Martial Chambounaud and Frederic Dalibard: decentralizing customer onboarding
Martial Chambounaud and Frederic Dalibard present Clipeum, a European consortium of financial institutions mutualizing data collection to facilitate the on-boarding of new customers.
Know Your Customer (KYC) requirements are often mentioned as being a major issue for corporate treasurers. Could you explain what are the main problems and what are the hurdles faced by international companies ?
MCH : The first fundamental problem is that each financial institution makes its information requests by itself, bilaterally with any company. This is despite 93% of companies maintaining business relationships with multiple banks and 60% of them working with more than 6 banks. Corporate treasurers are therefore beset by similar requests, questionnaires to fill out, documents to provide – this duplication of disorganized efforts becomes very time-consuming and labour intensive.
What makes this first problem even more painful is that, over the years, some banks have heavily invested to build their own onboarding platforms and digitize the related KYC processes. In doing so, they have shifted part of the burden to treasurers by asking them to fill in the requested information online, to upload the necessary documents, to extract information, etc. From that point on, a treasurer working with 10 banks is exposed to – and has to deal with – 10 proprietary collection channels and/or processes and/or platforms.
FDA : The second problem relates to the asymmetry of information between the bank which collects and consumes the data, and the treasurer who provides the data but does not know where this information goes, nor how it is stored and used. This asymmetry of information –which is also with data providers’ solutions and generates a certain mistrust, which crystallizes on the sharing of sensitive and personal data – which is often missing, or difficult to obtain and granted sparingly by companies.
MCH : The third problem for companies results from banks’ difficulties in collaborating and a lack of clarity in the guidelines issued by regulators. This leads to divergences in interpretation, which result in contradictory requirements for treasurers from their banking partners.
Does it explain why it can take even several months for an initial on-boarding of new customers ? It can be a blocking point when corporations are considering new bank relationships ?
FDA : First and foremost, KYC is a process to gather information to better identify a potential client, protect the economy against identity theft and possible risks of money laundering, fraud and financial crime. It is therefore normal that attention and time is allocated to this process.
That being said, the answer to the question is “yes” – 50 to 60% of the cost and time required to fulfil KYC processes focuses on the first stage of the process, which relates to documentation and data collection. This is generally manual (by email or through proprietary collection channels as mentioned above), iterative and generates multiple interactions between the bank and the company. Sometimes, all in an emergency climate.
MCH : Behind this symptom is the root cause of the extended delay we sometimes see in completing an entire onboarding process: there is a great tension between two conflicting principles – the precautionary principle for banks that pushes them to always ask for more information vs. companies’ "only need to know" protocol that encourages them to provide information sparingly. On one hand banks bear very strong pressure on these compliance matters, which could threaten their reputation and result in significant fines in case of non-compliance. On the other side , there are the companies wishing to maintain control over their data and its use – a principle further encouraged by GDPR requirements.
Could you explain the idea behind your Clipeum concept and who are the institutions behind the project ?
FDA : Clipeum is a European consortium of banks, insurance companies and asset managers (including Société Générale, Natixis, Commerzbank, Euler Hermes and Tikehau Capital) aiming to make the verification of customer identity more efficient through a mutualization of data collection channels from the corporates’ perspective. We all believe that the creation of this financial ecosystem for cooperation in terms of collection and pooling of KYC-related documents can solve many problems – especially in terms of costs, efficiency, risk reduction and corporate treasurers’ frustration.
Clipeum is based on the principles of decentralization and subsidiarity: the company keeps complete control of its information – which is stored in a secure digital data room. This “digital vault” can be hosted wherever the company wishes (on premise or in the cloud). Corporate treasurers manage access rights to the data, meaning that when a bank requests access to a specific set of documents, the treasurer can grant the permissions it sees fit to the requested documents.
Then, banks can carry out their independent process of verification and control of the documents provided. If the treasurer updates the information, all authorized stakeholders are immediately alerted and can access the updated information. This network effect greatly improves the “freshness” of information without any additional effort from either the corporate or the banks.
MCH : At any time, a treasurer wishing to terminate a business relationship with a particular financial institution can decide to revoke access to its information and thus close the flow of information from its data room towards that particular bank.
The architecture of Clipeum relies on the fully decentralized storage of data and documents for the company and the creation of direct bilateral communication channels between banks and companies. It has multiple advantages in terms of security, confidentiality and resilience while avoiding the creation of a "honey pot" situation inherent to centralized solutions which are very attractive for hackers.
Do you think that there is a one-size-fits all solution in terms of KYC which could satisfy all players? What about the smaller companies and mid-caps’ ?
MCH : There are more than 20 million corporates in Europe with very different sizes and needs. We do not think there is a one-size-fits-all solution. Some solutions will naturally focus on very large multinationals, others will be very local – some of them are bank-centric, others are corporate-centric. The market is not yet mature, and the forces involved are still fine-tuning their business models. In this context, we have no need to remind specialists not to put all their eggs in the same basket.
If we consider that we will potentially have several solutions, have you considered the interoperability ? How do you see the KYC solution landscape evolving in the coming years ?
FDA : Interoperability is key for us – it is the foundation of our strategic and technological choices. We are not betting on hegemony but on a market occupied by several complementary players. Therefore, we have made several technological choices to allow interoperability of solutions by design. In turn, we are able to install secure data rooms within other initiatives’ networks that would like to build an international network by collaborating with us.
Could your solution be used for other purposes than pure KYC documents exchanges? And if so which types of documents could be exchanged and with whom? Only the financial institutions or other stakeholders ?
MCH : We are building a network which puts corporates at the heart of the platform. So, it is natural that companies could use this network for their own data collection needs. For instance, they could collect data from their suppliers (Know Your Supplier), share their data with rating agencies and Legal Entity Identifier (LEI) issuers, among others.
The business model is very simple – using the Clipeum network to share data is free, using it to collect data has a cost. From there, everything is possible if the information provider sets the rules of the game. We believe in an open-source network where value can be brought by our partners and members of the network – this is why Clipeum must be as inclusive and open as possible.
FDA : Welcome onboard!
Frederic Dalibard, Natixis (BPCE Group)
After starting his career in 1998 as a consultant with Arthur Andersen Management, Fred occupied several positions within Natixis, mostly in Front Office and Quantitative roles, first in New York from 2004 until 2009, and then in Paris, dealing with Structured Credit Assets and also Financing assets. Fred has occupied the position of Head of Digital for Natixis’ Corporate and Investment Banking activities since March 2015. Fred has been representing Natixis at the Board of Director of R3 since April 2017 and is currently the Chairman of the Board, position he has been holding since march 2018. Fred is also representing Natixis at the Board of Director of komgo, position he has been holding since August 2018.
Martial Chambounaud, Société Générale
After starting his career as a Business Relationship Manager on the small corporate segment in a large French Bank, Martial Chambounaud was responsible for strategic marketing and then for a Data and Analytics department (Datalab of Société Générale Insurance).
Martial is Product Owner of Clipeum, a consortium of banks, asset managers and insurers built to rationalize and pool the collection of documents from corporate for compliance issues.