Straight-through processing – the 15 second advantage
March 18, 2013
Have you ever wondered what straight-through processing is? It’s a business process type that financial institutions employ to improve the customer experience while reducing it’s cost. Straight-through processing (STP) is the name of a business process automated by technology. End-to-end automation saves and shares information within an organization so that it only needs to be entered manually once, often by the customers themselves. It is then stored, retrieved, and reused throughout a business’s processes. The goal of STP is to reduce redundancy, error, and to speed up processing time. The most common ways financial institutions use STP is to process loan applications, payment transactions, capital market trade processes and employee onboarding. One obvious but underutilized area for STP is customer onboarding. If you are a leader at a payment processor, consider what STP could do for your onboarding process.
Today, onboarding with most payment processors requires filling out pages of application forms and waiting up to three weeks for approval. But the technology exists to shorten that timeframe to as little as fifteen seconds. Even complex tasks like identity verification can be automated. Once an application is submitted electronically, software can search and retrieve the applicant’s credit history in real time to provide instant identity validation. Once completed, the information will be stored for future use so the customers or employees don’t have to re-enter the same data again. In fifteen short seconds a new customer can start processing payment, instead of waiting for weeks.
What are the benefits of using STP in the customer onboarding process?
There are many benefits of using STP in onboarding. Financial institutions can process higher volume of new applicants with greater accuracy and faster results, which provides rapid scalability. Traditional onboarding is limited by the amount of resource dedicated to the onboarding process, such as the number of employees. STP removes that limitation. Take Square as an example: within three years of launch, they are now processing $10 billion worth of transactions annually. It would be extremely difficult for Square to grow that fast without an automated onboarding system.
STP enhances internal collaboration and communication, because information is stored in one location and is easily accessible. As a result, the amount of operational risk and data errors is reduced. STP also creates opportunity for cross-selling. Smart processing applications can systematically detect products a new customer could be interested in using the information provided. If the customer expresses interest, sign-up is a seamless process because the majority of the information required is already stored.
Financial institutions need to see the value of implementing STP in customer onboarding. Be more competitive and responsive than the competition. Think about this from the customers’ point of view: between a bank that takes three weeks to process your application, and one that takes fifteen seconds, which one would you choose?