan

origination35% 65% 36% 64% 4% 48% 48% 40% 40% 16% 8% 12%

Credit

decisioning56% 44% 38% 62% 0% 71% 29% 40% 36% 12% 12% 8%

Mortgage loanservicing

48% 52% 54% 46% 9% 52% 39% 33% 33% 8% 4% 4%

Default

management46% 54% 57% 43% 4% 65% 30% 43% 48% 4% 0% 9%

Small-business

loan origination38% 62% 46% 54% 4% 58% 38% 40% 48% 8% 4% 20%

Average 44% 56% 47% 53% 4% 59% 37% 40% 41% 10% 6% 12%

Color coding is applied by column section: Red=lowest value, Yellow=midpoint, Green=highest value

Q. Please help us understand your institution's IT initiatives in consumer lending. (Average N=26)

Firm's

satisfaction

withcapability

Firm's goal

with capability

24-month IT

spending forecast

Likelihood to ...

(Check all that apply)


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SEVEN ATTRIBUTES OF A MATURE AND CLIENT-

FOCUSED ONBOARDING PROCESS

This section explores the characteristics of a mature and highly efficient onboarding process. To

compete in an always connected, highly informed, multidevice environment, banks require anonboarding process that is

Efficient to meet clients' expectations for speed while managing regulatory risks

Automated, with the workflow tools necessary to automate and track the

completion of process steps

Multichannel, taking advantage of mobile and Web technology to capture images,

documents, and data using the devices customers and financial services

representatives already carry

Client-aware and can treat clients differently based on their prior experience with

the bank (new-to-bank or existing) and their life stage

Able to extract data from pictures of the physical documents that will always be a

critical input to the onboarding process

Visible and responsive, providing front-office staff with transparency over the

process and alerts

Consistent across channels and devices to ensure that the customer's experience is

best in class no matter how the customer chooses to engage with the bank

EFFICIENT: TARGET ACCOUNT OPENING CYCLE TIMES

What processing times should banks strive to achieve to meet client service expectations,

manage risk, and comply with regulatory requirements? The answer differs by product due to

differences in regulatory requirements and product risk profiles (for clients and banks).

R E T A I L D E P O S I T S

The primary goal of an effective onboarding process for retail deposits (checking, savings, CDs,

and money market accounts) is to approve and fund all qualified, legitimate applicants in an

efficient, automated single session, with minimal risk of fraud. Consumers apply online primarily

because they expect the process to be fast and simple and to spare them from a trip to thebranch. In order to offer a real-time onboarding experience, the process must include


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Real-time identity verification designed to screen out fraudsters and comply with the

customer identification program (CIP)4

and "Know Your Customer" (KYC) regulations

Real-time funding verification designed to help financial institutions determine

whether applicants are making authorized deposits to fund the new account

Real-time account funding, allowing initial funding of the newly created account

B R O K E R A G E

Banks should target to open and fund standard brokerage accounts within one business day

from the time the client agrees to open the account (Figure 4). For fee-based accounts, the

process stretches to one and a half to two business days to allow for the development of the

investment proposal and the home office review process, which can take more time than for a

brokerage account when portfolios veer from standard, packaged products. A highly efficient

managed account opening process is one in which funds are ready to be traded the day after the

investment proposal is signed off by the client. Achieving these time frames consistently requires

onboarding systems that can capture application information and identify and communicate anyerrors immediately to advisors and clients. Onboarding solutions should be able to send

messages to advisors and clients about the status of the account opening process across devices

and communications channels (text message, email, and client portal).

Figure 4: Brokerage and Managed Account Processing Times in the United States

Source: Aite Group Survey of 515 U.S. financial advisors, March 2012

4. A joint regulation (FDIC, NCUA, U.S. Treasury, OTS) to implement section 326 of the U.S. Patriot Actand require banks, savings associations, credit unions, and certain non-federally regulated banks"" to

have a customer identification program"".

19%

23%

24%

36%

21%

24%

19%

27%

16%

20%

24%

18%

32%

27%

24%

11%

8%

4%

5%

5%

Fee-based/managed

Brokerage

Fee-based/managed

Brokerage

Small/midsize

(n=143)

Largefirm(n

=66)

Q. What is the account opening cycle time, measured in days between receipt ofthe client agreement, to open an account and funding of a new account

for the following account types?

