How ‘noise’ caused by manual KYC is eating into business efficiency

David Williams of Encompass Corporation explains where KYC goes wrong. And how to fix it
David Williams
Bank of England

It is now a necessity for financial institutions to balance regulatory demands with first-class customer satisfaction to boost the bottom line, which is why digital transformation of compliance-centred processes like Know Your Customer (KYC) is more important than ever before.

The fight against economic crime remains front of mind, with the UK Government's Economic Crime Plan 2 an example of increased measures being introduced to combat wrongdoing, and the Financial Conduct Authority (FCA) also stepping up responses. The FCA is pushing financial institutions to prioritise consumers' needs, and with so much at stake, traditional manual processes are simply no longer cutting it.

In the fast-paced world of financial services, it is vital to stay ahead of the game when it comes to compliance. KYC is an essential component of this, allowing banks and financial institutions to verify the identity of clients and flag potential risks.

Enter digital transformation. While a number of financial institutions have already taken steps to embrace innovation, there's still a way to go. Equipped with the right focus and investment, the benefits of this transformation – both to compliance and operations – are huge.

Changing processes to leverage technology

Despite the progress mentioned, organisations are not taking full advantage of the technology that is available to them to improve efficiencies, especially around KYC automation, for example.

Traditional processes require extensive documentation and verification, often resulting in lengthy onboarding times and missed revenue opportunities. In fact, a recent study found that 64 per cent of banks experience revenue losses as consumers opt for companies with less complex onboarding processes.

Additionally, staff members who manage these processes are often overwhelmed with constant checks and the ever-changing regulatory landscape, which could lead to burnout.

The solution to these challenges, and the way in which businesses can keep pace and momentum and promote growth, is by utilising dynamic KYC process automation. Automation which is focused on real-time investigations and delivers a real-time digital KYC profile for customers can be transformative.

Automating the manual due diligence process undertaken by KYC analysts brings significant time and cost savings, reducing the process from days and weeks to minutes, as well as reducing both regulatory and reputational risk.

Leading global banks, such as Santander, have found success through digital transformation initiatives.

Santander, for example, was able to leverage automation to streamline KYC processes, reduce the time it took to complete a case, and improve the overall customer experience.

According to a case study, thanks to KYC automation, they were able to reduce the time it took to onboard a customer by 60 per cent, while also improving customer satisfaction by 18 per cent.

Saving Time

Manual KYC processes are time-consuming and labour-intensive, with analysts spending hours finding data, and even more time analysing it.

The process requires analysing documents and cross-referencing the data against various databases and watchlists. Done manually, this is prone to human error, and the process can take days or even weeks to complete.

By using dynamic KYC process automation, businesses can ensure a level of control reduce instances of error, and the time it takes to complete a case by up to 13 hours per analyst. Compliance teams, overall, become much more effective, as by automating manual and repetitive search tasks, automation allows personnel to focus on high-risk investigations.

Impacting Customer Relationships

Another critical advantage of this technology is the significant impact it can have on customer experience. Manual KYC processes, and particularly onboarding, can be cumbersome, as well as for those existing customers who are required to submit information they have already provided. This unnecessary outreach can lead to abandoned processes or a loss in revenue through customers switching to competitors in the hunt for a slicker experience.

Automating the process allows for the ongoing monitoring of customers via technology-centred and data-driven processes. As well as removing bottlenecks in KYC refresh and remediation, this also delivers deeper insights, reduces the need for outreach and, ultimately, ensures higher levels of satisfaction, which boosts revenue in the long run.

Real-Time Compliance

KYC compliance is a continuous process, with the regulatory landscape constantly evolving. Compliance teams must stay up to date with the latest regulations and policies to ensure that their organisations are meeting obligations.

According to a survey conducted by Corporate Compliance Insights, fifty-nine per cent of compliance officers report feeling a level of burnout, and sixty-nine percent say the pace of changing regulations is the most stressful aspect of their jobs.

Demonstrating consistent compliance, automation provides real-time access to the critical data required for investigations, while it also assists in monitoring regulatory changes and updating customer profiles in real-time. This not only allows for a more robust procedure, but also lessens the manual burden on analysts, increasing their job satisfaction and productivity.

Furthermore, automation can provide valuable insights into customer behaviour, as well as, crucially, identifying and flagging risk through real-time alerts. This helps financial institutions stay ahead of the curve and maintain the continuous and consistent level of compliance that is needed to satisfy regulators. As well as this, they can also future-proof processes against further regulatory change, while mitigating risks of the reputational damage that could come with non-compliance.

There is no denying that technology, and particularly KYC automation, is becoming increasingly important as financial institutions adapt to a changing world, and it is essential that businesses invest in the right solutions to stay ahead of competitors by ensuring continued compliance, top customer satisfaction and, ultimately, a quicker path to revenue.

Written by
David Williams
Written by
May 4, 2023