In a three-part series on the topic of customer experience, TAINA CEO Maria Scott has recently discussed in the first article how regulatory technology is the ‘next frontier’ of customer experience.
According to Scott, customer experience as it pertains to regulatory compliance is the next frontier that the financial industry must tackle. Due to the fundamental involvement in compliance in financial markets, it is important to be dealt with as soon as possible.
However, Scott believes that if is left to be dealt with later, this could see the entirety of the customer experience being affected in a negative way and could also see regulatory and operational risks heighten.
Other consequences of inaction could see traditional financial institutions lose customers to new competitors who offer better customer experience and the costs of compliance based on manual processes will continue to rise.
Manual compliance processes
In the article, Scott highlights the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) – two key regulations introduced by regulators in over 100 countries globally to tackle tax evasion. Financial institutions that do not comply with FATCA and CRS can face billions of dollars in fines or even criminal penalties.
However, the TAINA CEO detailed that for even some of the most highly advanced financial institutions who have invested substantially in digitising their customer journeys, when it comes to FATCA and CRS compliance, many of these firms are still dealing with ‘cumbersome and highly inefficient procedures’.
Scott detailed that many customers find the validation of tax forms – often carried out manually – challenging. Meanwhile, overlooked errors and omissions from the banks at this stage and reliance on invalid forms can create substantial bottlenecks at the reporting stage. She added that frustration brought about by this time-consuming process means that customers often resist submitting their tax forms and financial institutions must resort to continuously chasing them for this information.
To make matters worse, the regulatory environment for companies is getting evermore complex. She cited Brandi Marie Caruso – financial services industry tax leader at Deloitte Switzerland – who claimed there is ‘increased intersection between numerous complex regimes’ and added that ‘procedures to ensure compliance have been layered on top of existing procedures with this complexity reaching the client facing teams and the end customers’.
Another key challenge for the financial institutions is ensuring that reporting to different authorities remains consistent and based on the same source of data, Scott claims.
Customer experience importance
These challenges have helped light the fire behind many financial services leaders who are now focusing on customer experience as one of their key priorities. Scott highlighted a conversation she had with the head of strategy and innovation of an unnamed top-tier European bank, who said, “Customers expect to have an engaging, straightforward and pleasant interaction with the product—a small and visible part of an iceberg above the water. Yet, it takes an incredible effort behind the scenes to make everything resilient and seamless, which is the portion of the iceberg you can’t see. Never take great customer experience for granted.”
While understanding of the importance of customer experience and the role of digitising customer journeys is increasing, Scott mentioned that the FATCA and CRS compliance area is often lagging behind and still addressed through manual processes – something that is causing frustration to customers and customer service offers alike.
An unnamed strategic investments leader at another top tier institution was quoted by Scott as saying, “Technological advances have accelerated broad-based digitalization efforts across the traditional banking sector but have failed to garner significant traction in areas that are still heavily dependent on legacy processes, none more evident than the manual processing of tax forms.
“Given the associated regulatory risk in the current environment and the expectation to provide clients with a best-in-class digital-based experience, institutions will need to make a decision as to how they will adapt and integrate in order to remain competitive or run the risk of being left with a highly inefficient process that remains a key pain point for their clients.”
The negative impact on customer experience caused by such legacy processes can often go unnoticed by senior management teams, Scott stated. She referenced a quote by another unnamed source, who said, “Senior business leaders often overlook the importance of tax along with all other things that they deem as operational.
“Client experience should be end-to-end, and it doesn’t stop at deal execution level because the frustration often originated from the business enablement teams, and tax elements sit within that. Not completing the tax up-front doesn’t make the issue go away but merely extends the timeframe to a later part where clients may be more annoyed.”
Scott concluded the article by claiming the risks of not tackling this fundamental part of the customer journey are ‘too high to ignore’.
She said, “Frustrated customers give up halfway through their journeys and leave their banks for new competitors, whilst traditional banks suffer from rising costs of compliance through manual processes and regulatory risks soar due to the poor quality of the data collected.”
The full article can be viewed here.
