How Banks Can Balance Compliance with Building Customer Trust

During the recent Financial Times Global Banking Summit, it was striking how many discussions involved customer trust and regulatory burdens.

With banking leaders forced to spend most of their time on risk management and compliance, it can be frustrating to see how little time is left over. Banks are well aware of the benefits in modernising core banking and payments infrastructure, digitising the supply chain, and trialling new technologies. But time is in short supply.

So, let’s look at our biggest takeaways from the event, and how banks can improve operational efficiency and budget outlay around compliance and building customer trust.

The Operational Weight of Regulation

Regulatory compliance in banking can be frustrating on two levels. One, the complexity and interrelated nature of these frameworks consume up to 60-70% of senior leaders’ time. Two, the regulations keep changing.

As Charlie Nunn, CEO at Lloyds, pointed out at the event, the recent court ruling around auto financing could drain £16 billion from UK lenders. In fact, banks are already provisioning funds. However, the High Court decision seems contrary to the current regulatory set-up.

When you have courts and regulators taking a different view of the market, it’s difficult to build strategies that will stand the test of time. Banks are hardy. They can adapt to any given regulation in time, but if the rules keep changing, banks have to start from square one every time.

This idea was echoed by César González-Bueno Mayer at Banco Sabadell, who remarked that excessive regulatory requirements can make it difficult to trial new technologies or stay agile to adapt to the latest market moves.

While you can’t control regulation, you can ensure you’re in the best shape to comply with whatever comes next. That starts with core modernisation, compliance automation, and process optimisation. If you get those right, you can reduce the cost pressure and free up your leaders to focus on innovative projects.

We’ve got plenty of experience helping banks through this journey. For example, our Dolffia platform automated the extraction of information from notarial deeds for a major Spanish banking group, reducing processing time by 50% and costs by approximately 30%.

Trust as a Strategic Priority

Trust was the number one most repeated word at the FT Banking Summit.

In 2023, £1.17bn was stolen through fraud, while - according to UK Finance - 73% of UK adults are afraid of falling victim to a bank impersonation scam.[i]

Customers are more aware of fraud-related risks than they’ve ever been. They’re also more likely to take data breaches from an FI (financial institution) into their borrowing or banking decisions. As a result, banks are trying to reassure customers that they can be trusted with their money and personal data.

Risk management is the other side of the coin when it comes to big issues holding banking leaders back from innovation. When you’re spending more time each year on fraud prevention and toughening your security posture, where does the time go for exciting new initiatives and proofs-of-concept?

As Tal Cohen, President at Nasdaq, said, trust and integrity play a huge part in the industry, and fraud is a problem we all share and have to fix together. We heard about companies like Monzo doing some interesting things with its in-house-developed tech stack and proactive approach to fighting impersonation fraud. C.S. Venkatakrishnan at Barclay’s also made some great points about asset concentration in a single segment of the system and how to carefully select clients to mitigate exposure.

Fundamentally, though, the challenge is similar for everybody. How can I innovate and get ahead when risk management consumes all my time?

We recently partnered with Lynx Tech to help banks use AI to identify suspicious activity accurately while minimising customer disruption. If you want to learn more about this solution, click here.

Balancing Innovation and Risk

Compliance and risk management don’t have to come at the cost of innovation. In fact, the most effective solutions often incorporate elements of the latest technologies. This can be a great way to iterate: supplementing, rather than overhauling, your tech stack.

At the Summit, our global CEO, Abhijit Dubey spoke about the shift from KYC (Know) to UYC (Understand) to EYC (Engage). This way, using hyperautomation, hyperspecialisation, and hyperpersonalisation, banks can build more tailored customer relationships without increasing their day-to-day workload.

We also heard Raman Bhatia at Starling Bank share how StarAI (Starling’s internal LLM model) is used by his teams. It has improved workflows that led to increased engineering efficiency and prevention of financial crime.

With AI-driven compliance tools, you can cut operational friction and make it easier to adapt your reporting and other measures to fit a changing set of requirements. See how we’re working with Lynx Tech to give banks a 360-degree view of all incoming and outgoing transactions in real time, staying one step ahead of fraudsters.

If you’d like to know more, take a moment to get in touch and arrange a 45-minute consultation to explore how NTT DATA can support your compliance and trust-building initiatives.