The changing landscape of compliance and regulations in the post-COVID-19 time has pushed financial institutions worldwide to rethink and renew many of their business processes.
Especially in environments characterised by low-interest rates and poor profitability, where the possibility of a “second wave” persists, financial institutions will need to prioritise client requirements while enhancing efficiency and resiliency.
To explore this topic, Apiax joined Hubbis’ webinar on the Drive to improve business processes, efficiencies and compliance in the Asian wealth sector.
The webinar discusses how COVID-19 has affected business operations and the most significant opportunities and obstacles in Asia’s current wealth environment. It also delves into how technology can be used to overcome these challenges and enhance customer experiences.
The evolving needs of customers and employees
In the last couple of years, businesses have scrambled to implement digital systems to suit the alterations brought about by remote work. This has altered front-office roles that engage with clients since the absence of a human touch remains obvious.
According to Alex Sim, Managing Director and Chief Operating Officer of United Overseas Bank (UOB) Private Bank, “significant concerns have been unleashed by the hybrid model of working since the relationship between customers and the bank has diminished”.
He went on to say that this lack of personal contact encourages clients to utilise the services of other banks. “It is crucial to return to pre-covid working circumstances, not to make the processes more efficient, but to restore the human contact between customers and relationship managers”, he added.
Helen Kan, Executive Director and Deputy Chief Executive Officer of China CITIC Bank International, emphasised the severity of changing the face of front-end operations. “Due to border closure, face-to-face transactions, particularly investment and insurance products and services, have taken a significant hit”, she explained. This rings especially true for insurance and investment products that demand intense examination from the customer and the bank, and where obstacles must be addressed before the situation deteriorates.
“It is crucial to return to pre-covid working circumstances, not to make the processes more efficient, but to restore the human contact between customers and relationship managers.”Alex Sim, UOB Private Bank
The increased role of relationship managers
Relationship managers (RMs) are the central pillar of many financial institutions. They are the ultimate front line, the primary points of contact with clients and prospective clientele, and those who receive calls from clients when issues happen, and who are then required to resolve the issue.
According to Helen Kan, “relationship managers play a crucial role in providing a smooth customer experience in the digital era since clients often have pressing questions that must be addressed immediately. Improving efficiency is not limited to the RM and the front line; rather, it requires everyone to advance toward the front”.
New opportunities in a post-COVID-19 era
The current geopolitical tensions and inflation are further factors that have put many financial institutions worldwide under even more strain. On the flip side, this has put other countries on financial institutions’ radar.
In fact, in the last few years, Singapore has witnessed a new wave of investors, bringing in clients and wealth from around the world. “In the post-COVID age, investors are flocking to Singapore. These include big investors, family offices, and multinational corporations”, Alex Sim shared.
Singapore has become one of the hottest investment locations and Alex Sim shares that UOB intends to use its business processes to capitalise on this opportunity. “What information UOB provides customers to assist them in making sound investment decisions is crucial”, he added. This data covers the appropriate portfolio, risk profile, and preferences. Instead of giving consumers pre-packaged investment solutions, UOB focuses on customising financial advice for each client.
In fact, it seems that there’s another APAC country on investor’s radar. According to recent research by KPMG, by 2025, mainland China will account for 54% of Hong Kong’s Assets Under Management (AUM) in wealth management. This is a tremendous potential for wealth transfer from the mainland to Hong Kong, especially since Hong Kong is the gateway to the mainland and the rest of the globe.
Helen Kan commented on this progress by stating, “there is a consistent flow of money between Hong Kong and China. Intriguingly, the increased cash flow suggested that Hong Kong clients are interested in Chinese wealth management solutions. This is an enormous potential and challenge for banks operating in the Hong Kong area”.
The influence of COVID-19 on the banking system and the bank-customer relationship might be seen as a “positive discontinuity”. This discontinuity presents an opportunity for the sector’s digitalisation and the potential to provide an exceptional customer experience.
Even the most territorial and branch-focused banks are compelled to promote the use of channels that have never been a strategic priority. This phase would be very complicated, and banks must handle it by providing genuine customer connections.
