Scaling The Vendor Onboarding Process For Growing Financial Services Institutions

Vendor onboarding is the first step in vendor lifecycle management, covering due diligence, ongoing compliance, performance monitoring and risk mitigation throughout the relationship.

Business growth can easily stress the processes and practices used in vendor onboarding, by generating transaction volumes not previously considered or catered for. It can highlight shortcomings in the capability and capacity of processes, people and technologies.

Scaling, the strategic reconfiguration of processes to accommodate growth, ensures operational consistency, maintains compliance, and reduces risk as volumes and complexities rise.

This article explores key vendor onboarding challenges in growing Finance Services Institutions (FSIs) and outlines best practices to support vendor onboarding at scale, ensure compliance and manage risk effectively.

 

What are the common challenges of vendor onboarding?

Vendor onboarding in financial institutions requires careful resource and risk management. Common challenges - and their impact on the process - include:

1. Over-reliance on Manual Processes

Manual data entry, document handling, approvals and compliance checks are still common in many financial services – but they come at a cost.

• Higher risk of human error: Mistakes in data capture or documentation can lead to compliance gaps and reputational damage.
• Slower onboarding cycles: Manual steps introduce delays, create bottlenecks and limit the institution’s ability to scale.
• Reduced operational agility: Without automation, vendor integration is delayed – and with it, the value vendors can deliver.
• Inadequate risk visibility: Delays in identifying, assessing and escalating vendor risks leave FSIs exposed to threats they could have avoided.
• Difficult to scale with business growth: As vendor volumes increase, manual processes become unsustainable - placing greater strain on teams and increasing the likelihood of missed steps or oversights.

2. Limited Visibility and Ineffective Reporting

In financial services, where regulatory scrutiny is high and risk exposure can be costly, limited oversight of vendor onboarding is a critical weakness.

• Inaccurate or outdated information: Without real-time visibility into onboarding progress, FSIs struggle to track vendor status, documentation gaps or risk indicators.
• Ineffective reporting tools: Legacy systems often lack the reporting capabilities needed to demonstrate compliance, monitor vendor performance, or surface risk early.
• Delayed decision-making: Lack of timely, reliable data can result in missed opportunities, onboarding delays, or exposure to unassessed risks.
• Reactive, not proactive vendor management: Without a clear view of onboarding activity, FSIs are forced to respond to issues after they arise - rather than preventing them altogether.

Addressing these challenges head-on enables FSIs to strengthen compliance, improve operational resilience, and onboard vendors in a way that supports sustainable growth.

3. Navigating Regulatory Compliance

Financial services institutions must comply with a vast and evolving web of regulations - including GDPR, SOX, MiFID II, DORA, BCBS 239 and more - each carrying unique, jurisdiction-specific obligations. As onboarding volumes increase, meeting these obligations becomes exponentially harder.

Common issues to be dealt with include:

Difficulty Interpreting and Applying Regulations

• Confusion around how broad regulations apply to specific vendor types or offshore entities.
• Challenges interpreting nuanced obligations across different frameworks, especially when regulations conflict or overlap.
• Uncertainty around which regulations are applicable to which vendors – and at what point in the relationship.

High Due Diligence Burden

• Significant effort is required to assess a vendor’s ability to comply with relevant financial, data protection and operational risk standards.
• Diversity in vendor types makes it hard to apply a one-size-fits-all due diligence process.
• No consistent standard for evidence or documentation is required across jurisdictions or regulations.

Volume and Velocity of Change

• Regulations evolve constantly, requiring FSIs to track and react to changes across multiple jurisdictions.
• New requirements often emerge with short timelines for compliance, creating reactive, resource-heavy processes.
• Keeping internal policies aligned with external changes is difficult at scale.

Inconsistent Application and Enforcement

• Regulatory focus areas differ - some prioritise data protection, others financial transparency or risk controls.
• Without standardised onboarding workflows, compliance is applied inconsistently across teams and vendor types.
• Vendor risk tiers may not align with compliance requirements, leading to over- or under-enforcement.

