For heavily regulated industries like banking & finance, CRM solutions heavily assist with compliance — saving time, money & effort.
High regulated industries are required to adhere to more stringent regulations as compared to less regulated industries. It is crucial to understand specific regulations and standards governing the industry before implementing a CRM solution.
Regulation Challenges in Different Regulated Industries
Regulation Difference Between High Regulated and Less Regulated Industries
|High Regulated Industries
|Less Regulated Industries
|Able to freely disrupt the industry
|BFSI, Healthcare, Government
|Computer Hardware and software, supermarkets
High Regulated Industries
With regulations governing various aspects of an organisation, such as marketing, consumer rights, safety standards, and environmental impact; high regulated industries are subject to strict government oversight and control. These industries include the BFSI industry, healthcare and government sectors.
Due to the high quantity of rules and regulations, it limits the company’s ability to disrupt their industry – which is the introduction of innovative ideas, technologies, or business models that significantly changes the way an industry operates.
High regulated industries are required to adhere to extensive regulations, leading to higher costs and lower profit margins. This is because these industries are offering products or services at a higher cost than their production value. This makes it challenging for businesses in the industry to maintain a healthy financial performance.
Less Regulated Industries
Less regulated industries, on the other hand, are subjected to less stringent government oversight. They adhere to fewer rules and regulations, as they involve professions or sectors that are not subjected to strict regulatory oversight. These industries include computer hardware and software, utilities, agriculture as well as real estate.
Due to the fewer constraints, they have more freedom to innovate and disrupt their industry. For example, the innovation of Real Estate CRM Software that manages customer relationships, automates marketing campaigns and improves customer experience. This allows the industry to be more efficient, transparent and accessible to a wider range of investors and buyers.
As they are subjected to lesser regulatory compliance, these industries face lower costs and higher profit margins. This leads less regulated industries to having the advantage of more financial resources to invest in growth and other strategic initiatives, such as affiliate marketing.
Data Privacy Laws High Regulated Industries Are Required to Adhere To
The data privacy laws CRM software assists in compliance with are GDPR and PDPA. Industries such as healthcare, BFSI and government sectors are subject to stringent data privacy laws and regulations that mandate the protection of sensitive information or personal data.
GDPR (General Data Protection Regulation)
GDPR is known to be the strictest privacy and security law internationally. While it was drafted and passed by the EU (European Union), its obligations are imposed to organisations that collect data of EU citizens.
Regardless if an organisation is EU or Non-EU based, so long as they process personal information, offer products or services to EU citizens and/or residents, they must oblige to the GDPR. If the organisations do not comply with the privacy and security standards, they could face penalties of up to tens of millions euros.
PDPA (Personal Data Protection Act 2010)
PDPA is the equivalent to the data controller under the EU’s GDPR, but is a local privacy law in Malaysia. It purports to safeguard personal data by requiring data users to comply with certain obligations and conferring certain rights to the data subject in relation to their personal data.
It applies to Malaysia-based organisations that process or have control over or authorises the processing of any personal data concerning commercial transactions; and/or non-Malaysia based organisations but uses equipment in Malaysia to process personal data other than the purposes of transit through Malaysia.
PDPA defines commercial transactions as transactions of a commercial nature and include any matter relating to the supply or exchange of goods or services, agency, investments, financing, banking, and insurance.
eKYC Policies (electronic-Know Your Customer)
eKYC Policy is an additional digital process that enables companies to verify their customers remotely with the help of digital technology. This allows the Compliance Risk Assessment process to be conducted without the need for either party to exchange physical documents.
Compliance Risk Assessment protects both organisations and the public from illegal activities such as fraud and terrorism. This is an approach to the AML/CFT Policy (Anti-Money Laundering/Countering the Financing of Terrorism) intended to combat money laundering, criminal activity, and corruption.
CRM Regulatory Compliance in Digital Transformation
CRM Aims to Help High Regulated Industries Fulfil Their KPI
Digital Transformation Initiatives
Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. This assists them to better engage and serve both their workforce and customers – improving their ability to compete.
One of the well-known digital transformation initiatives would be the transformation of KYC (Know Your Customer) to e-KYC (electronic-Know Your Customer). KYC helps businesses verify the identity of their clients and assess potential risks of illegal intentions for the business relationship. eKYC is the digital process of identity verification with the addition of Customer Risk Assessments – a standardised technique of determining the level of risk posed by a customer.
Healthcare sectors are an example of the implementation of digital transformation. They require the use of digital technology for innovative solutions to improve healthcare delivery and achieve improvements in medical related problems. It offers better customer experience by enabling personalised healthcare experience with integrated patient access and clinical information exchange; alongside real-time access to relevant patient and clinical information at the point of care.
An example of this can be seen via FollowMyHealth, a popular patient portal among US citizens. It allows users to maintain records of both general medicines, specialist visits and the feature to contact doctors within the platform. Doctors, on the other hand, can access connected patients’ complete medical history from a single location.
MyDigital Blueprint is a national initiative that aims to transform Malaysia into a high-income nation that is focused on digitalisation. It emphasizes the adoption of innovative business models, human capital development, and the creation of an ecosystem that embraces the digital economy,
CRM software is an example of digitalisation for the MyDigital Blueprint initiative, as the initiative is expected to support the adoption of digital technologies. CRM software enhances customer relationships, manages sales pipelines, and drives digital transformation.
MyDigital Blueprint’s focus on empowering business and workforce for the digital economy aligns with the role of CRM software in improving customer interactions and the support of digital first policies.