Real time Not real time, but same day 1 day 2 to 4 days 5 to 7 days 8 to 14 days

Avg.

1.1

1.3

1.6

2.0


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AUTOMATED WORKFLOW

Achieving the account opening time frames discussed above across accounts requires an

automated onboarding workflow. An automated workflow routes electronic data and documents

(document images) to the applications and approvers that need to analyze the information.

Workflow tools should also be able to track the completion of process steps and kick off the next

step in the process.

R E T A I L B A N K S

Scalability for opening retail deposit accounts is achieved by eliminating the manual components

of the onboarding process. Applicants need to be able to complete the application and get real-

time feedback in one single session. The workflow automation is centered on the following

components:

Real-time identity verification. This step is designed to screen out fraudsters and

comply with the CIPand ""KYC regulations. Even as the applicant fills out the

application, financial institutions can begin to reach out to third-party data providers

that compile public records, credit bureau files, and government data to assess the

validity of the Social Security number, driver's license, passport, and address

information the applicant has provided. It also includes real-time screening against

government watchlists, including the OFAC Specially Designated Nationals,

Sanctioned Programs and Sanctioned Countries, and Palestinian Legislative Council

(PLC) lists, as well as out-of-wallet challenge questions. Ideally, this process is

automated and will generate an approval or a rejection decision immediately.

Real-time funding verification. This process is designed to help financial institutions

determine whether applicants are making authorized deposits to fund the new

account. Verifying account ownership is done via three methods; however, only two

are real time. data analysis uses third-party data providers or account aggregationwhereby the applicant provides login information to the funding account, enabling

the financial institution to confirm information in real time. Another method

commonly used is known as micro-deposit or trial deposit authentication, whereby

the financial institution makes small deposits into the funding account and asks the

applicant to verify the amounts. This process typically takes two days or more.

Real-time account funding. This process will allow initial funding of the newly

created account. Real time is achieved by the applicant using an existing debit/credit

card or by an account-to-account transfer within the financial institution if the

applicant has an existing account. Another method commonly used is funding the

account via ACH processing; however, this process typically takes two days or more.

Enhanced customization of rules for applicant approval, cross-selling of multiple

financial products, and funding transactions.

Integration with core systems or other systems of record for true straight-through

processing.


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W E A L T H M A N A G E M E N T

While more than half of financial advisors indicate that they are able to open brokerage accounts

within one business day, the reality is that this process breaks down in too many instances.

Reducing the percentage of accounts with errors (not-in-good-order accounts) is an important

objective of many advisors and wealth management firms. The wealth management onboarding

workflow is in dire need of automation today. An Aite Group survey of just over 500 U.S.financial advisors conducted in March 2012 reveals that more than one-third of financial

advisors still consider filling out paperwork by hand to be their primary method of opening

accounts. Paper-based applications increase the potential for errors and limit the firm's ability to

find and fix errors quickly.

This study also found that less than half of financial advisors surveyed have access to onboarding

solutions that automate the approvals workflow (e.g., submitting to a compliance officer for

approval) and tracking the approval (Figure 5). Only one-third of advisors indicate that their

account opening systems are integrated with other business applications, including customer

relationship management (CRM) and document management systems. This lack of integration

significantly limits the automation of the onboarding workflow and the ability to analyzeapplication data for compliance, marketing, and sales purposes in a timely manner.

Figure 5: State of Workflow Automation in U.S. Brokerage Accounts

Source: Aite Group survey of 515 U.S. financial advisors, March 2012

M O R T G A G E S

Accepting and adjudicating a residential mortgage application is a labor-intensive, document-

centric, frequently regulator-scrutinized process that typically represents the single largest and

most stressful action for a consumer. Further adding to initial processing delays is the U.S.

market approach to funding these loans, which usually includes a transfer of the complete loan

and its documentation to one third party for purchase and to another for servicing. The original

33%

37%

48%

Integrates with otherbusiness applications (e.g.,CRM, imagin g, workflow)

Enables anelectronic/paperless

workflow

Tracks an d enables accountand product approvals

workflow

Q. For brokerage accounts, please indicate the extent towhich account opening systems and processes provide

the following capabilities.(Percentage of advisors indicating the solution

"completely provides" capabilities, n=211)


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bank's goal is to keep this customer and gain the opportunity to reach further into the customer

wallet.

