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7 ways to maximize value with dynamic KYC process automation

By Darren Marion | Mon 26 June, 2023
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Delivering efficient know your customer (KYC) is not a new concept. But now, more than ever, is the time for banks to make it an urgent business imperative as operational costs continue to rise.

With RegTech spend expected to rise to $207 billion globally by 2028 banks should direct their investment on automating their manual KYC. In this blog we look at seven ways banks can maximize value with dynamic KYC process automation.

Removing manual inefficiencies

The total cost of financial crime compliance across financial institutions worldwide rose by approximately 25% from 2020 to 2022. Automation is vital to counterbalance the current exponential rise in costs and reduce the administrative burden of maintaining an effective KYC program. Manual KYC delivers daily challenges of gaining access to trusted and accurate data; managing jurisdictional nuances and allocating additional headcount to name but a few. More often there are backlogs and KYC teams battle with being seen as the blockers to growth.

Rather than focus on the challenges that are impeded with manual processes, banks are looking for alternatives. Realizing the benefits and maximizing the value that automation can bring to KYC, offers opportunities of scale, growth, and efficiency. Indeed, the benefits are far wider than meeting the needs of the regulators and audit trails.

Seven ways a dynamic KYC automation process can maximize value

1. Inefficient KYC does not just impact customers – banks also suffer

There is a clear growth opportunity for banks as corporate customers diversify their accounts across multiple institutions to minimize their risk. But, for many, one obstacle stands in their way: the onboarding experience.

It is not uncommon for banks to take up to 100 days to onboard a new corporate customer. Inefficient manual data collection can be the culprit. Numerous requests back and forth to the customer to gather information are frequent. Without such information the bank cannot inform its decision making for client suitability.

The simplest way to improve the process is to boost onboarding with an automated solution. Pulling data from global premium and public data sources can reduce the KYC outreach process by over 60%. Supporting the customer experience as well as creating operational efficiency for the bank.

2. Accelerate time to revenue

The faster the onboarding, the faster the bank can begin to realize revenue. Additionally, with a deeper understanding of clients’ financial needs, banks can also identify upsell and cross-sell opportunities sooner.

Teams within banks often work in silos with manual processes developed over prolonged periods of time. Existing operating patterns leave KYC and risk teams removed from one another when it comes to sharing information.

Automation enables multiple access to central sources of valuable data across the client lifecycle. Furthermore, banks can reduce time to trade by over 40% and effortlessly unlock new revenue streams.

3. Reduce KYC spend

A significant portion of the time and effort for building a typical KYC profile is concentrated on the collection of public data. This is a predominantly manual and administrative process. The greatest KYC spend for banks is headcount related and typically spans multiple functions in both the back and front offices to gather data. Moreover, resulting in higher-cost implications which detracts from revenue-generating opportunities.

With almost 100% straight through processing (STP) with dynamic KYC process automation the team can focus their valuable time elsewhere. This can be unraveling the convoluted corporate structures of complex beneficial ownerships or similar value-added tasks, such as risk decision making.

4. Demonstrate consistent compliance with fewer errors

Manual processes often rely on disparate data sources, spreadsheets, and manual records. Moreover, with multiple internal stakeholders involved in building each KYC profile, inconsistencies and human errors occur.

Automation not only lowers barriers to onboarding, but makes the process more consistent, avoiding human error and longer processes. Additionally, each staff member can constantly adhere to the bank’s risk controls that are delivered perpetually, with ease.

20-30% of resource is typically spent on control. Furthermore, anything a bank can do to provide data points automatically, from source, removes the need for control oversight offers significant efficiency savings.

Standardization of the KYC process can be applied across the bank in readiness for futureproofing for growth, scale, and changes in regulation across multiple jurisdictions.

5. The value in quality and depth of data for real time digital profiles

Access to high quality, accurate, and timely data is key to onboarding entities. Structured and unstructured KYC data can be sourced, collected, and stored in diverse ways making it difficult to manage on a manual basis.

Having such fragmented data impedes banks from developing a single customer view and effectively unwrapping ownership structures. KYC process automation enables banks to bring together, integrate and analyze their choice of data products via a single platform, based on their risk appetite and policy. Corporate structures are unwrapped faster and in more depth with process automation with multiple search procedures be performed concurrently enabling insight than an analyst working with manual processes.

6. Scalability

Global banking revenues are expected to rise by 9% a year through 2025 and corporate customers are expected to be at the forefront. Banks that have smooth processes and can onboard at scale will be the banks that have a head start on their competitors and benefit from the growth.

Using automation that is complementary to client lifecycle management (CLM) solutions streamlines the KYC process which lays the foundation for growth and a move towards a pKYC journey further down the line.

7. Enhanced compliance

Remaining compliant with anti-money laundering (AML) and audit ready can be challenging. Especially when considering the workload associated with manually collating the necessary data and documentation.

Reducing this issue is easily solved with automation. Banks can demonstrate AML compliance with a dynamic audit trail. A digital record of all KYC activity is automatically stored as standard, available to share, download and review when refresh or remediation is required.

Author: Darren Marion

With an extensive management career within several leading Investment Banks – UBS, Deutsche Bank, BNP Paribas and Citigroup, Darren has managed teams across the complete Operations function. More specifically, he has led KYC teams and has been responsible for contributing to DB’s CLM Transformation journey. At Encompass, Darren works closely with our existing clients to maximise the platform's automation efficiencies as well as provide current industry insights.

LinkedIn Profile | Darren Marion

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