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The Modern Hurdles Of Corporate Banking Compliance

Corporations aren’t entirely satisfied with their banks, and are demanding more sophisticated services to meet their international needs. It’s a conclusion reached by Pegasystems in its latest research, but the cloud-based enterprise app developer isn’t the first company to make this finding (nor will it be the last).

But according to Pegasystems, the driving force behind corporate dissatisfaction with banks and their need for modern digital banking tools is a pain point that is far from novel: regulatory compliance.

Fresh from the annual Sibos financial services conference held in Singapore, Pegasystems’ Reetu Khosla, Senior Director of Risk, Compliance, and Onboarding, discussed with PYMNTS how regulation is, in many ways, carving out the path large banks are taking to adopt new technologies and meet the needs of their large, multinational corporate clients.

“One of the key themes we heard at Sibos is how banks are transforming their onboarding and client lifecycle management strategies not only to stay competitive, but also to be able to onboard around global KYC and still place their customer at the center of their interactions,” Khosla said.

KYC (or Know Your Customer), is a hot area of banking regulation that requires banks to identify their clients’ identities in an effort to curb identity theft, money laundering and other bank-related crime.

Pegasystems is often at the front of this space as a developer of customer relationship management tools. Khosla explained that as major banks continue to explore how technology can ease the already complex task of corporate client onboarding – made even more complicated as corporations demand multijurisdictional services – they are also tasked with keeping pace with KYC and the rest of the ever-changing regulatory landscape.

For corporations that operate in dozens of countries – sometimes up to 80, Khosla said – banks can be challenged to meet their clients’ international needs.

“What large corporates are looking for is they want to be able to streamline their interactions globally,” she said. “They want to do business in New York and Hong Kong and London, all in a streamlined way.”

[bctt tweet="'What large corporates are looking for is to be able to streamline their interactions globally'"]

These demands are forcing banks to look at technology as a way to not only facilitate, for example, their client's need to trade in Hong Kong and have an account in London, but also to meet the regulatory demands in each of these jurisdictions. The banks able to accomplish this, Khosla added, will have the competitive edge over their rivals.

Modern Hurdles

For banks and businesses alike, the struggle to maintain regulatory compliance has always been a priority. But corporations’ ever-more global reach means banks must manage these regulations across jurisdiction. And today, it must be done while keeping up with clients’ very modern requirements.

“We’re less patient than we were 20 years ago,” Khosla said, adding that corporate customers using iPhones and iPads and laptops are demanding to know where they are on the onboarding process with a bank. They want greater transparency, and they want it faster than ever before.

“Before, even just five years ago, a corporation expected a transaction to take a long time. You waited patiently,” she explained. “And now, the customer wants to be able to call and say, ‘OK, where are we stuck?’ The relationship manager wants to be able to transact, and you can’t transact until due diligence is complete. And they want to be able to see all of this on a mobile device or laptop.”

This means innovators are developing their technologies and programs around this “digital transformation” of corporate banking customers, said Khosla, while banks are themselves trying to use these innovations to keep up with demand, regulation and putting the client front-and-center.

“All of these things really go hand in hand,” she said. “What they’re saying is, ‘we need to put the customer in the center, and then we need to look at how we streamline services’ – all while meeting the complex rules and regulatory requirements.”

[bctt tweet="Banks need to put the customer in the center and look at how they streamline services"]

Testing The Waters

Major global banks can sometimes have a reputation for being slow to adopt new innovations. But Khosla argues that banks are generally very interested in emerging technologies, in large part because they know these tools can help them meet global regulatory demands.

But, she says, their interest in many technologies is “exploratory.”

“It’s obvious they would want to invest in more technology and be able to explore what its impact would be on their organization,” she said. But before these technologies can actually be implanted into the banking system, the industry needs to first work out the kinks.

“Banks want to know what the best practices are to approach this technology, and how it will impact their client lifecycle management, streamlining front office to back office, and being able to do things like digital approvals,” Khosla stated. “But also, to drive the right due diligence rules at the right time. The pragmatic question is always, ‘How do you implement these technologies?’”

What banks do know is that as regulation becomes more complex, technology becomes more sophisticated, and thus can help institutions more easily adjust their services to meet compliance standards.

“Now banks are saying, ‘We need to have technology that can scale, that’s very flexible, and that can make changes in minutes without impacting the onboarding time,’” Khosla said. “We need to make changes quickly to stay pace with regulatory change.”

According to Khosla, it’s the banks that can adapt and implement new technologies for their customers, and use that technology to stay compliant globally, that will come out on top.

“The bottom line, beyond customer centricity and staying competitive, is that the fines are significant and the risk is very high for not being compliant,” Khosla said. “How do you take that problem of very complex, rapidly evolving regulation and turn it into someone’s competitive advantage? That’s what the large, global, innovative banks are doing.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.