Moreover, the clear awareness by bank operators of their gap in service offerings, made more concrete than ever by COVID-19, may make Asian financial institutions more eager to speed the digital transformation road via partnerships and collaborations with the RegTech providers.
Changing regulations, processes and their impact
To remain competitive in today’s fast-paced environment, many financial institutions in Asia have discovered that they must alter their product lineup, service offerings, geographies served, or all three.
Compliance officers are comprehensively grasping new offerings, from the conception phase to account creation and management, to reducing inherent risks. Likewise, extending the company’s influence into other locations necessitates adherence to distinct regulatory obligations.
According to Alex Sim, due to stringent regulatory norms in Asia, several institutions are overdoing their due diligence operations. “It should be reduced for low-risk accounts to simplify operations. The more efficient and effective the onboarding process is, the more engaging the customer experience”, he added.
He went on to explain that, to save everyone’s time, the fundamental idea to adhere to is technological advancement in the KYC, onboarding, and due diligence procedures. “Banks must meet a minimal level without overdoing things, thus enabling wealth and asset managers to focus more on nurturing customer relationships and client experiences”, Alex Sim concluded.
Meanwhile, Alan Blanchard said that there has been a great deal of conflict between conventional regulatory obligations and the current digital world. “To provide clients with a seamless experience, digital processes must be sturdy enough to address all client demands with the fewest number of clicks”, he shared.
Customer expectations and how technology can help
The pandemic has compelled financial institutions and their clients to use digital tools and procedures to compensate for closed branches, offices, and contact centers.
“COVID has spread about irrevocable changes in consumer expectations that banking should be done even without face-to-face contact and banks should be able to deliver banking products and services digitally”, explains Helen Kan. To her, digital methods, especially mobile apps, have been a lifesaver for her bank. Especially mobile apps, which have facilitated clients’ acquisition, retention, and ongoing engagement.
However, bank CEOs are faced with the challenge of combining the conventional approach to risk management with the necessity to react rapidly to a crisis that has wreaked major changes in their operational environment. As more people work remotely, criminal cyber activity, including fraud and phishing assaults, has surged.
“Amid the compliance and regulatory environment, data analytics become critical to identify anti-money-laundering (AML), financial crime risks, and fraud threats. Especially since it is hard for people to comb through all the essential information”, Alex Sim explains. “This data comprises voluminous KYC data that the bank obtains based on onboarding requirements, as well as transaction data from various sources, mostly for scanning questionable transactions”, he added.
As the economic effects of the pandemic continue, banks are revising their risk models and stress scenarios to remain ahead of the curve. However, operational environment unpredictability continues to provide obstacles. And a lack of regulatory harmonisation may further complicate international peer comparisons.
“The advantages of technology and up-to-date digital data lay in the fact that the data may be redeployed for use in new situations, making future procedures more efficient and streamlined.”Alan Blanchard, Apiax
The road ahead
Financial institutions can, and should, leverage regulatory technology to perform risk-based assessments and accomplish compliance at a cost-effective level. This not only reduces the cost of compliance but also improves front-office accuracy and efficiency.
According to Helen Kan, risk must be measurable and transformed into data points to assess its ramifications. “Simplifying the whole checking and compliance process and eliminating redundant layers would improve customer retention and business operations”, she affirmed.
Alan Blanchard believes that digitising a portion of the complexity behind compliance procedures can help implement the necessary guidelines and accomplish a degree of automation in the operations.
“The advantages of technology and up-to-date digital data lay in the fact that the data may be redeployed for use in new situations, making future procedures more efficient and streamlined. In addition, automation frees up time and resources that may be directed to acquiring more business at a lower cost”, he concluded.
Possessing the proper tools to cope with uncertainty and manage known and unknown risks may elevate planning, increase performance, provide deeper insights for decision-making, and ensure long-term efficacy. Prevention is better than cure. Consequently, compliance functions are laying digital foundations and transforming the face of provisions, regulations, and processes.