In recent times, financial institutions globally have witnessed a substantial increase, roughly around 25%, in the overall cost of compliance with regulations against financial crimes. This surge occurred between 2020 and 2022. The banking sector is now seeking automation as a crucial solution to counterbalance this surge in costs while mitigating the administrative complexities that come with maintaining effective KYC (Know Your Customer) programs. Operating with manual KYC processes presents daily challenges, including the struggle to access precise and reliable data, navigating through intricate jurisdictional intricacies, and allocating extra workforce to name just a few. These manual procedures frequently lead to backlog issues, making KYC teams appear as bottlenecks hindering progress.
However, banks are now shifting their focus towards alternative approaches. They're acknowledging the potential advantages and value that automation can bring to KYC procedures, offering opportunities for expansion, efficiency enhancement, and growth. These benefits extend beyond just meeting regulatory requirements and ensuring audit trails are in place.
Here are a few ways in which dynamic KYC automation can deliver significant value:
Enhanced Customer Onboarding:
Inefficient KYC processes can prolong the customer onboarding experience, sometimes taking up to 100 days. The manual collection of data often results in multiple rounds of requests to customers for information. Automation can dramatically improve this process by sourcing data from global premium and public data sources, reducing KYC outreach by over 60%. This not only improves the customer experience but also enhances operational efficiency.
Cost Reduction in KYC:
A significant portion of KYC-related costs is dedicated to the manual collection of public data, often through labor-intensive administrative processes. Automation, offering almost 100% straight-through processing (STP), frees up valuable resources for tasks of higher value, such as untangling complex beneficial ownership structures and making informed risk-related decisions.
Ensuring Consistent Compliance with Fewer Errors:
Manual processes, relying on various data sources and spreadsheets, frequently lead to inconsistencies and human errors. Automation not only streamlines the onboarding process but also ensures a consistent approach, reducing errors and minimizing the need for control oversight. Standardizing the KYC process prepares banks for future growth and ensures readiness for regulatory changes across various jurisdictions.
Enhancing Data Quality and Depth:
Access to high-quality, accurate, and timely data is essential for effective entity onboarding. KYC automation consolidates structured and unstructured data, allowing banks to create a comprehensive customer view and unravel ownership structures faster and in greater detail.
Scalability:
With global banking revenues projected to see substantial growth, banks that can efficiently onboard clients at scale will gain a competitive edge. Automation, when seamlessly integrated with client lifecycle management (CLM) solutions, establishes a strong foundation for scalability and prepares banks for progressive KYC journeys.
Improved Compliance:
Meeting anti-money laundering (AML) requirements and maintaining audit readiness can be a daunting task, particularly when manually gathering data and documentation. Automation simplifies this process, enabling banks to demonstrate AML compliance with a dynamic audit trail and a digital record of all KYC activities.
Embracing KYC automation empowers banks to streamline their processes, reduce costs, strengthen compliance, and position themselves for growth in an evolving financial landscape.