The bank crisis shed light on a glaring challenge: how to quickly onboard new commercial customers.

In the news

The days following the failure of Silicon Valley Bank and Signature Bank not only tested US and global financial markets—they also saw the largest weekly decline in smaller banks’ deposits in dollar terms on record.

As small and regional banks reeled from the losses, large banks strained under the crush of new depositors. While retail banking customers can typically open new accounts in 30 minutes or less, the onboarding of commercial customers routinely takes as long as three months. After years as a low priority, the glacial pace of client onboarding suddenly emerged as a crucial factor in banks’ ability to serve commercial clients.

Not that there was anything routine about the events of the last few weeks. According to the Federal Reserve, $120 billion in deposits flowed into the 25 largest US banks. At large and super-regional banks, the influx of new commercial customers overwhelmed operations, with several banks reassigning employees to jobs associated with account openings.

The outflow of deposits from small and regional banks appears to have slowed, but the headache of onboarding business customers continues. Collection of know-your-customer (KYC) and know-your-business (KYB) data requires stacks of documentation.

Despite the strides in automation banks made during the global pandemic, manual intervention and outdated back-office processes remain at the heart of commercial deposit operations.

The Cognizant take

Actions taken by the Federal Reserve and FDIC are giving the industry reasons for optimism that contagion has stopped. “Right now, banks are looking to stabilize their operations as they prioritize messages about safety and soundness, and maximize customer activity,” says Sanghosh Bhalla, Senior Banking Consulting Principal in Cognizant’s Banking and Financial Services division.

This is a time of great opportunity for banks to significantly improve their onboarding and servicing experience, by simplifying and streamlining processes, modernizing technology infrastructure and creating digital-native solutions for foundational capabilities such as KYC and document management, Bhalla says.

“We anticipate regulatory reaction that will require banks to further strengthen their risk management and reporting practices,” he says. “As a result, the focus will also be on enhancing data and analytics capabilities.”

Retaining high-value corporate clients is a key competitive issue for banks, and deposit operations play an important role by providing the customer experience that leads to relationship expansion.

“Big banks don’t want to be just a haven for servicing deposits with no lending products,” says Nigel Smith, Vice President for Consulting in Cognizant’s BFS division. “Once banks onboard new business customers, they need to evaluate the CX to encourage the same stickiness they’ve worked to develop for their retail customers.”

Which aspects of deposit operations should banks tackle first? “Step zero is understanding the constraints and capacity of their current processes,” says Smith. “Where are the bottlenecks? Where can tactical automation benefit operations and assist with surge capacity?”

Regardless of size, it’s time for banks to reevaluate their deposit operations. “My call to action for every bank is to take a fresh look at your current commercial deposits, capabilities and operating model” says Bhalla. “Use this opportunity to examine where the challenges, gaps and pitfalls are, and where you can create next-gen digital banking capabilities and strengthen your back-office operations.”