Lack of Automation and Scalable Tools

• Manual compliance checks slow down onboarding and are prone to human error.
• Limited reporting capabilities make it difficult to demonstrate compliance to regulators.
• Reactive, spreadsheet-based approaches can't keep pace with growth or scrutiny.

4. Managing Data and Cybersecurity Risks

For an FSI, vendor onboarding involves evaluating each vendor’s ongoing ability to safeguard sensitive financial data against cybersecurity threats. Inadequate assessments can leave the institution vulnerable to data breaches, fraud, financial penalties and reputational harm.

Key areas that must be assessed include:

• Security frameworks and infrastructure
• Data encryption standards and access controls
• Incident response readiness and breach protocols
• Overall security posture across third and fourth parties.

Financial data is a prime target for cybercriminals, making a proactive approach essential. Onboarding processes should incorporate:

• Stringent cybersecurity assessments
• Regular penetration testing and vulnerability scans
• Ongoing third- and fourth-party risk monitoring.

As vendor networks expand, these security checks must be built into scalable, repeatable onboarding processes to protect both data and reputation.

Best Practices for Scalable Vendor Onboarding in Financial Services Institutions

Scaling vendor onboarding isn’t just about doing more, faster. It’s about doing it consistently, compliantly and confidently as your vendor base grows. These six best practices help FSIs build a foundation that supports growth without sacrificing governance or increasing risk:

1. Implement Standardised Onboarding Procedures

• Standardisation ensures consistency across high volumes of vendors.
• Creates a repeatable framework that ensures every vendor is assessed to the same standards
• Reduces rework, bottlenecks and subjective decision-making
• Helps onboard new team members faster by clearly defining expectations and steps.

By reducing friction and improving efficiency, standardisation enables FSIs to scale without needing to redesign processes for each new vendor.

2. Adopt Enhanced Due Diligence Practices

• Enhanced due diligence allows FSIs to scale safely by identifying risk early.
• Helps prioritise time and resources based on risk profile
• Reduces the chance of partnering with non-compliant or unstable vendors
• Lowers exposure to regulatory breaches, contract disputes or service disruptions

With better risk visibility up front, FSIs can grow their vendor base with confidence - not blind spots.

3. Use Vendor and Contract Lifecycle Management (vCLM) Software 

• Automated vendor onboarding enables growth without increasing headcount.
• Accelerates repetitive tasks like data entry, document collection and approvals
• Ensures every step is followed correctly, every time
• Frees teams to focus on higher-risk, higher-value work

Vendor and Contract Lifecycle Management software removes manual bottlenecks, allowing FSIs to increase onboarding capacity while maintaining speed and consistency.

4. Conduct Ongoing Performance and Compliance Monitoring

• Sustainable onboarding means staying in control after vendors go live.
• Ensures vendors maintain required standards over time
• Provides early warnings about potential non-compliance or performance issues
• Reduces reliance on reactive audits and interventions.

Continuous monitoring helps FSIs scale their vendor base without sacrificing governance.

5. Balance Automation with Human Expertise

• Intelligent scaling requires both speed and sound judgement.
• Supports nuanced risk analysis and complex decision-making
• Helps resolve exceptions and edge cases automation can’t handle
• Ensures processes stay adaptable as regulations and risks evolve.

Human oversight ensures that scalability doesn’t come at the expense of strategic thinking or regulatory resilience.

6. Establish KPIs for Measuring Scalable Vendor Onboarding

Having scaled the vendor onboarding process, the final best practice involves confirming that the scaled process is effectively handling the growth of the FSI, and producing the desired outcomes for the FSI and its vendors.