Consequences of Non-Compliance to Regulations
The consequences of non-compliance with regulations include financial penalties, legal repercussions and reputational damage that would cause a strain in a business’ financial statements.
In 2019, it is reported that the average fine imposed for non-compliance was $145.33 million, with certain fines reaching as high as $1 million or more. Ponemon Institute and GlobalScape also reported that the annual cost of non-compliance to businesses has increased by 45% since 2011 with the fines running at an average of $14.8 million.
Data breaches are a result of weak data security, giving individuals with malicious intent the opportunity to commit illegal activities such as fraud and identity theft.
Not only is the organisation subjected to a disruption in operation but, they are also at risk of facing consequences such as regulatory fines and reputational damage. CRM platforms assist organisations in maintaining the security and privacy of data by providing robust data protection features such as encryption and role-based permissions.
Financial loss and data breaches of an organisation can result in negative publicity, which leads to reputational damage – causing the public to lose trust, and making it difficult to attract and retain stakeholders.
This leads to a significant decline is sales and customer loyalty as users will doubt the industry’s ability to safeguard individuals’ personal information
How Does CRM Software Assist in Regulation Compliance?
Aids in the Fulfilment of eKYC Policies
The e-KYC not only requires a company to identify their clients, but also to access their risk profile. Customer risk assessments are one key component of the Customer Due Diligence (CDD) process – a risk management strategy implemented for financial institutions to safeguard the financial system from criminal activity, such as money laundering and terrorism financing.
Customer Risk Assessments allow financial institutions to assign a risk level to each customer. The risk levels are based on factors such as the financial activities of a customer, country of origin, and political exposure. By analysing this information, financial institutions are able to identify customers who pose as a high risk of financial crimes.
Some examples of financial institutions’ failure to conduct risk assessment include:
- Skandinaviska Enskilda Banken (SEB) – In 2020, the second-largest Swedish bank SEB was fined $107.3 million by the Swedish Financial Supervisory Authority after an investigation by a Swedish regulator had exposed a series of compliance issues by the bank. The regulator later revealed that numerous SEB’s Baltic operations came from non-residential customers, including those that were classified as high risk by the bank’s subsidiary.
- Westpac – In 2020, unreported transactions worth of $11 billion and overlooked transactions linked to financing a criminal network in Asia led to a fine of $900 million (AUD $1.3billion) to an Australian bank, Westpac. This is due to the failures related to the transaction monitoring and violation of multiple provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act.
BFSI industries are embracing CRM software as they offer features such as streamlining customer onboarding process and conducting further CDD as well as risk assessment. CRM software aids in the monitoring of AML due to its automated process of collecting and retaining data from web forms sent through email, updating it into the KYC database without any manual work.
Due to the continuous monitoring capability of a CRM software, it assists banks to maintain compliance throughout their journey. With regularly updated sanction lists and adverse media checks, banks can detect any changes in their customer’s status. This ensures that if a customer becomes a potential risk, the banks are alerted immediately, allowing them to take the necessary measures to prevent further risks.
Aids in Audit Management
For organisations operating in strict regulated industries, CRM audit are important as they help in meeting compliance standards by documenting all user interactions with sensitive customer data, ensuring the data access is secure and traceable.
In government sectors, internal and external auditing enables governments and government entities to fulfil their role of accountability for its citizens. The role of government auditors is to not only identify trends and prevent future crises; but to also detect and deter public corruption, including fraud, inappropriate or abusive acts; and other misuses of the power and resources entrusted to government officials.
Audit logs ensures data accuracy in high regulated industries by maintaining a detailed history of changes. They offer insights and identify records associated with certain events that have been collected through marketing campaigns or interactions via email, website visits, call centres, direct messages, past campaigns and physical events or exhibitions.
With the feature of audit logs, it discourages unauthorised data tampering while promoting data integrity that aids in detecting unusual or suspicious activities that indicate signs of breaches or unauthorised access. These logs also provide organisations with a detailed record of all CRM-related activities, offering numerous benefits such as data accuracy, compliance, accountability, enhanced decision-making, security, and performance evaluation
Integration with Regulatory Tools
Integration with regulatory tools is important for businesses to ensure regulatory compliance and data security. CRM software provides a comprehensive solution to support compliance.
Integration is the process of connecting a CRM platform with other software tools and systems used by a business or organisation. It allows data to flow to, from, and between them, ensuring data accuracy as well as consistency. While the process may be complicated, it ensures that businesses have a cohesive, synchronized environment, maximizing the potential of all their digital resources.
Examples of regulatory tools include:
- KYC (Know Your Customer) – Helps businesses verify the identity of their clients and assess potential risks of illegal intentions for the business relationship.
- AML (Anti-Money Laundering) – Assist in monitoring and reporting potentially suspicious activities to prevent money laundering.
- Regulatory Compliance Software – Provides a comprehensive solution to support compliance and data security. It can be integrated with CRM to ensure regulatory adherence and data protection.
In summary, highly regulated industries face more government oversight, strict compliance requirements, and potentially lower profit margins due to the high costs of compliance. On the other hand, less regulated industries have more freedom to innovate and disrupt their industry, but they may still need to comply with some regulations and face lower costs and higher profit margins.
Before using CRM in a highly regulated industry, it is important to familiarize oneself with the specific rules and standards that apply to the sector and consult legal teams, compliance officers, or industry associations to get the latest and accurate information.
ORLIG CRM is one of the CRM solutions that could assist your organisation in complying with these regulations.