The Top 5 Technologies for Enabling Due Diligence Automation in 2024
What makes a customer due diligence process truly great in the modern finance era?
Like all aspects of the industry, customer due diligence has experienced impactful changes thanks to technological developments. Though cumbersome manual processes once dominated the CDD process, digital innovation has paved the way for a more seamless and streamlined approach.
As we near the end of 2023, the time is now for banks and other financial institutions to consider how AI technology can help improve their customer due diligence automation processes.
With the right strategy and tools, your organization can transform the tedious CDD process into a simplified and automated system. Discover the full capabilities of our generative AI adoption for CDD process.
Why Customer Due Diligence Processes Need an Upgrade
Over the past decade, IT in the financial services sector has evolved significantly.
Today’s CIOs are met with a slew of responsibilities when it comes to customer due diligence, or CDD for short. Not only must IT leaders ensure that their organizations have the necessary digital infrastructure to remain competitive, but also that their systems align with current CDD standards.
Some of the top tech-based challenges within the CDD process today include:
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Data Collection & Aggregation:
Traditional due diligence involves gathering data from various sources, often in disparate formats. Upgrading your Customer Due Diligence automation could streamline this process by employing AI and machine learning algorithms to automate data collection and aggregation from multiple sources while ensuring accuracy and consistency.
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Identify Verification:
Keeping up with growing pools of customers requires far greater speed in the onboarding and identity verification processes. Implementing automated and AI-powered identity verification systems can enhance the accuracy and security of CDD processes, making your CDD system more robust and less prone to identity fraud.
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Risk Monitoring:
The digital risks of CDD only grow more complex by the day. Predictive AI analytics and Big Data analysis can significantly improve your risk assessment and monitoring process. These technologies can detect unusual patterns and provide continuous monitoring for early detection of potential issues.
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Customer Profiling:
No two customers are the same, making it necessary for modern organizations to develop dynamic and adaptable customer profiles. Advanced analytics can provide a more comprehensive understanding of customer behavior, preferences, and risk profiles, all while enabling your organization to gather this information automatically.
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Reducing False Positives:
False positives can be a major hassle to deal with and can significantly impact your bottom line when encountered too frequently in the CDD process. Upgrades in machine learning models and data analysis can reduce the number of false positives, making the due diligence process more efficient by focusing on truly high-risk cases.
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Regulatory Compliance:
Compliance checks in line with ever-changing regulations can be better managed through technology. By integrating regulatory databases, utilizing natural language processing (NLP), and adopting innovative technologies like generative AI, your systems can stay automatically updated and ensure ongoing compliance checks in real-time.
The Top 5 Technologies Reshaping Customer Due Diligence Today
The times of manual customer due diligence have come and gone — to excel at CDD in today’s climate, your organization needs a streamlined and automated approach.
Let’s take a look at the top five technologies simplifying customer due diligence automation:
1. Generative AI
Artificial intelligence (AI) has been at the top of FinTech-savvy CDD processes for a few years now. AI continues to evolve at one of the most rapid rates among recent technological advancements, and keeping up with innovation is essential for further optimizing CDD.
Generative AI is the latest development in AI to make major waves across nearly all industries. Generative AI makes greater use of Large Language Models (LLMs) that can perform a wider range of natural language processing (NLP) tasks, including but not limited to:
- Generating text, visual, audio, video, and code-based content
- Summarizing large datasets into digestible insights
- Simplifying translation and other international communication processes
According to one McKinsey report published in May 2023, an “entire value chain is emerging” to help support the training, development, and utilization of generative AI. In particular, McKinsey notes that specialized hardware and cloud-based platforms offer the capabilities and computing power necessary to train and manage generative AI models.
From a due diligence perspective, generative AI presents an enormous opportunity to increase the overall efficiency of CDD processes without compromising security or accuracy. Generative AI models can help CDD teams gather and analyze customer data quicker.
In addition, generative AI can extract meaningful insights from that data to help inform and improve decision-making processes.
2. Cloud-Native Applications
Cloud-native platforms and applications have undoubtedly a major role to play in the optimization of CDD processes in the coming years.
Through cloud-native product and application development, organizations can achieve resilient technology strategies that can quickly scale alongside a growing business. Moreover, cloud-native platforms are vital for enabling AI-powered applications, such as generative AI models that help gather, manage, and analyze crucial customer data.
Along with improving overall scalability and flexibility, cloud-native applications and platforms also provide the following benefits to customer due diligence automation processes:
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Increased Data Accessibility:
Cloud-native applications provide powerful tools for processing, storing, and analyzing data. In turn, organizations have better access to data for completing crucial due diligence automation tasks. By developing cloud-native applications, your organization can efficiently access large volumes of customer data for risk assessment and compliance purposes.
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Boosted Cost Efficiency:
Unlike legacy applications that require substantial efforts to develop and maintain, cloud-native applications are far more scalable. As a result, you can optimize your operational costs by only paying for the resources and storage your business currently needs, and scaling resources up or down according to current demand.
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Greater Integration Capabilities:
When compared to legacy applications, cloud-native applications are much simpler to integrate with your digital platform and other tools and services. This enables seamless collaboration between your due diligence teams by allowing easy access to external data sources.
3. Advanced Analytics
As customer pools continue to grow larger and more digitally adept, modern organizations need the right mix of tools and resources to perform advanced analytics.