The following metrics provide a clear indication of the success of the scaling:

• Compliance Metrics: Improved regulatory compliance scores and reduced frequency of compliance incidents show that the scaling efforts have enhanced the FSI's ability to meet regulatory requirements. Think about the percentage of vendors with completed compliance documentation at onboarding.
• Enhanced Capacity: An increased number of vendors onboarded simultaneously, maintaining high quality, indicates that the FSI can handle a larger volume of vendors without compromising on quality or efficiency. Think about time to complete onboarding per vendor (e.g. reduction from 30 to 10 business days).
• Operational Backlogs: Reduced onboarding times and elimination of process bottlenecks demonstrate that the scaling initiatives have improved the efficiency of the onboarding process. Think about manual interventions per onboarding process (e.g. 80% decrease following automation rollout).
• Stakeholder Feedback: Positive internal and external stakeholder feedback on improved operational interactions reflect that the scaling initiatives have improved the overall experience for both vendors and internal teams. Think about tracking an internal stakeholder satisfaction score (via quarterly surveys; e.g. average score increased from 3.8 to 4.6 out of 5).

By tracking these metrics, the FSI can gain valuable insights into the success of its scaling programs and make data-driven decisions for further optimisation.

Supporting Smarter, Faster Vendor Onboarding at Scale

For legal and procurement professionals in financial services, scaling vendor onboarding often means more admin, more compliance pressure, and less time to focus on strategic work.

A robust vCLM platform removes the bottlenecks from vendor onboarding - helping you onboard faster, ensure compliance from day one, and manage risk at scale without adding to your team’s workload.

Here’s how the right platform helps you scale with confidence:

Centralised Vendor Management

Managing vendors across spreadsheets, inboxes and shared drives doesn’t scale. A vCLM platform brings everything together in a centralised repository.

• One secure system for all vendor data - contracts, risk profiles, contacts and compliance documentation
• Smart Records link every vendor to their associated workflows, documents and status
• Quickly access onboarding history, approvals and documentation for audits or internal reviews
• Eliminate manual document tracking and reduce time spent searching for information.

Automated Onboarding Workflows

Manual processes increase the risk of missed steps and inconsistent compliance. Workflow automation simplifies and enforces best practices.

• Build no-code workflows tailored to internal policies and regulatory requirements
• Route vendors by type, location or risk level using conditional logic
• Trigger legal or compliance reviews automatically, with built-in escalation paths
• Remove bottlenecks by automating reminders, tasks and approvals across teams.

Vendor Portal with Self-Service Onboarding

Chasing vendors for documents and due diligence slows everything down. A dedicated vendor portal puts them in the driver’s seat.

• Vendors upload documents, respond to questionnaires and track progress in real-time
• Secure, structured workflows reduce back-and-forth communication
• Smart forms and adaptive due diligence questionnaires surface issues early
• Low questionnaire scores or missing data are automatically flagged for review so you can maintain compliance.

Automated Due Diligence and Risk Scoring

Evaluating vendors manually is time-consuming. It’s also unsustainable at scale. Built-in risk tools standardise and accelerate decision-making.

• Automate due diligence to assess compliance, financial health and cybersecurity posture
• Assign structured risk scores to each vendor, updated in real -time
• Surface high-risk vendors early and route for enhanced review
• Track vendor health continuously and trigger follow-ups automatically.

Continuous Compliance Monitoring

Staying compliant shouldn’t depend on manual effort. Built-in compliance tools keep things moving and your business audit-ready.

• Automated alerts for missing or expiring documentation
• Scheduled check-ins keep vendor information up to date
• Full audit trails for onboarding and ongoing interactions
• Real-time dashboards show compliance performance across your vendor base.

Wrap-up

Scaling vendor onboarding in financial services institutions involves addressing sector-specific challenges through strategic investments in capability and capacity expansion, robust due diligence, process standardisation, and continuous improvement.

It’s a strategic imperative driven by the need to manage increasing vendor volumes, navigate complex regulations, and mitigate potential risks.

By embracing scalable vendor and contract management software and implementing best practices, FSIs can transform their vendor onboarding process from a potential bottleneck into a strategic asset.

Gatekeeper equips financial institutions to onboard vendors efficiently, manage compliance, and mitigate risk - supporting sustainable growth and operational excellence.

To discuss how we can help you conduct effective vendor onboarding, contact us today.