First-wave onboarding technology struggled to keep pace with the needs of the sell side and buy side, but a second wave is now poised to deliver true digital transformation. 

Few financial processes are in greater need of digital transformation than onboarding, where regulatory reform and growing transaction volumes have pushed onboarding teams to breaking point.

Yet that transformational potential has taken time to emerge. A lack of bandwidth among onboarding teams, a lack of buy-in at the organizational level and a lack of cohesion and maturity in the onboarding technology landscape have left many teams clinging to emails and spreadsheets to manage the workflow.

But in 2020, we have reached the tipping point. Onboarding teams are making time to explore their technology options, empowered by a leadership that recognizes the importance of onboarding as a key customer touchpoint and competitive advantage.

At the same time, the technology itself has matured, with a small group of dedicated, top-tier solution providers emerging from a previously fragmented and uncertain vendor landscape.

According to a report by Aite, global IT spend on client lifecycle management solutions will grow by an estimated 60 percent between 2018 and 2022.

Where will onboarding professionals focus their attentions as they explore and evaluate next-generation solutions? SIFMA Asset Management Group and IHS Markit recently reached out to a group of onboarding professionals to find out. We conducted a series of interviews to explore the challenges that onboarding teams expect technology to address and the priorities they have set for technology adoption and digital transformation in their organization.

End-to-end solutions

Many of the onboarding professionals interviewed had plans to take a holistic approach to functional improvement rather than implementing point solutions to alleviate specific issues. In fact, they are looking to technology to help them facilitate a seamless workflow across every onboarding and offboarding function.

This commitment to holistic onboarding has many teams planning to adopt technologies that will make onboarding a truly data-driven and client-centric function. Several respondents described their upcoming technology initiatives and plans in terms of a digital transformation.

"I think we have a big opportunity to not only focus on onboarding, but also the offboarding and everything that happens in between."

"The focus on onboarding is part of a broader digital transformation project that spans the company's operational infrastructure."

Efficiency and scale

Given the urgent issues of scale that virtually every onboarding team faces, it's little surprise that technologies that automate and streamline the workflow top the list of priorities. The need to manage a growing volume of work as well as the pressure to increase speed to revenue and improve the customer experience are all challenges that the next wave of onboarding technologies is designed to solve, including workflow automation and document digitization. Next-generation technologies such as robotic process automation (RPA) are also already on the radar for many of the professionals we spoke to.

"We want to have a lot more data straight-through processing and use machine learning. Within five years, we'll definitely have an automated process and the ability to go a lot faster."

"We have asked ourselves: 'Do we really need to have this inbox where we have to answer these very straightforward questions? Or can a robot answer 95 percent of those questions and we just get the 5 percent that are a little more complicated?"

"Ideally, the only things we'll need humans or SMEs to do is to solve for a lot of the new regulations or changes in regulation that will continue to come out."

Consolidation and coordination

Technology holds great promise for consolidating and normalizing data and coordinating market participants—including brokers, custodians, corporates, fund admins, managers and service providers—each of which contributes data and actions required to drive onboarding forward.   

One of the most exciting developments that next-generation onboarding platforms have made possible is the creation of a digital institutional identity. Shifting the data from its analog state, distributed across documents, external applications and spreadsheets, into a single, digitized source has the potential to dramatically reduce the number of redundant information requests as well as enable teams to maintain cleaner records and minimize the risk of privacy breaches. It's also a prerequisite for building a truly customer-centric onboarding process that delivers a qualitatively better customer experience.  

There was general agreement among the interviewees that the industry is heading towards greater collaboration and resource-sharing. For many, the ultimate goal is to create a single, integrated workflow that coordinates all participants across the full onboarding lifecycle and uses digital identities to streamline processes and eliminate wasteful repetition and delays. 

"If you've got the underlying client inputting the various pieces of information—such as their LEI, regulatory disclosures, and custodian information—into a utility, you've got a golden source that everyone can feed off."

"It would be good to have an industry utility where more of that data is essentially available or where we share information a bit more openly to streamline the process." 

"If the sell side, buy side, custodians and agents all used the same form and referenced the same account number, life would be so much easier."

Transparency and analytics 

Digitizing the onboarding process not only holds the promise of optimizing efficiency and increasing speed to revenue, but also bringing much-needed transparency to a process that has historically been frustratingly opaque.

Greater visibility into the process accomplishes a number of goals. Perhaps most critically, it reduces the volume of communications that onboarding teams are currently forced to maintain with external and internal stakeholders.  

In addition, to keeping the onboarding team itself up to date, digitizing the workflow can also help the team empower internal and external stakeholders to "self serve" when they need a status update.

Beyond streamlining communications and workflow, enhancing transparency within the system also offers an unprecedented opportunity to measure, analyze and improve onboarding processes. Shifting those processes from inboxes and spreadsheets to a centralized, digital repository and workflow allows teams to identify and address bottlenecks, set benchmarks across transaction time, jurisdiction, client type and client and use those metrics to improve performance.

"We want to be able to automate and manage the onboarding, see the different pieces of it that are going out to the different teams, set up guidelines or set up benchmarks, and run that as the onboarding dashboard. That would give us a far better sense of how things are working and how they could work better." 

"As the technology evolves around onboarding data and especially around counterparties, and we're able to get more disciplined in our ability to measure the service level, I think we're probably in a better position to say, 'You know what? We're not going to route business this way. We're going to route it this way.' It becomes more of a substantive measure in terms of how business is being allocated."

"The key business priority is to gain more transparency. We are working on an equity solution that is more robust in providing the front office with transparency into all those things that are being requested of the onboarding team."

Embracing onboarding's second wave

As onboarding technology matures, buy-side and sell-side onboarding teams are more optimistic and more ambitious than ever in their approach to technology adoption. After years of making do with fragmented point solutions or, in the worst-case scenario, relying solely on email and spreadsheets to manage increasingly complex workflows, today's onboarding teams are ready to invest in next-generation onboarding platforms that offer end-to-end workflow capabilities, process automation and deeper analytic insight. And as the onboarding function undergoes a digital transformation, the industry grows that much closer to the adoption of a digital institutional identity that could herald a new age of coordination and collaboration among all stakeholders.