Financial Crime Software – a bank's secret weapon

Financial Crime Software – a Bank’s Secret Weapon

As the battle to avoid disintermediation continues, there is no doubt that ‘predicting and understanding the customer’ is the number one focus for banks in 2015.

Temenos – Company

As the battle to avoid disintermediation continues, there is no doubt that ‘predicting and understanding the customer’ is the number one focus for banks in 2015.

The results of last months Temenos News survey further support this, with an outstanding 91% of respondents believing that ‘customer data is a bank’s most valuable asset’. And with recent IDC research demonstrating that a comprehensive approach to data is likely to result in a $1.6 trillion opportunity for businesses worldwide, banks stand to benefit from a considerable share of that pie.

The ultimate goal and potential outcome of this focus should lead to a positive impact on the balance sheet from an increase in cross-selling efforts and a decrease in customer attrition attributed to improved customer relationship programs. It provides banks a heightened ability to better invest in services and products that produce stable deposits. However, at present banks tend to work with the limited customer data available within their standard portfolio. This information comes from account holder information fields (name, date of birth, address) and transactional history (income, spending source and values). Banks are generally working with limited information, and limited information often results in limited opportunities.

The hidden arsenal

There is a source within a banks infrastructure that contains rich, up-to-date customer information that has already undergone extensive analysis. Financial crime mitigation (FCM) software, which all banks must have, should hold a detailed picture of both retail and corporate customers.

Big data offers huge opportunities for retail banks. However, to fully maximize this (through predictive analytics) there are practical issues to address, particularly given the variety of transaction types. FI’s must consider if there is enough information to understand customer behavior over time and across the product line. Anti-money laundering software offers this complete picture. It should hold all the transactional information on the customer in one record, regardless of how many accounts they have (credit card, current account, savings, etc.). And this transactional information often provides a picture of several days, providing a detailed insight of the customers’ recent behavior. With this information on the payments and spending patterns of customers, banks can start to direct very targeted offers to their customers.

Banks already realize the benefit of peer grouping and segmentation, this information is held in FCM software. This presents a significant opportunity to measure and understand trends. For example, highlighting a large debit from a savings account, coupled with a smaller transaction with a furniture removal company and an interior shop, this may offer the opportunity for the FI to cross-sell home insurance. The opportunities are endless when you combine information from several account sources, but with many banks having disparate systems that struggle to talk to each other, the FCM system provides the only holistic view. It is the cleanest unified set of data in a bank.

And the benefit of big data from a corporate banking perspective is also strong. Using data to drive value-added customer insights and getting that information to corporate treasurers at the time and place they need it, over their preferred channel offers huge opportunities to corporates in their trade and cash management activities.

Greater knowledge, greater power

It has never been more important to have the right Know Your Customer (KYC) solution in place to prevent identity theft, financial fraud, money laundering and terrorist financing. But standard KYC requirements are not enough to ensure protection. Banks are now starting to include within their FCM systems, a complete customer enhanced due diligence (CEDD) approach to ensure full awareness at client level, offering a greater level of detail than is held at current account, savings or credit card account level. And where CEDD is practiced an even greater level of data is available.

Collaborate with allies to win the war

And this opportunity could be further enhanced if banks looked to share information on their customers to further guard against financial crime. If banks were to work together to provide specific information to each other, not only would this help to protect against financial crime, but a richer level of information would be available on each customer. This concept may sound rather revolutionary but insurance companies have been doing it for years. The Medical Information Bureau (MIB) contains information about paid insurance claims, past applications and other information that insurance companies can access (with your permission) to check your medical history, and credit bureau’s are also operating the same approach so why shouldn’t banks?

For too long compliance has been seen as a costly hindrance within the banking sector; the cost of doing business and a necessary evil. By creatively weaponizing financial crime system information, a huge raft of detailed customer data can be used to grow the business and not just protect it. FCM data can be more than just a tick in a box, it can make fighting the battle for survival easier, and turn information into currency.

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Temenos – Company