For customers, process time is critically important; in the past, institutions have worked to

streamline and automate this process as much as is feasible. Studies have shown that consumers

want to initiate mortgage loans from online channels and that the largest impediments have

been document delivery and electronic signatures. Mobile devices that have the capability to

take and transmit picturesalong with applications and signaturesand to receive necessary

documentation has become the middleware that moves the online channel to full service for

receipt and adjudication of loan applications. These devices are critical if firms want to achieve

the low end of the processing time frames shown in Figure 6.

Figure 6: Mortgage-Origination Process

Source: 2013 Aite Group

MULTICHANNEL WORKFLOW

A mature onboarding solution is one that can support a multichannel workflow (Table C). Some

applicants are comfortable providing personal information such as their Social Security number

and driver's license online, while others are more comfortable providing such data over the

phone or at the branch. By supporting multiple channels, the onboarding process provides

maximum flexibility to the financial institution and the applicant. The entire application can be

Prequalification

Product selection

Application

completion

Loan registration

Rate lock

Loan submission

Property

appraisal

Compliance

documents

Pricing, delivery, and

processing decisions

made (includes good

faith estimates)

0 to 20 days

Credit reportand models

Other scoring

models (ID)

and documents

(Pay)

Automated

credit policies

Appraisal

evaluation

Commitment

issuance

Credit, property,

loan approval

decisions made

2 min. to 20 days

Automated mortgageinsurance U/W

Commitment condition

compliance

Survey, title, insurance,

etc. ordering

All document

preparation

Closing instructions

Signatures

Funding authorization

Post-closing

document

tracking

Servicing system

setup

Loan package

audit

Shipping

Investor pool

placement

Vendor services ordered and

MI decision made (Includes

RESPA)

3 to 30 days

Investor placement,

servicing rights and

decisions made

3 to 60 days

ApplicationPost-Closing and

DeliveryPre-Closing and ClosingUnderwriting


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completed in a single channel (online, branch, or call center) or can occur across multiple

channels. Items that are most easily completed online, like acceptance of terms and conditions

or completion of an e-signature, can be done in the online channel, while other items can be

completed in the branch or call center. Multichannel support also gives the financial institution

the ability to proactively reach out to applicants who have started but not completed the

onboarding process. With a multichannel workflow tool, applications that stagnate can beproactively moved toward completion.

Table C: Multichannel Approach to Onboarding Workflow

Onboarding Stages Channels Used

Build awareness Mass media, social media, direct marketing, financial

institution's website

Create interest Social media, search engines, branch, ATM, financial

institution's website, direct mail

Acquire client Branch, call center, financial institution's website, financialinstitution's mobile app

Engage client Branch, call center, ATM, financial institution's website, social

media, direct mail, online banners

Cross-sell client Branch, call center, outbound phone campaign, ATM, financial

institution's website, direct mail, online banners, outbound

email program

Retain client Branch, call center, outbound phone campaign, ATM, financial

institution's website, direct mail, online banners, outbound

email program

Source: Aite Group

When selecting an onboarding solution for multichannel deployment, banks should keep in mind

that the solution should support the following:

Customization of the user interface to integrate seamlessly with other online and

mobile properties

The ability to efficiently change the user interface and business rules across multiple

devices through one centralized application

The ability to optimize the content displayed given the screen size and the operatingsystem

Integration with systems of record, including hosted and home systems to ensure

the application data is available to all agents and processes required to complete the

onboarding process and service the customer thereafter

Pre-filling of online forms for existing customers with existing customer information

(regulatory constraints may prevent pre-filling of some sensitive client information);


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this not only saves existing customers some time but also demonstrates to

customers that the bank knows them

T H E B E N E F I T S O F M U L T I C H A N N E L O N B O A R D I N G T O T H E W E A L T H

M A N A G E M E N T I N D U S T R Y

In the wealth management group, providing customers with the ability to open accounts online,

or at least start the online account/origination process online, saves financial representatives'

time with gathering client information and filling out forms. Despite these benefits, very few

wealth management firms allow clients and prospects to open accounts or start the onboarding

process through the client portal. An Aite Group financial advisor survey of 529 U.S. financial

advisors conducted in January 2013 reveals that clients of only 17% of financial advisors have

access to an online portal that enables online account opening, and clients of one-third of

financial advisors can upload documents to the client portal to share with advisors (including

document images and statements; Figure 7).

