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The power of APIs for transforming KYC processes

By Michael Wilson | Mon 29 January, 2024

Are you a Head of Operations within a commercial bank? Are you looking to navigate the transformative world of Know Your Customer (KYC) processes through the power of Application Programming Interfaces (APIs)? This blog discusses the possibilities of supercharging KYC and Anti-Money Laundering (AML) processes.

Understanding APIs

APIs act as software intermediaries facilitating communication between different applications. They have become the cornerstone of faster and more efficient software distribution across various industries. Now is the time for commercial banks to utilize the power of API software to greater advantage for KYC. Particularly as the rise of cloud-based infrastructure and services architecture is fueling expansion opportunities with the move away from on-premise tech and manual processes.

How powerful APIs transform KYC

Data is the vital foundation for KYC and AML processes. But there is a significant challenge in handling extensive volumes of data, often sourced from different channels. Utilizing APIs to extract this data and gain insights proves advantageous in enhancing KYC processes.

The Encompass API increases the depth and quality of data sources available. It offers efficiency gains by employing a “federated search” that spans single or multiple data sources in a unified request.

As a result, it provides access to hundreds of approved data sources, enabling the verification of millions of entities and individuals across the globe.

All data can be accurately transmitted and shared between various systems in real time. Interacting seamlessly contributes to a more interconnected and interoperable environment. Equally important is knowing that the origin of the data can be traced, facilitating a comprehensive audit trail. Furthermore, supporting the efficiency of KYC processes, compliance procedures, and overall operational workflows.

Using an API in this way enhances the accuracy of customer profiles, reduces manual errors, and contributes to a more streamlined and effective KYC process.

Structured interaction in real time

APIs create a structured and standardized way for banks to interact with customer data. Through well-defined endpoints and schemas, banks can define and communicate the necessary data elements and then identify which requests are valid based on several request properties.

Carried out in real time saves on resource and reduces customer friction when compared to manual processes of researching and retrieving data/documentation. This dynamic approach enhances risk management and enables banks to respond promptly to any changes in customer status.

Why banks should embrace the power of APIs: A strategic advantage

A common challenge in banks is “swivel chair”, where analysts must navigate multiple systems to access information. APIs allow a greater number of systems to communicate directly, reducing the need to log in and out of different platforms and applications.

APIs can also easily scale KYC processes by adding new functionalities or integrating additional data sources without overhauling their entire infrastructure. Additionally, API models only map the fields that are important, therefore reducing the noise of other models that must display all fields.

Furthermore, APIs play a crucial role in accelerating digital transformation initiatives such as perpetual KYC (pKYC). A solid foundation of automation helps construct a pKYC environment to reduce the burden of traditional KYC refresh cycles.

Business benefits of APIs for KYC

  • Efficiency
  • Regulatory compliance
  • Automation
  • Reduce time to revenue
  • Digital transformation
  • Cost reduction
  • Collaboration
  • Transform KYC processes with scalable APIs

The inherent ability provided by APIs to make data available across systems minimizes the number of fields individuals need to complete during verification, effectively reducing onboarding friction.

Additionally, removing manual research with 100% automation of the KYC search procedure reduces rework and improves straight through processing (STP).

APIs assist in proactively monitoring changes in customer circumstances and moving towards a risk-based approach. Periodic review challenges can be addressed with APIs by proactively monitoring for changes in customer circumstances, such as ultimate beneficial ownership (UBO), shareholder, or director changes.

Designed for scalability and flexibility, an API has the capability to meet future demands. This includes incorporating additional features and extensions, such as expanding coverage to more countries and accessing novel data sources.

The future of banking: API centric strategies

As technology continues to shape the future of banking, embracing API-centric strategies becomes increasingly imperative for commercial banks. APIs not only provide a solution to streamline KYC processes but also serve as a fundamental enabler for innovation, agility, and enhanced customer experiences.

Utilizing the power of APIs in the KYC process ensures the bank remains agile, overcoming operational challenges and becomes responsive to the evolving needs of the industry and regulation.

Author: Michael Wilson

Michael Wilson is the Product Manager for the Encompass API, where he assumes a pivotal role in steering the product's roadmap, strategy, and overseeing the delivery of all features associated with the Encompass API. Michael's professional journey commenced with hands-on experience implementing and managing corporate applications for companies such as Ford Motor Company and Finastra. Transitioning into product development, he honed his expertise in seamlessly integrating various products and systems. With a robust background in both corporate application management and product development, Michael brings a wealth of experience to his role as a dynamic leader shaping the evolution of the Encompass API.

LinkedIn Profile | Michael Wilson

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