KYC and the imperative for digital transformation
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How efficient KYC management can boost your bottom line

By Chris J. Arthur-Collins | August 9th 2022
How efficient KYC management can boost your bottom line | Encompass blog

For financial institutions (FIs), getting the full picture of corporate structures for new clients is the first step in defending against the risk of money laundering, sanctions violations and wider financial crime.

However, efficient KYC management offers more than protection and compliance benefits; it can become a competitive advantage.

Businesses are now realizing that improving KYC management can deliver value for the whole organization: it can create a measurable impact on the bottom line by transforming ineffective, expensive processes and improving customer experience. Operations teams have the opportunity to take a leading role in this journey by implementing new technologies to streamline KYC processes for internal and external stakeholders alike.

Let’s look at how efficient KYC management can boost your bottom line and the role of RegTech solutions in supporting efficiencies.

Driving value through efficient KYC management

KYC is an essential step in remaining compliant and reducing your business’ risk exposure. However, the importance of efficient KYC management goes beyond compliance.

From an operational perspective, KYC is a key opportunity for driving value across your business, through efficient processes, customer experience and data visibility. Research shows that the average annual operations costs for financial crime compliance have grown by around 43 percent. This is largely due to the increase in anti-money laundering (AML) legislation, with regulators demanding more from FIs regarding the breadth, depth and recency of the information they gather on customers.

For banks, the increasing workload for compliance teams creates multiple issues:

  • Those still working with manual processes will see their costs balloon, while overall workload increases with customer volume.
  • For customers, more complex checks require more data collection and input from them, which can add friction to the customer experience.
  • Stretched compliance teams can come under pressure to increase the speed of onboarding, meaning a greater chance of human error or missed steps, leaving banks exposed to penalties from regulators.

How RegTech is changing the game for banks and financial institutions

Operations leaders have the chance to take a leading role in solving these issues by leveraging RegTech solutions to streamline outdated processes.

The advent of RegTech software has created new opportunities for efficient KYC management, automating manual processes, reducing human input, improving customer service and reducing risk. These solutions can manage a large amount of the data sourcing, retrieval and collation involved in corporate KYC due diligence, enabling compliance teams to spend more of their time on complex cases and improving customer service.

Firms that can strategically implement these systems to close the gaps in their KYC process have the opportunity to gain a competitive advantage in the market by increasing customer volumes, while reducing growth costs and operational expenses.

However, to achieve this, operations leaders must play their role in making the case for change and digital transformation for KYC.

Three ways efficient KYC management can boost your company’s bottom line

More efficient approaches to KYC management can have an impact throughout the KYC journey and beyond, creating the foundations for more valuable relationships and processes across the business.

1. Improved customer experience

Onboarding is your customers’ first experience of your organization and the right experience can make or break your relationship. In an increasingly competitive business client market, making the right impression early is key to driving long term customer satisfaction, loyalty and advocacy.

Onboarding has, therefore, become an important competition area, with banks aiming to maximize speed and reduce unnecessary touchpoints around requests for information and documents.

Driving efficient KYC management with the support of a RegTech platform that integrates directly with trusted third-party data sources to source information seamlessly  reduces client-side work, while accelerating the speed of onboarding by reducing the need for manual intervention. Customers report that successful use of RegTech solutions, like KYC automation software, substantially reduces onboarding time, shortening the window to providing your customers value and retaining more business.

2. Increased process efficiency

KYC and AML compliance is increasingly expensive for financial institutions. This is largely due to the resources required to manage the workload in the face of increasing AML legislation.

Banks and FIs now have to source and verify a wider array of information than ever before for KYC due diligence. And without access to the right data sources, costs can quickly grow beyond acceptable parameters. According to research by McKinsey, data quality problems account for up to 26 percent of operational costs for financial institutions. This is due to non-standardized data formats and duplicate and incomplete information requiring manual review.

Modern RegTech platforms can access multiple sources instantly through integrations with external data providers to onboard customers faster and mitigate risk, while reducing the need for additional document sourcing, increasing the speed and capacity of compliance teams.

3. Reduced risk

Regulatory scrutiny remains high for FIs, especially regarding AML infractions. Last year saw a record level of AML penalties handed to banks and financial institutions, equating to hundreds of millions of dollars.

While some institutions have previously considered fines for AML breaches as simply the cost of doing business, the rise in RegTech solutions that can minimize the scope for human error and enable more efficient management of KYC due diligence means that these risks can be significantly reduced, along with costs.

By using a KYC process automation platform, FIs can increase data quality and depth across onboarding, KYC remediation, refresh and perpetual KYC (pKYC). Meanwhile, automated workflows reduce the possibility of missed information when reviewing a potential customer.

It’s time to create a connected KYC process

As the burden of KYC, compliance and risk management grows, KYC efficiency will be a key competition area for FIs. Those who can embrace RegTech and the benefits of digital KYC will be able to create end-to-end customer and stakeholder value through modern processes, secure data and effective risk reduction.

Encompass works with leading global banks to help them drive more value from their KYC processes. As a trusted technology partner, we specialize in bringing a fresh approach to existing manual processes, including smart process automation, access to external global primary and premium KYC data sources, digital KYC profiles and dynamic audit trails.

Our compliance experts work with institutions all over the world to analyze processes, find opportunities and implement game-changing technology to create efficient, value-driving KYC workflows. Explore our range of award-winning KYC process automation solutions.

To find out more about how efficient KYC management can deliver value for your whole business, the need for digital transformation and the key steps to success, download our whitepaper, Embracing KYC Transformation.

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