The journey from manual KYC to corporate digital identity

Know your customer (KYC) processes are essential for compliance and risk management. However, the traditional manual approach presents significant challenges for banks. These lead to inefficiencies, excessive cost, and poor customer experience. In this blog we explore the path to corporate digital identity (CDI) from manual KYC and the benefits on offer.

Challenges of manual KYC

Key issues facing banks in maintaining accurate and efficient manual KYC processes include:

• Numerous disconnected systems, making it difficult to consolidate and verify information when performing searches.
• Risk of human error, such as missing or mis keyed information from maintaining paper documents or internal spreadsheets.
• Ability to keep client data current.
• Multiple siloed systems and information resulting in an inconsistent audit trail.
• Inconsistency complicates compliance and regulatory reporting.

The inefficiencies and errors in manual KYC processes are glaring. The average onboarding process takes between 90 to 120 days, causing delays in client acquisition. With $3.3 trillion lost to client abandonment and 85% of clients reporting a poor experience, the impact is substantial. Manual KYC processes waste time and resources, leading to high internal friction and lost business opportunities.

Manual processes increase the risk of non-compliance with KYC regulations, exposing banks to significant risks, including fines and reputational damage.

Additionally, inefficiencies within the KYC process cause frustration among staff, leading to decreased morale and productivity. This cycle of dissatisfaction and inefficiency not only undermines trust but also hampers the overall operational effectiveness of the bank.

The role of public and private data

When onboarding entities for corporate banks, the distinction between public and private data becomes crucial for an efficient KYC process. Public data, accessible from government databases, regulatory filings, and other open public sources, provides a foundational layer of information about an entity.

However, private data, which is specific to the client and often held internally, offers the information required for validation. The challenge arises when banks repeatedly request private information from clients that is already available. Subsequently leading to a frustrating and cumbersome onboarding experience and increasing the likelihood of abandonment.

Scaling KYC operations

High employee turnover combined with a shortage of experienced analysts hampers efforts to scale KYC operations. Developing technology in-house is complex. Banks face issues such as project overruns, lack of internal expertise, difficulties of future proofing as well it being prohibitively expensive.

Multiple records and disconnected systems complicate data integration and management further and proving the origin and accuracy of data further complicates scalability.

Banks are attempting to address these challenges by transitioning to more efficient and automated KYC processes. However, a staggering 88% of banks report challenges in obtaining the necessary private information for KYC.

Path to CDI: offering the way forward

CDI is emerging as a pivotal aspect of modern KYC operations. Advancements in technology can now facilitate a dynamic view of the customer and a move towards a standardized approach to KYC.

A CDI profile incorporates real-time data and documents from authoritative public sources and private information from the customer. Subsequently providing a holistic customer risk view configured to a bank’s individual regulatory and business requirements.

With CDI banks can overcome many of the challenges previously faced from manual processes. CDI solutions provide fully integrated systems powered by real-time data with seamless integration via APIs. Automated processes enable the ingestion of public data in real-time, and automated outreach for private data collection reduces the need for manual intervention.

CDI ensures that data is normalized and resolved, with clear entity primacy and hierarchy rules. Digital client profiles are standardized, providing a consistent and reliable source of information. Full visibility of data provenance and an audit trail enhance compliance and risk management further.

Advantages of CDI

The benefits of CDI are significant. It can result in savings of up to $700 million over five years and reduce client abandonment rates by up to 40%, improving customer retention. Efficient and compliant KYC processes lead to business growth, happier customers and staff, and robust risk mitigation.

By adopting CDI, banks can transform their KYC processes, achieve significant efficiency savings, and improve overall customer and employee satisfaction. The future of KYC lies in automation and integration, ensuring that banks remain compliant while fostering growth and innovation.

View our ‘Path to CDI’ infographic for an overview.