What Remediation means to a Bank

Banking Remediation Image

What Remediation means to a Bank

Driven out of the recommendations from the Australian Banking Royal Commission, customer remediation has become a critical process for the banks, as it seeks to remediate customers financially.

Implementing Remediation processes within an already complex operational environment has been a big challenge for banks. The business processes require extensive forensic data analysis skills, with stringent regulatory reporting requirements.  

What is remediation?

Remediation is the process of identifying customers affected by systemic issues detected in the banks’ systems and determining what’s required to address the impact to the customers.

Remediation serves an increasingly broad range of purposes, including: 

  • Remediating customers (via payments) for incorrect charges
  • Preventing regulatory action and reputational damage
  • Building and maintaining trust among customers.
  • Preventing banking transaction errors.

Why’s remediation important?

There are two primary reasons why remediation is a necessity for Banks. 

It avoids regulatory action

Remediation has forced the banks to ensure customers are being charged correctly (e.g mortgage interest calculations, account fees), remediating and paying customers where required, and avoiding the payment of incredibly large financial fines to the regulator as well as legal action.  

It increases trust and loyalty

Ultimately, the incorrect calculating of fees and charges impacts customer satisfaction.  So, it’s important for banks to have strong remediation processes in place, as this will protect customers, which will increase their loyalty and trust. 

Challenges faced by banks

There are many challenges faced by banks when it comes to remediation. These include:

Allocating staff to remediation

Remediation programs are non-core activities for the banks, and therefore they have been slow to allocate sufficient resources to this critical task.  Remediation is costly and is therefore met with resistance by banks that want to focus their efforts on areas that provide more tangible outcomes.

Remediation is time consuming to resolve

Remediation processes are complex and time consuming, and cases often take time to investigate and resolve. This inefficiency can contribute to a lack of trust from customers who want their issues to be resolved in a timely manner. 

Undefined or unclear regulations 

Unclear regulatory guidelines can make it difficult for banks to execute efficient remediation processes. As a result, remediation processes can take longer than they should, as lots of time and effort is required to decipher and operationalise the relevant legislation. 

How to solve these challenges

Banks have had many years to overcome these challenges, by focusing on a number of key areas: 

Creating a unified vision

Banks have created operational business units to address remediation, thereby creating solid foundations for their remediation programs.  Clear goals and objectives, and the design of proper processes and guidelines for staff have made remediation cases easier to resolve by removing any unnecessary steps that may hinder or confuse staff members. 

With a more organised approach, banks have been able to efficiently resolve remediation cases.

Recruitment and training

When it comes to addressing the key issues around remediation, and with the possibility of huge fines, remediation activities have been prioritised through recruitment of staff and engagement of third parties enabling banks to:

  • Pay more attention to remediation as a whole
  • Train more staff to focus on remediation cases

Automation

A key component of any remediation program is leveraging automation in key business processes.  Examples include building financial payment calculators that can analyse high volumes of customer transaction data and, based on the business rules established, provide advice on remediation payments. This has increased efficiency and helped banks to make faster decisions.

Assessing the priority levels of each case

To focus their energy on more important cases, banks have clustered remediation activities into customer cohorts, to then enable priority levels to be established.  

The future of remediation

Remediation has been at times a painful journey for many financial institutions, but has been a pivotal step for banks using data to better understand how their products are implemented for customers against the product terms and conditions.

Not only does remediation protect banks and their customers, but it is increasingly being leveraged for wider business outcomes, with many benefits including: 

  • Obtaining rich customer data which can help them devise future growth strategies
  • Spending more time focusing on customer satisfaction
  • Building loyalty and trust 
  • Securing a future of safety and innovation

Learn More: 

Gen AI in Financial Services

Customer Remediation within the Banking Sector

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Building a Single Source of Truth platform for a Financial Services provider

Do you want to develop strong remediation processes? Chat with us today.