Key Questions to Ask When Investing in a Client Onboarding Solution to get it right first time

30 years ago, financial services built everything in-house. Nowadays, with so many off the shelf software products for trading and transaction systems – accounting, HR, CRM to name a few – the challenge now is which vendor to select.

In the words of Tony Soprano, “Believe none of what you hear and half of what you see.” When it comes to investing in new KYC & CLM solutions should we be taking a leaf out of Mr Soprano’s book? When seeking a new vendor, the following questions should be kept front of mind to guarantee you are choosing the right technology partner to meet your specific needs and that they aren’t pulling the wool over your eyes.

Question one: “What am I being shown? Is it part of the core offering or is it ‘art of the possible’?” 

When a vendor shows off fancy looking charts it is important to check if it is part of the current version. Ask for references and make sure the vendor clarifies when a particular feature was added to their core software. Where is the feature implemented for clients – is it in their sandbox only? Is it a production instance? How many existing customers are currently using it live in production?

If the vendor responds saying a feature being demonstrated will be in the next cycle of releases that should raise alarm bells.

Question two: “Is the software demo you are being shown actually live?”

It is inevitable that salespeople will try and show off the top capabilities of their software that they want prospects to see. That is why it is so important to check if you are being shown software that is active, in the cloud or local laptop install etc., to ensure it is the software being run in reality. Some vendors have been known to try and win business using videos, clickthroughs, wireframes and sometimes even images to simulate a dashboard or report. To avoid falling into this trap, always ask for them to change a data point in front of you to ensure the live data updates accordingly.

Question three: “In your independently audited financial statement, what percentage of revenue is from licence and what is from implementation services?”

Before forking out huge amounts of investment, establishing the true cost of ownership is imperative. You need to make sure that the vendor you are talking to is in the business of software and not implementation services.

Question four: “How does the software integrate into other vendors, or members of the KYC ecosystem?”

For the integration that you and your teams require to best reflect your current onboarding process, does the vendor really have access to all the data providers they claim to offer out of the box?

Going back to question three, it is important to understand whether building out the required integrations would be an additional unforeseen cost.

Question five: “How many regulations are currently covered AND in use – and by how many live clients?”

As with any financial software, compliance is critical. If the technology does not meet regulatory requirements, then businesses run the risk of huge fines or legal action. Therefore, claims of a community approach to regulations, or a substantial regulatory specialist team must be verified.

As well as asking the question above, checking with them how many staff are dedicated to regulations and asking for their CVs will give you that validation. It is also good to know whether they receive any outside counsel – legal and/or regulatory – to confirm compliance with legislation. If they are simply the middleman for gathering regulatory rules from clients and repurposing them as sales material, how trustworthy can they truly be? Can you actually rely on their rules analysis or are you assuming that another client’s interpretation of a certain regulation is sufficient to meet your needs also? If not, then you will just be redoing doing all your work by having to verify what they are putting in the software, and inadvertently giving away your regulatory analysis to potential competitors.

Question six: “How many clients are currently using the version of the software that you are intending to purchase?”

If the vendor is claiming 100 clients split across contracted, live and legacy, it’s important to know how many clients are currently using the version of the software that you are intending to purchase. It’s irrelevant if they have 100 clients if half or more are signed up to a legacy release. Or, if they do still have that many live customers, it’s worth getting the vendor to verify that their revenues match up in their audited financials. If they are private or venture backed company, you need to be confident that they are profitable enough to still be around three to five years from now for future support.

Question seven: “How many staff do they have per department in each region?”

This question will be more to verify the vendor’s claims or credibility in the AML domain. By getting an understanding of their employee breakdown, for example, how many are double jobbing, as well as how staffing numbers equate to revenues, and charging for license vs. consulting services, you can get a feel for whether they are a reputable vendor, in client onboarding and KYC.

Question eight: “How vertically integrated are you? Do you develop your own software, or do you rely on third party software to develop and deploy it?”

If the vendor is reliant on third party providers, the natural question is what costs (if any) are needed to be passed through for license use. However, if they are selling open source software and there are no costs involved, you need to understand how long that technology will be supported for. If a change in underlying technology is necessary, will your purchased version of the software be upgraded for free? Or will you be forced to pay for an upgrade to stay current, because new features rely on new third party software and will not be made backwards compatible?

Question nine: “How does the software fit into the rest of my lifecycle”

Once you have found the perfect client onboarding solution, what’s next? Is the software going to allow you to stay agile or pivot should anything unexpected occur? To guarantee it is future-proof you need to make sure the solution will seamlessly support the customer journey from the initial onboarding stage, right through to additional services such as new products, jurisdictions, and additional lines of business. Whether it will allow for re-use of customer data, and its ability to help with a reduction in client outreach are other important considerations. Finally, looking at whether economies of scale, such as straight through processing can really be achieved and how, will also make sure the software truly lasts.

By following these recommendations, organisations can be sure that they select a vendor who will suit their requirements and stand the test of time. Investing in technology that is flexible and allows quick and easy updates enables them to build for change.

As we have all recently experienced our world can quickly transform, so having a vendor that can accommodate for future unknowns will help make sure any investment goes a long way.