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Six challenges of building KYC solutions in-house

By Howard Wimpory | Mon 10 June, 2024
Challenges of build vs. buy

For banks contemplating the development of an in-house know your customer (KYC) solution, numerous difficulties loom on the horizon.

In this blog we explore the challenges of building KYC in-house and why opting for a third-party solution can offer a smoother path forward.

Challenges of building KYC in-house:

  1. Initial planning and scoping 

    The complexity of KYC presents a formidable challenge during the initial scoping phase, particularly when onboarding corporate entities. Meticulous planning, demanding extensive efforts, to foresee all requirements is necessary. The solution must have the ability to cater to the diverse aspects of KYC entity verification, often across different jurisdictions using multiple data sources and workflows.

  2. Dealing with the data deluge 

    The sheer volume and breadth of data available poses a significant headache in KYC. Filtering through this data deluge to access, extract, and process relevant information for KYC purposes requires a focused approach to reduce white noise and pinpoint essential data points.

  3. Access to data sources 

    Accessing data sources such as registries presents difficulties due to the absence of standardized interfaces, hindering seamless integration. Additionally, data stored in secondary sources often contains outdated information, complicating the task of ensuring accuracy and relevance. Sophisticated CAPTCHA systems employed by websites further amplify the technical hurdles faced by internal developers.

  4. Maintenance issues 

    Data is dynamic. Moreover, the complexity and volume of data grow exponentially with the scale of operations. If banks decide to build their own solutions for data management and monitoring, the pain associated with maintaining and updating these systems also scales. The ongoing need to adapt to new regulations, manage vast datasets, and ensure seamless integration between various data sources can overwhelm internal resources.

  5. Risk and cost 

    While building an in-house KYC solution offers customization benefits, banks must assess the associated risks and costs. These should not be limited to the short-term consideration of resources. Instead, the bank must allow for ongoing maintenance with regulatory updates and the addition of new data sources being required.

  6. Integration and time to value 

    Ensuring seamless integration between the KYC solution and existing systems is paramount. However, differences in system architectures and technologies may introduce complexities, necessitating additional development efforts. Furthermore, the time to value for in-house solutions is often longer, with project creep occurring.

The alternative to building in-house

External vendors specializing in KYC solutions bring a wealth of expertise and experience gained from working with numerous banks. They are dedicated to staying informed of the latest regulatory requirements, technological advancements, and industry best practices. By leveraging a vendor’s specialized knowledge, banks can access innovative solutions without the need to invest heavily in building internal capabilities.

Outsourcing KYC offers advantages:

  • Cost reduction
  • Speed to implementation
  • Data expertise
  • Scalability
  • Customization
  • Analytics
  • Compliance expertise

Encompass, as a specialized vendor with a decade of experience, transforms KYC for corporate banks. Continuously innovating, refining and enhancing the product, our solution often exceeds industry standards. Our advanced features address banks’ unique KYC challenges, facilitating swift and precise identification and verification of corporate entities through intelligent process automation, data normalization, and entity resolution capabilities.

By leveraging corporate digital identity (CDI), banks can overcome the challenges of scale and complexity inherent in building and maintaining their own systems. These technologies provide a scalable, efficient way to handle dynamic data, ensuring continuous compliance and operational efficiency. The integration of automated monitoring tools becomes a critical factor in maintaining robust data management practices. Ultimately enabling banks to focus on core business activities and customer satisfaction.

Read our eBook to discover more and access our decision-making framework for a build vs. buy KYC solution.

Author: Howard Wimpory

Howard works with Tier 1 banks to digitally transform their KYC onboarding and refresh processes. He has held a number of executive-level operational roles with a major global bank including leading their wholesale KYC Onboarding and Refresh functions. His most recent role prior to Encompass was as Managing Director, Group Financial Crime Operations position at Barclays Bank, where amongst other functions, he was accountable for leading KYC Remediation of Corporate and Investment Bank Client records to FCA committed timeline.

LinkedIn Profile | Howard Wimpory

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