Risk and compliance operations are essential to regulated businesses, but they can be carried out in a variety of ways. Many new organizations use manual processes when they first start out, whether that be to save costs or shorten their time-to-launch.
No matter the reason, manual processes eventually run their course as companies grow, causing them to fall behind on compliance operations - and lose out on operational savings and improved performance.
When to adopt risk and compliance software is a difficult decision, as it depends on a number of factors. To help, we’ll cover a few different stages that you could make the switch, and explain why some are better than others.
We’ll explore why waiting too long to adopt a Risk and Compliance software can be detrimental, why adopting too early has its own challenges, and why a few months into launch is often the best time to adopt a fraud and AML solution.
When is the Best Time to Adopt a Risk and Compliance Platform?
The best time to adopt a risk and compliance software varies from business to business. It comes down to reducing costs, promoting growth, enabling scalability, and optimizing processes.
While it does vary significantly, there are some general benchmarks for financial service businesses to consider when thinking about when to adopt a risk and compliance platform with transaction monitoring, identity verification, and case management capabilities.
Below, we examine the pros and cons of adopting Risk and Compliance software at different stages of the product life cycle.
Some companies choose to set up transaction monitoring before they go live. The aim is to be prepared from day one, which is a great approach to take. As soon as your product goes live, you’ll be able to monitor transactions, mitigating the risk of fraud on your platform.
However, this approach does have challenges. Since you haven’t launched your product yet and have no live transaction data, you don’t fully understand your own data yet. This makes the implementation process more complicated to execute. The longer it takes to go live the longer you’re paying for capabilities you don’t need, as you’ll have no transactions to monitor yet.
Oftentimes, companies that invest in transaction monitoring prior to launch are companies that have acquired adequate funding, and want to do all of this work upfront, so as to avoid adjusting later on. For many companies, this isn’t feasible, as it requires considerable upfront costs.
For most Fintechs, it’s best to launch transaction monitoring three to six months after the product is live.
Typically, the first few months are very slow. Growth managers and the Risk and Compliance team are still learning customer acquisition best practices. After the first quarter, your acquisition strategy will see some traction and begin taking off. That’s a good time to switch from manual operations to an automated, optimized transaction monitoring software solution.
Ideally, market research and implementation will take around 3 to 4 months. If you start this process after the first quarter, you could have a transaction monitoring system up and running 6 to 8 months after going live. Without this, you’ll start to see a lot of manual work piling up, because you don’t have transaction monitoring or case management. You’ll instead rely on whatever you can utilize in-house, which is usually Excel, SQL queries, or static dashboards.
As your growth scales, you’ll struggle to keep up using these methods - and soon, you’ll be playing catchup. When you go from hundreds to thousands of accounts being onboarded daily, it becomes much more challenging to manage operations manually.
The longer you use a manual system, the more robust the system gets. After 18 months of operations, you’ll have a lot of reports, dashboards, and SQL queries. The larger and more complicated this manual process gets, the harder it will be to transfer to a vendor (and the longer and more challenging the migration process will be).
Regardless of whether you are ready to adopt a risk and compliance software at this point, this is a good point in time for risk and compliance managers to discuss future plans with the growth team. Have an open, honest discussion between the risk and growth teams; discuss expectations for monthly, quarterly, and annual growth. Explore the best times to implement Regtech software that automates manual processes and adds new capabilities (like transaction monitoring).
These discussions can be challenging to have; growth managers can sometimes view Risk and Compliance teams as an obstacle, as operations adversely affect growth by turning away transactions. More collaboration at the right time is the best way to ensure you adopt a solution at the right time, and to ensure that it benefits both growth and Risk and Compliance teams.
This late in the game, there are two scenarios: you chose a vendor you’re not happy with or you haven’t adopted a system yet (and are likely overwhelmed with your manual process). You could build your own fraud and AML software, but it’s a costly, time-consuming process to both initially build and manage.
If you haven’t chosen a vendor yet, you’re likely playing catchup. It’s never too late to adopt a solution that will automate your manual process, saving you time and effort. As discussed above, if you wait too long, you’ll have a complicated manual process established, with numerous employees. The longer this goes on, the harder it will be to not only migrate to a new system, but to rework team dynamics to fit the new system and to train staff how to leverage it.
It’s often difficult to know when the best time to switch vendors is. If you aren’t seeing the performance or results you’d like from the solution you currently have, it could be a good time to switch vendors. Is the current vendor limiting your ability to hit KPIs? Are they handling growth well? These are great questions to ask to see how well the vendor is performing, and whether they are meeting the expectations that were laid out.
Now that you know when the best time is to incorporate a fraud and AML system, it’s time to get a risk and compliance solution that works for you. Find out why Unit21 would be a great fit for your company below:
1. Build rules easily with a no-code solution
Rule creation can be complex and challenging for engineering and product teams. We simplify rule-building so that teams don’t have to hard-code software to make rules. Our system comes optimized for rule creation so that companies can seamlessly build rules that detect anomalies and enable better investigations. There are even out-of-the-box rules available for transaction monitoring, so you can be compliant the day after deployment.
2. Reduce false positives to maximize revenue
False positives are a consistent struggle for compliance systems; thousands of alerts can be triggered daily, costing companies wasted time and money. Each of these needs to be reviewed by your compliance team, which can overwhelm their workload significantly. Our system has clear visibility over transaction monitoring so you can do more to reduce false positives. With advanced testing options you can fine-tune your rules to significantly reduce false positive rates.
3. Use one consolidated, unified system
For many risk and compliance teams, their solution consists of a myriad of specialized solutions, leaving teams to manage multiple dashboards and screens to perform investigations, update compliance rules, and more. Unit21 is a comprehensive system that consolidates fraud and AML operations, making it much easier for Risk and Compliance teams to do their job. Get onboarding orchestration, transaction monitoring, and case management from one unified dashboard, streamlining analysis and operations.
Don’t Wait Too Long to Adopt a Fraud and AML Solution
Typically, the sooner you think about risk and compliance operations and how they fit into your organization the better, as you’ll be more prepared. That being said, adopting a risk and compliance solution prior to launch can add challenges to the product launch process (as you’ll have this additional component to consider). It can also add significant costs; but these costs aren’t being capitalized on if the product launch is delayed, takes longer than intended, or has rollout issues.
Three to six months after launch is an ideal time to integrate a risk and compliance solution. Early customer acquisition is slow to take off, which makes it easier to manage compliance manually. After the first quarter, you’ll have a better idea of your growth performance, and you’ll have streamlined your customer acquisition strategy.
Waiting longer than a year is a serious problem unless you’re a small organization that can keep up with the manual systems you’re using. For FIs experiencing growth, there will come a point where you need a unified risk and compliance tool that will enable your fraud and AML program. Be sure to adopt it earlier than later to avoid serious challenges, like a major migration process and inadequate compliance processes that lead to fines and penalties.