In the due diligence automation process, advanced analytics use AI and machine learning (ML) models to identify new opportunities in enterprise data. Your organization can leverage advanced analytics to produce improved visualizations, dashboards, and intelligence reports that enhance decision-making processes.
Beyond decision-making processes, advanced analytics are also beneficial for improving fraud detection, boosting customer screening efficiency, and staying ahead of regulatory compliance.
4. Platform Modernization
Platform modernization has become a necessity in today’s digitally-oriented industries.
For the financial services sector especially, platform modernization is crucial for adopting innovative and cloud-native solutions. Without updating older legacy systems, your organization may find it very difficult to take advantage of key tools like cloud-native applications and generative AI.
Depending on the current digital status of your business systems, your platform modernization strategy may be more, or less, complex. If your organization is still in the midst of developing such a strategy, important components to consider include:
- Designing a modernization strategy that addresses scalability, security, cost, and quality
- Transforming your organizational culture to improve efficiencies and control risk
- Identifying which existing applications can be integrated into a new platform versus which applications must be immediately modernized and re-coded as cloud-native applications
5. Enhanced Security & Data Privacy
Increasing amounts of customer data equate to increased security risks — especially as the digital channels through which customers access products and services continue to evolve.
Oftentimes, increased security and data privacy risks can be linked to outdated or poorly managed digital infrastructure. Without the right tools in place to help your organization deal with large datasets, completing customer due diligence automation efficiently and securely can be a real headache.
As more innovative technologies such as generative AI are introduced to the Customer Due Diligence automation space, organizations need to take more care than ever when following data privacy best practices.
For many organizations, dealing with the heightening burden of security and data privacy in Customer Due Diligence automation processes requires finding the right third-party partner. When looking for such a partner, crucial solutions to look for in data privacy services include:
- Development of a comprehensive privacy program
- Assessment and implementation of the latest regulatory changes
- Consent management for customer and business data
The Talent Risk: How a Lack of Talent Increases the Risks of CDD Processes
As CDD processes become more tech-based and innovative — and as fraudsters and bad actors adapt to these digital advancements — finding the right ways to optimize risk management is vital.
While organizations may understand the risks associated with modern CDD processes, many fall short when searching for adequate talent to meet today’s CDD needs.
According to the second edition of Deloitte’s State of AI in the Enterprise, 68% of executive respondents report a moderate to extreme skill gap in their team’s AI skills. The Deloitte report also found that companies experienced the most prominent gaps with the following skills:
- AI researchers (30%)
- Software developers (28%)
- Data scientists (25%)
- Project managers (23%)
Additionally, companies revealed a significant need for talent in AI translation roles, including business leaders, change management experts, user experience designers, and subject-matter experts.
What this need for talent ultimately reveals is that modern organizations must find the right partnerships to rely on. With the right technology provider, your organization can establish a comprehensive Customer Due Diligence automation strategy that addresses digital risks, reduces manual effort, and boosts overall efficiency.
Harness the Power of Exadel’s Generative AI for Customer Due Diligence Automation
Overcoming the modern challenges of customer due diligence automation requires modern solutions.
At Exadel, we leverage the latest innovative technologies to improve your CDD processes and ensure total optimization. Exadel’s recent developments in AI have resulted in powerful Generative AI capabilities that provide your organization with the ability to streamline Customer Due Diligence automation by:
- Quickly validating data quality through AI-enhanced cross-referencing
- Keeping up to date on the latest regulatory changes to ensure total compliance
- Improving risk assessment processes by identifying high-risk customers
- Limiting the occurrence of false positives
Exadel’s Generative AI consulting and development services are designed with the nuanced needs of the financial and banking sector in mind.
Our solution enhances your existing CDD system by replacing the existing NLP with Generative AI, all while remaining compliant with relevant data privacy and security regulations. With the help of our solution, your organization can cut down on the need for manual effort and human due diligence checkers, allowing your overall automation ratio and customer due diligence efficiency to increase.
Additionally, the limitation of manual effort in the CDD process ensures fewer human errors and reduces the need for people from different departments to be involved.
With our deep industry experience and extensive data privacy expertise, Exadel has the talent and resources your organization needs to take full advantage of Generative AI in the customer due diligence automation process.
Exadel also offers a variety of managed services and technology solutions to provide your business with the end-to-end support it needs, such as:
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AI-Powered Applications:
We help you drive value by embedding AI into core products and processes. With Exadel’s expertise, you can efficiently run, scale, and manage AI within your operational systems, development environments, and digital platforms.
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Cloud-Native Product Development:
Finding expert cloud-native developers is crucial for creating a modern digital infrastructure. We aid you in cloud-native development with unique technology strategies and scalable solutions designed for your exact needs.
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Advanced Analytics:
Keeping up with growing datasets and customer pools requires an advanced approach to analytics. Exadel’s advanced analytics capabilities utilize the top technologies and tools to provide you with seamless and actionable business insights.
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Platform Modernization:
If your organization is stuck on modernization, Exadel is here to help. After thoroughly assessing your current infrastructure and systems, Exadel can guide you through the platform modernization process, ensuring all new technologies and tools are tailored to meet your unique business use cases.
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Data Privacy:
Don’t let modern fraudsters and evolving regulations get the best of your organization. Through partnership with Exadel, we can help you establish a comprehensive privacy program, as well as establish and run corporate governance.
Find out why Exadel is the key to becoming the digital leader of tomorrow — get in touch with our AI team today to discover the full capabilities of our generative AI solution.
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