Client Lifecycle Management Software 101 - All You Need to Know

Client Lifecycle Management software, or CLM software, is an essential tool for banks and other financial institutions for managing new and existing clients. Specifically, it allows them to quickly and efficiently onboard new clients, do periodic reviews, update risk profiles, and offboard existing clients.

In this article, I’m going to go more in depth and discuss why Client Lifecycle Management software is so essential in the finance world as well as clarify a few common points of confusion in regards to this software.

What does Client Lifecycle Management software do?

Firstly, I’d like to discuss what exactly Client Lifecycle Management is. This is because due to naming conventions and differences between industries, some confusion can arise.

Namely, in this article, I’m specifically talking about CLM software as it relates to banks and other financial institutions and their handling of new or existing accounts in order to remain compliant with different regulations and streamline key processes.

I am specifying this because of two reasons. Firstly, CLM software can refer to Contract Lifecycle Management as well. And while this type of software achieves a similar goal on the surface, it does operate slightly differently and is used in a different context.

Namely, as the name suggests, Contract Lifecycle Management software deals specifically with different types of contracts – such as investment contracts or deposit agreements. Therefore, it is often used in legal, procurement, and contract management matters as opposed to strictly banking transactions.

Secondly, CLM can also stand for Customer Lifecycle Management. Here the difference in usage is ever greater, as Customer Lifecycle Management software typically deals with marketing-related processes.

For example, most public-facing businesses can use Customer Lifecycle Management software to track key points of interest such as conversion rates, retention, customer behaviour, and so on.

Client Lifecycle Management software for financial services

Banks and other financial institutions utilise Client Lifecycle Management software to properly manage their customers both for the sake of efficiency and compliance.

However, the exact way in which any given CLM software will tackle this task will differ. Namely, some CLM software will only cover certain aspects, such as centralising customer data but not others, such as KYC or onboarding. That latter example is especially common as onboarding software commonly comes as a separate service.

On the other hand, CLM software can cover the entire customer lifecycle and all the associated processes. This is called end-to-end lifecycle management software.

In this case, CLM software is first utilised to onboard a new customer, often covering key processes such as Know Your Customer (KYC), monitoring the customer throughout their lifecycle, and then offboarding them once their account has been terminated.

The reason end-to-end Client Lifecycle Management tools are very important for banks in particular is because it allows them to have a unified view of their customer, lowering manual effort across different departments or branches and allowing them to perform proper Customer Due Diligence to stay compliant with different regulations.

Furthermore, well-optimised Client Lifecycle Management software also allows for the bank’s other processes to be more efficient, leading to a smoother customer experience. I will expand on all of these points in the following section.

How does CLM software benefit banks and other financial institutions?

As mentioned in the previous section, CLM software covers a few key processes that banks must perform when opening, maintaining or closing a customer account. To be clear, all of these steps can be done manually – meaning that CLM software is not a necessity.

However, this approach comes with significant drawbacks in terms of efficiency, consistency and ease of use. To better clarify this point, let’s look at the individual processes and see how CLM software makes them better overall.

Streamlining client onboarding with Lifecycle Management software

A good client onboarding process is essential as it’s the final step before a prospect becomes a customer. In fact, according to a survey, customer onboarding was ranked as the third most important factor when it came to customer churn.

And given that the onboarding process for banks can be quite long, this fact is only exacerbated further. Therefore, many modern banks look for CLM software that includes client onboarding and lifecycle management tools to minimise friction and keep users happy.

To do so, the software needs to be able to accurately assess risk and utilise different levels of Customer Due Diligence as needed. The software should furthermore utilise automation to cut down on manual tasks and take advantage of third party databases to perform actions such as background checks quickly and efficiently.

Of course, a bank can opt to have CLM software to handle general lifecycle management and then have a separate onboarding process by a different piece of software.

As long as the two are properly integrated, this can be a valuable option for those who already have a rock-solid onboarding or lifecycle management system. However, this will also mean some parts, for example KYC, would need to be maintained in two systems.

Utilising automations for manual tasks such as client reviews

As touched upon in the previous section, automations are a straightforward way to better the onboarding process and lower overall processing times. Furthermore, automations can help banks and other financial institutions stay compliant with Anti-Money Laundering and Countering the Financing of Terrorism regulations (among others).

This is because good CLM software can automate key checks to be made at the appropriate intervals or upon predefined triggers. For example, whenever there is a change in circumstance, the software can trigger an ad hoc review of the client in question in order to ensure that their risk level is still accurate.

We can take this one step further and even have the software allow customers to self-serve and fill in important information in regards to their account. The most obvious example here being once again a change in circumstance.

All of this ensures that checks are being made when needed without an employee having to manually go in and do the task and/or remember key customer information.

Standardising risk responses and monitoring

How a bank handles risk is essential for its long term success. And Customer Lifecycle Management software is incredibly important in this area. This is because unlike onboarding, monitoring risk takes place during the entire customer lifecycle.

Furthermore, properly managing risk can be a very resource intensive task. For example, let’s say that a bank has decided to lower their risk appetite – that is to say, the amount of risk they are willing to manage. All of a sudden, they have to update hundreds or thousands of different accounts that fall above or below the new cutoff point.

However, through CLM software, this can be done in a few clicks. That is because risk responses can be standardised. That is to say that the software will run an internal set of calculations and then automatically process low to medium risk clients.

So, in the above example, the bank would now only have to worry about high-risk clients, which are typically the minority and should be handled on an individual basis.

Centralising client data

A common problem banks can run into is making customer data accessible to different branches and departments. With customers going through different checks, as well as account reviews and changes, the data can often get scattered across multiple systems.

Client Lifecycle Management software however allows banks to have a more holistic view of the customer, centralising all of the client data. Furthermore, external sources can even be used to enrich customer profiles even further, allowing for more detailed insight and analysis.

And the value of this holistic approach only grows as the bank scales up, as the amount of data that needs to be processed will only increase.

Who can benefit from Client Lifecycle Management software?

The last question left to answer is do all banks CLM software? The simplest answer here is, of course, yes.

Process automations make things more convenient for both the customer and the bank, which everyone can benefit from. Furthermore, since all banks and financial institutions must comply with Customer Due Diligence regulations, utilising the monitoring and risk management functions of CLM software is likewise a good to have for everyone.

However, I will point out that the bigger the bank, the more essential CLM software is. This is due to the simple fact that there will be a lot more data to process.

Furthermore, financial institutions that offer a wider range of products will likewise benefit from CLM software significantly. This is because they might have the same customer under different systems, making it essential to have a holistic view of your customer base.

Conclusion

In conclusion, Client Lifecycle Management (CLM) software allows banks and other financial institutions to have a holistic view of their customers. This means unifying customer data across different systems, departments and branches, utilising automations to streamline key processes such as onboarding and risk management, and monitoring the customer throughout their lifecycle.

As such, well-made end-to-end CLM software can be beneficial to just about any financial institution. However, the need for this software only grows as the institutions in question scales up their business and develops new offerings.

‍