Figure 7: Availability of Online Onboarding Capabilities for Investment Accounts

Source: Aite Group survey of 529 U.S. financial advisors, January 2013

Financial advisors whose clients have access to these capabilities are more likely than other

advisors to state that their client portal saves them time with gathering client data/information

and that the client portal has driven clients to bring more assets to the firm (Figure 8). These

advisors are also more likely to indicate that the portal keeps them better informed of their

clients' financial livesallowing clients to complete application forms electronically provides a

one-point-in-time snapshot of their financial information which they are likely to continue to

update after investing the initial time entering the information. Access to updated client

information on a continual basis generates multiple benefits, including faster account opening

for subsequent accounts, better (and more compliant) advice delivered, and deeper advisor-

client relationships.

27%

17%

Upload documents to

share with advisors orto s tore key financial

documents

Start/complete theclient onboarding/new

account process

Q. What can clients accomplish on yourfirm's client site/portal?

(n=306 U.S. financial advisors)


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Figure 8: Benefits of Providing Online Account Opening Capabilities Through the Client Portal:

Wealth Management Firms With Online Account Opening vs. Firms Without

Source: Aite Group Survey of 529 U.S. financial advisors, January 2013

In addition to making the application available online for clients to open accounts on their own,

wealth management firms should consider enabling financial advisors to open accounts with

clients during the client meeting. Many financial advisors are already leveraging their tablet

devices to guide their meetings. They should be leveraging these devices to fill out application

forms either by handing the tablet directly to the client or by filling the form out on behalf of

their clients. This approach is likely more suitable for high-net-worth clients, who may expect a

high-touch service from their advisors. Advisors can make the in-meeting application processeven more efficient when they come to the meeting with applications already partly filled, or

when they can leverage mobile applications (smart phone or tablet) to take pictures of

documents (i.e., a passport or a driver's license). The benefits to advisors of completing an

application process through a tablet device during a client meeting are multiple and include

advisors' ability to

Demonstrate value by helping clients complete a process that they may usually be

responsible for

Complete the sales process in one interaction

Leave the meeting with validated forms

Avoid carrying (and losing) physical documents and paperwork that contain sensitive

client information

Speed up the account opening process and other downstream processes by

immediately transmitting client information to workflow, document management,

financial planning, CRM, and other advisor applications

9%

17%

29%

24%

31%

47%

Drives cl ients to bringmore of their assets to

the firm

Keeps me informed ofmy clien t's complete

financial life

Saves time withgathering clientdata/information

Q. In your opinion, what top 3 benefits does the client site provide to youand your practice? (Advisors with client portals that enable accountopening vs. advisors without online account opening capabilities)

Financial advisorclients canstart/complete theon boarding processon line (n=51)

Financial advisorclients can'tstart/complete theon boarding processon line (n=255)

Percentages differ s ignificantly from oneanother across responses


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Wealth management firms have barely scratched the surface of the possibilities the tablet device

offers to enhance advisor client collaboration and relationships. While several private banks

leverage tablet devices to deliver prepared portfolio reviews and other documents to clients, few

advisors report using their tablet devices to complete interactive and collaborative processes

with the client, including financial planning and gathering client information and documents

(Figure 9).

Figure 9: Financial Advisor Applications Available on Tablet DevicesU.S. Financial Advisors

Source: Aite Group Survey of 529 U.S. financial advisors, January 2013

While wealth management firms are only at the beginning stages of offering online and mobileaccount opening capabilities, mortgage departments are further along. Mortgage loan

origination solution providers see growing requests for mobility tools and channel delivery, with

particular focus on e-doc delivery and signatures as well as the electronification of processes

listed in Figure 6 above.

CLIENT AWARENESS

The onboarding process must be aware of who the customer is. It should treat existing bank

customers, for example, differently than brand-new customers. Modifying the process for

existing clients and avoiding recapturing/rekeying of information that the client has alreadyprovided for another line of business will speed up onboarding and improve customer

satisfaction.

