New account opening

From Wikipedia, the free encyclopedia

Here is a step-by-step introduction to New Account Opening, presenting the main terms and explaining why the process is so complex that financial services organizations are starting to focus on it with technology solutions.

New Account Opening for financial services is a broad and rapidly evolving topic, covering a range of business, financial and technical issues.

This definition is a work in progress... While this is happening, feel free to use the external links to find more information from the associations, information sources and vendors.

Contents 1 New Account Opening Scope 1.1 Account 1.2 Account Opening 1.3 New Account Opening 2 Business 2.1 Applicability to financial services 3 Key issues 3.1 Business Challenges 3.2 Process Complexity 3.3 Regulatory Issues 4 Business Partners 4.1 Customer information, privacy and retention 4.2 Business processes across business partners 4.3 Role of the Producer 4.4 Role of the Broker/Dealer 4.5 Role of the Carrier 5 Customer 5.1 Customer view of the process 5.2 Satisfaction 5.3 Outcome 6 Information Technology 6.1 Straight-Through Processing 6.2 Decisions and Rules 6.3 Business Process Management 6.4 Electronic Forms 6.5 Integration 6.6 Document and Records Management 6.7 Electronic Signatures 7 Summary 8 Related Areas 9 Professional Organizations 10 Related Blogs

[edit] New Account Opening Scope

[edit] Account

Everybody is familiar with a bank account as the way that your bank manages your details, the services they provide you, your rights and obligations, the transactions performed and your funds. The term Account can be applied to a customer relationship with any financial services organization for almost any type of service, including: insurance products, brokerage services, mutual funds, annuities, etc.

[edit] Account Opening

Account Opening is the process that a financial services organization goes through to set up an account offering a new service or financial product for a customer. For some products this can be a straight-forward process, especially if the customer currently has a relationship with the organization and the value of the product is relatively low - the account can be funded by the customer easily and the organization can set up the account and link it to the current customer details they already have.

[edit] New Account Opening

Opening an account for a new customer who currently does not have a relationship with a financial services organization is a more difficult process, even for relatively low value products, and increases in difficulty to match the value and complexity of the product. New Account Opening is the process that the financial services organization uses to handle the potential new customer, from the point of the customer submitting an application through to the organization creating the account and issuing a Welcome Package to the customer.

[edit] Business

[edit] Applicability to financial services

All financial institutions require account opening procedures to cover the multiple operational and compliance requirements of account opening. Compliance, fraud and credit risk set many of the internal controls and processes that must be performed. This is implicitly linked to the complexity of the products offered, so more complex products that are considered high-risk or are created out of multiple components will require more detailed and effective business processes.

Annuity (US financial products) are complex financial products for standard consumers, due to their high value and compound nature. They are also high underdeveloped in the processing of new accounts, using highly paper driven applications and processes, and little formalized messaging between the business partners. The National Association for Variable Annuities (NAVA) [1] is concentrating on the new account opening problem as their main priority in 2006.

[edit] Key issues

[edit] Business Challenges

Traditionally New Account Opening has been a very paper-intensive process, and even online accounts struggle to avoid this. Combine this with the fact that many organizations run this process largely manually and you can see that there is a great potential for errors and inconsistencies to be introduced. This can lead to:

• Low customer satisfaction
• Customers abandoning the application process
• Regulatory fines
• Lawsuits for accounts managed incorrectly due to inaccurate information
• Damage to brand

[edit] Process Complexity

The process is complex due to the fact that at the outset (the point of application) the financial services organization has little or no reliable information about the customer. The process controls the collection of that information to satisfy many financial and regulatory requirements, including:

• Collecting and validating customer details, identity, etc
• Generating a profile of the customer appropriate to the product being offered, such as credit history, employment, etc
• Assessing the suitability of the type of product or products being offered
• Completing anti-money laundering (AML) risk ranking and other AML program tasks
• Funding the account
• Generating business system accounts and records
• Fulfilling the process with a Welcome Package to the customer

The process can be significantly more complex when the product being offered is composed of products and services from multiple business partners and offered by a third-party sales agent. Annuities are one example, where the product consists of combined securities and insurance products in a complete annuity wrapper. The communication of customer information, ensuring suitability and enabling trust required between organizations are big challenges.

[edit] Regulatory Issues

Regulatory issues add complexity to the process, with the requirements of the individual regulators for each type of financial organization, coupled with the legal requirements of the Bank Secrecy Act (BSA) and USA PATRIOT Act, especially around anti-money laundering (AML).

[edit] Business Partners

[edit] Customer information, privacy and retention

[edit] Business processes across business partners

[edit] Role of the Producer

Agent (economics)

[edit] Role of the Broker/Dealer

Broker-dealer

[edit] Role of the Carrier

[edit] Customer

[edit] Customer view of the process

[edit] Satisfaction

[edit] Outcome

[edit] Information Technology

[edit] Straight-Through Processing

Straight Through Processing - STP

[edit] Decisions and Rules

Enterprise Decision Management

Business rules engine

[edit] Business Process Management

Business Process Management

[edit] Electronic Forms

Need to find the correct term

[edit] Integration

Enterprise application integration

[edit] Document and Records Management

Electronic document management system

Records Management

EDRMS

[edit] Electronic Signatures

E-Sign and UETA are primary sources of reference. See also a background article, which although not fully authoritative, provides a good source of reference and links for further investigation: [2] and [3]

[edit] Summary

[edit] Related Areas

Loan origination

Business Process Management

[edit] Professional Organizations

NAVA [4]

ACORD [5]

LOMA [6]

SEC [7]

[edit] Related Blogs

Andera CEO Blog [8]

Bankwatch [9]

Enterprise Decision Management [10]

Improving New Account Opening [11]