Improving New Account Opening

Tuesday, June 27, 2006

What is New Account Opening?

Here is a step-by-step introduction to New Account Opening, presenting the main terms and explaining why the process is so complex that financial services organizations are starting to focus on it with technology solutions.

Back to Basics: Account

Everybody is familiar with a bank account as the way that your bank manages your details, the services they provide you, your rights and obligations, the transactions performed and your funds. The term Account can be applied to a customer relationship with any financial services organization for almost any type of service, including: insurance products, brokerage services, mutual funds, annuities, etc.

Account Opening

Account Opening is the process that a financial services organization goes through to set up an account offering a new service or financial product for a customer. For some products this can be a straight-forward process, especially if the customer currently has a relationship with the organization and the value of the product is relatively low - the account can be funded by the customer easily and the organization can set up the account and link it to the current customer details they already have.

New Account Opening

Opening an account for a new customer who currently does not have a relationship with a financial services organization is a more difficult process, even for relatively low value products, and increases in difficulty to match the value and complexity of the product. New Account Opening is the process that the financial services organization uses to handle the potential new customer, from the point of the customer submitting an application through to the organization creating the account and issuing a Welcome Package to the customer.

Business Challenges

Traditionally New Account Opening has been a very paper-intensive process, and even online accounts struggle to avoid this. Combine this with the fact that many organizations run this process largely manually and you can see that there is a great potential for errors and inconsistencies to be introduced. This can lead to:

  • Low customer satisfaction
  • Customers abandoning the application process
  • Regulatory fines
  • Lawsuits for accounts managed incorrectly due to inaccurate information
  • Damage to brand

Process Complexity

The process is complex due to the fact that at the outset (the point of application) the financial services organization has little or no reliable information about the customer. The process controls the collection of that information to satisfy many financial and regulatory requirements, including:

  • Collecting and validating customer details, identity, etc
  • Generating a profile of the customer appropriate to the product being offered, such as credit history, employment, etc
  • Assessing the suitability of the type of product or products being offered
  • Completing anti-money laundering (AML) risk ranking and other AML program tasks
  • Funding the account
  • Generating business system accounts and records
  • Fulfilling the process with a Welcome Package to the customer
The process can be significantly more complex when the product being offered is composed of products and services from multiple business partners and offered by a third-party sales agent. Annuities are one example, where the product consists of combined securities and insurance products in a complete annuity wrapper. The communication of customer information, ensuring suitability and enabling trust required between organizations are big challenges.

Regulatory issues add complexity to the process, with the requirements of the individual regulators for each type of financial organization, coupled with the legal requirements of the Bank Secrecy Act (BSA) and USA PATRIOT Act, especially around anti-money laundering (AML).

The Future

Financial services organizations are having to respond to the needs of the online customer and ever evolving regulatory and legal requirements. By utilizing a combination of technology components and solutions they can achieve this, while gaining these benefits:

  • Improved customer satisfaction
  • Improved brand image and loyalty
  • Reduced error rates
  • Reduced risk of financial loss from lawsuits and regulatory fines
  • Improved efficiency and speed of account setup

More information

This information is provided to accompany the blog Improving New Account Opening, which acts as a knowledge base for many technology and business issues and solutions related to New Account Opening.

For an example of a New Account Opening process see this process proposed for new annuities proposed by the National Association for Variable Annuities.

Also see the partially completed Wikipedia definition


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