The use of data analytics and the development of a customer-specific approach rather than

pushing products to a large group of customers are other elements contributing to onboarding

success. This can be achieved by collecting key customer data or insights to better understand

and serve the customer, including understanding channel, communication and language

preferences as well as the customer's life stage. The benefits of using this information include

9%

8%

6%

4%

2%

Advisor dashboard (bookoverview, alerts, etc.)

Customer relationshipmanagement (CRM)

Broker workstation

Financial planning

Document management(in cluding imaging and

workflow)

Q. Please indicate whether the following applications areavailable to you via a tablet device. (n=408)


23/28



minimizing abandonment and maximizing adoption (Figure 10). Other data attributes that may

drive targeted messaging for deposit account holders are direct deposit flag, online banking

usage, online bill pay usage and biller data, debit card, average account balances, total number

of products/services, homeownership status, and household income.

Figure 10: Client Awareness Maturity Level for Onboarding

Source: Aite Group

EXTRACTS DATA FROM PHYSICAL DOC UMENTS

When applying for accounts and loans, customers must submit copies of government-issued

documents and, for certain products and processes (as is the case with mortgage originations),

bank representatives must indicate that they have seen original copies of these documents.Tablets and mobile devices can now take pictures of these documents when presented in

branches, thus allowing banks to upload their images to internal systems. But, these devices do

not come with the ability to extract data from these documents to populate account opening

applications. Banks required specialized mobile applications with imaging and data extraction

capabilities to achieve auto population of forms and trigger the rest of the onboarding workflow.

Imaging and data extraction capabilities are particularly important for mortgage departments to

acquire today in light of banks' requirements to better measure credit risk as part of Basel III

Sends outbound

messages to broad

customer groups

on a regular basis

Sends outbound

messages to customer

groups in response to

specific events or

actions such as new

account opening or

account balance

threshold

Targets a segment of

customers that are

experiencing a life-

change event such as

purchase of a new

home or preparing for

retirement

Life stage

marketing

Event-based

marketing

Mass

marketing

Life cycle

marketing

Customer intimacy

High

High

Low

Targets individual

customers basedon their unique

attributes and

engagement with

the financial

institution based

on data modeling

and database

marketing


24/28



stress testing. Mortgage departments are reviewing historical loans in paper format to measure

their exposure or to review the historical process. Imaging these paper documents in order to

automatically extract and analyze the information they contain would eliminate significant

manual work.

An additional significant pain point in mortgage processing is that many mortgage wholesalers,

servicers, and government sponsored entities are being required to buy back mortgage loans

originally sold into the secondary market. This is usually because the portfolio investors or their

agents made the case that the institution failed to follow its credit policies and procedures when

adjudicating these loans and are therefore responsible for losses. Banks and servicers struggle

to work manually through processes of ten or more years ago in order to reduce the institutions

loss exposure. Complicating the effort are bank mergers (sometimes two or three) that make it

virtually impossible to pinpoint the policies in place at the time of application. The human

resource cost alone is staggering as workers search for the cause of each distressed loan one

loan at a time. Results are predictably abysmal. Coupled with automated analytical tools,

document imaging and data extraction capabilities would provide significant time savings and

more accurate results.

VISIBLE AND RESPONSIVE

Onboarding processes that are electronic from beginning to end can be tracked, reported on,

and managed. As the client's application data and documents cycle through the multistep

process, the various actors involved in the process must be kept up to date. In particular, when

errors are identified in the application data or when the process is stalled for longer than

expected, process stakeholders must be informed immediately. As more and more sales and

service agents, financial advisors, and loan officers carry mobile phones and tablets, they should

be able to obtain messages or alerts about the process through these devices as well as through

their work desktops or email inboxes. Clients should also be informed of issues in theirapplication as they occur, particularly if the onboarding process is stalled because they need to

provide additional information or documents. A mature onboarding solution would have the

ability to automatically generate an email or text message informing the client to take action.

In wealth management departments, financial advisors request alerts when an application is not

in good order. With this information at hand, the advisor can be proactive and help resolve the

issues or, at a minimum, use this information to assuage any client concerns regarding the

process delay. Aite Group's 2012 financial advisor survey showed that financial advisors who say

they have complete visibility into the onboarding process report that they have higher firm

satisfaction compared to financial advisors who say they have no visibility into the process

(Figure 11). Investing to improve onboarding process visibility can have a direct impact on thebottom line of wealth management firms if these initiatives increase advisor satisfaction and

retention.


