How Middesk helps banks mitigate emerging risks and streamline new business onboarding

Middesk’s identity and business risk products provide financial institutions with instant access to the data and documents they need to ensure regulatory compliance, automate business verification, and streamline compliance reviews. Middesk helps banks of all sizes simplify the process of opening a business account for their customers with customizable, compliance-first solutions.  

As fintech innovation continues to reshape customer expectations and KYC/AML regulations evolve, it’s critical for banks to innovate by improving the onboarding experience while maintaining compliance with regulatory standards. Middesk provides financial institutions with the most up-to-date views of a business customer profile, including business registration and tax identification data, government watchlist screening, beneficial owner validation, and workflow tools to streamline the decision-making process. 

Middesk breaks down barriers that cause friction in onboarding and bottlenecks in compliance reviews. Below, we provide some examples of how Middesk has partnered with banks of all sizes, helping them to reduce risks of exposure to financial crime, maintain regulatory compliance standards, and improve efficiency within their operations. 

National Bank

Overview

Middesk helped a top 5 national bank improve the speed and efficiency of new account onboarding, achieving a 46% auto-approval rate for new SMB checking accounts. The bank targets seasoned small business owners with a focus on building their digital channels and sense of community. The bank provides customers with a premium business checking account with relationship-based rewards and top-tier security. The bank's size enables them to cater to diverse business clients, offering benefits like international payments, treasury management, fee-free transactions, and robust fraud controls, as well as access to other banking products, including credit cards, customized checks, and high-yield savings accounts. The bank emphasizes community and trust for its customers through one account servicing a wide range of business needs. 

Challenge 

Prior to partnering with Middesk, the bank was using LexisNexis for business verification, but the compliance team experienced issues with data quality and efficiency. LexisNexis, being a reseller of third-party data, couldn't confirm original data sources or reasons for validation failures. This required a significant amount of manual reviews, onboarding delays, and inexplicable client rejections.

The turning point for the bank happened when they saw the results of the data test with Middesk–they were able to envision a streamlined and more accurate onboarding process using Middesk’s direct integrations with state business registries. The bank was also seeking an API-first solution with high-quality, structured data to power their digital focus, and Middesk showed them a different path to running automated, efficient KYB checks. The evidence was in the data; Middesk’s solution showed a clear difference in data quality, and provided the bank with a path to instant account approvals that LexisNexis could not. 

Solution

The bank began using Middesk to support onboarding new customers to their small business checking accounts. Because of the bank’s size and more conservative risk tolerance, they slowly migrated their new customer volume from LexisNexis to Middesk, making recommendations for better efficiency and cost savings, and product adjustments to support a growing number of use cases. Eventually, the bank was able to achieve a 46% auto-approval rate when they made the full switch from LexisNexis to over to Middesk, improving their top-of-funnel acceptance. 

Outcome 

Middesk was able to help the bank achieve a 46% auto-approval rate (roughly a 25% improvement) because of our direct integrations with the IRS for TIN matching and state registries for KYB data. Middesk’s ability to locate and approve similar name business matches, was a strong differentiator, showcasing that it’s possible to achieve better results even with imperfect data inputs. 

More auto-approved businesses has allowed the bank to retain more potential customers in their digital funnel and provide them with the ideal account onboarding experience. Customers who are auto-approved have the highest rate of conversion to successful completion of their first deposit, leading to higher growth rates for this customer segment over time. Middesk’s solution has enabled the bank to onboard more new SMB customers, while taking on minimal risk and saving on operational overhead. 

Regional Bank

Overview

Middesk partnered with a community-focused regional bank to build out their enterprise risk management team and save on operational costs. 

This bank offers a wide range of accounts and financial services. As they’ve grown from a small local bank to a network of community-focused regional banks in the Midwest, they have maintained a commitment to building trust and focusing on building for their customers’ needs. The bank’s growing business unit provides business checking accounts, credit lines, and equipment financing for small to mid-sized businesses. 

Challenge 

Initially, the bank’s core offering for small businesses was providing access to capital in the form of business loans and equipment financing, serving industries such as agriculture, manufacturing, construction, healthcare, and hospitality. What started out as a small network of local banks grew into a large regional bank through expansions and acquisitions. The bank’s product offering also grew to include a wider range of business banking products, and they realized the need to establish standardized risk processes across each line of business and branch across the region. 

The bank established an enterprise risk management team to standardize CIP and KYB procedures and manage emerging risks within the enterprise. Initially, both the equipment financing and enterprise risk teams conducted due diligence checks manually, searching the Secretary of State and IRS websites, screening against government watchlists, and collecting registration documents to verify business clients. As business volume grew, manual reviews proved to be time-consuming and expensive in terms of operational overhead. 

The equipment financing team had already been using Middesk’s Business Verification API to pre-screen business applications for KYB before determining creditworthiness for loans. The enterprise risk team had a revelation when they realized that Middesk could provide access to first-party data from both the IRS and Secretary of State, and began to explore opportunities to grow the partnership.

Solution 

The bank’s enterprise risk team began using Middesk’s Business Verification solution and TIN Match to automate the exact process they had been doing manually. Every day, the team would submit a batch of the new applications that they received that day and pull detailed reports via API. This allowed the team to approve prospective business clients more quickly and leverage the Middesk dashboard for applications in need of further review. Middesk partnered with the enterprise risk team to build a custom solution that integrated seamlessly with their existing products and procedures, building the foundation for a valuable and enduring partnership. 

Outcome

With Middesk, the bank was able to strengthen their risk mitigation approach, streamline their business verification process, and realize significant cost savings for their risk operations. Since the start of their partnership with Middesk, the bank has seen continued growth of their SMB and enterprise customer segment, identified new opportunities to better serve their business customers and invest in their local communities, and maintained a reputation of trust by adhering to compliance standards and mitigating risk effectively. 

Next Steps

Interested in learning more about how you can leverage Middesk in your onboarding flow? Contact our team to learn more.