25/28



Figure 11: Advisor Firm Satisfaction Correlates With High Account Opening Process Visibility

Source: Source: Aite Group survey of 515 U.S. financial advisors, March 2012

CONSISTENT ACROSS BUSINESS LINES AND CHANNELS

As the onboarding process expands into new channels to take advantage of mobile technology

and to better meet the needs of clients, banks must ensure that the onboarding experience and

core process steps are consistent across channels. Standardization across channels and devices is

important not only from a branding and client experience perspective but also when meeting

compliance requirements. An online onboarding process typically complies with the same core

regulatory requirements as an offline process. While processes will be, and should be, different

across channels based on the constraints of the device and differences in the sales process, the

look and feel and the core business and regulatory requirements should be the same.

46%

59%

70%

34%

29%

22%

20%

12%

7%

Does not provide (n=35)

Partially provides (n=69)

Account opening solution

provides complete visibility(n=108)*

Visibility Into Brokerage Account Opening Process vs.Level of Satisfaction With Firm

Satisfied or very satisfied Areas of d issatisfaction and satisfaction Unsatisfied or very unsatisfied

Percentage outlined by a square differs significantly from percentage outlined by a circ le


26/28



CONCLUSION

Across the globe, banks have been undergoing tremendous change since the financial crisis of

2008. These adjustments have been driven largely by profitability pressures and changing

investor preferences. While banks may look to the myriad regulatory requirements and conclude

that they cannot afford to allocate much to client experience initiatives, they must reconsiderthis assessment and identify initiatives that can both meet the needs of regulators and ensure

their long-term competitiveness. Banks that fail to incorporate mobile and Web technologies to

enable their client-facing processes will be left behind. Here's why:

Aite Group's recent research on investors reveals that young investors, including the

future high net worth, are prepared to shift their assets to firms that can provide

them with more convenient services and more online/mobile tools. Providing this

generation of investors with a time-consuming and paper-intensive onboarding

process will give them the impression that the firm will not be able to meet their

ongoing needs for convenience in their financial lives.

More and more financial services representatives, including financial advisors and

mortgage loan officers, will consider a firm's technology capabilities as an important

factor in their workplace decision. Firms that provide a highly inefficient working

environment in which they are left in the dark about the status of their customers'

processes will be unappealing to the new generation of representatives.

Regulators across the globe will continue to ensure that financial institutions are

delivering solutions that are in the best interests of customers and that they are not

taking undue risks. To accomplish these objectives, regulators will require more

documentation of the sales process and they will investigate this documentation.

Firms that are still storing key client documents in paper format will have trouble

responding to information requests of regulators in a cost-effective manner.

Banks should look to solutions that are adaptable to changing customer preferences

and changing regulatory requirements. Application forms and underlying business

rules will change often. Solutions that enable banks to efficiently change the user

interface and business rules across multiple devices through one centralized process

should be prioritized.


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ABOUT KOFAX

Kofax plc (LSE: KFX) is a leading provider of innovative smart capture and process automation

software and solutions for the business critical First Mile of customer interactions. These begin

with an organizations systems of engagement, which generate real time, information intensive

communications from customers, and provide an essential connection to their systems of record,which are typically large scale, rigid enterprise applications and repositories not easily adapted

to more contemporary technology. Success in the First Mile can dramatically improve an

organizations customer experience and greatly reduce operating costs, thus driving increased

competitiveness, growth and profitability. Kofax software and solutions provide a rapid return on

investment to more than 20,000 customers in banking, insurance, government, healthcare,

business process outsourcing and other markets. Kofax delivers these through its own sales and

service organization, and a global network of more than 800 authorized partners in more than

75 countries throughout the Americas, EMEA and Asia Pacific. For more information, visit

kofax.com.


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ABOUT AITE GROUP

Aite Group is an independent research and advisory firm focused on business, technology, and

regulatory issues and their impact on the financial services industry. With expertise in banking,

payments, securities & investments, and insurance, Aite Group's analysts deliver comprehensive,

actionable advice to key market participants in financial services. Headquartered in Boston witha presence in Chicago, New York, San Francisco, London, and Milan, Aite Group works with its

clients as a partner, advisor, and catalyst, challenging their basic assumptions and ensuring they

remain at the forefront of industry trends.

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