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Why a tech enabled approach to KYC is critical to business success

By Dipak Gorasia | Tue 5 September, 2023
How banks can use technology for KYC to scale for growth

Know your customer (KYC) is an essential part of a bank’s business. But as a bank scales it is important to use technology to automate the KYC process to stay competitive. In this blog, we look at how banks can use technology for KYC to scale for growth.

What is KYC and why is it important

The KYC onboarding process is a necessity for commercial banks for the purpose of anti-money laundering (AML) compliance. It is the process of vetting a business or corporate entity and its beneficiary owners. As a result, banks must gather data, check documents, verify information, conduct data remediation and finally, approve or reject an application.

Often banks rely on manual processes to collect and process vast amounts of data and documents from various sources.

However, manual processes are cumbersome and result in protracted delivery of KYC often with human error and risk of regulatory consequences. There is immense potential to automate these and build a more accurate digital KYC profile for each corporate customer.

Opportunities to differentiate through technology

Reimagining the KYC process allows the bank to integrate technology with preferred data sources and existing systems. In particular, existing client lifecycle management (CLM) and customer relationship management (CRM) systems. Which subsequently improve the client experience and provide scalability to meet future growth.

Simplifying the technology landscape with a single point of entry to perform live searches frees up resources to focus on revenue generating tasks at the front end. With the technical team reaping the benefits of data sourcing and collation together with automation to improve performance and consistency.

KYC pain points for the technology team

The key to using KYC automation to its fullest potential, however, is realizing its part in the process. It takes planning, strategizing, and the right mindset to overcome the pain points and provide the most value.

Pain points for the bank can include:

  • Integrating into multiple individual sources of inconsistent data which is fragmented and challenging to match and merge for reconciliation
  • Cost and burden of maintaining data source integrations
  • Different data formats and lack of standardized naming conventions
  • Keeping up with the constantly changing data requirements to deliver effective KYC
  • Existing technology is difficult to manage or update and is not scalable
  • Technical debt
  • Limited capacity to implement new solutions
  • Previous technology implementations have over run and require more resourcing than anticipated

These are familiar challenges, but ones that Encompass has regularly overcome in our experience of delivering KYC solutions to leading global banks.

Overcoming the KYC data challenge

With access to 175+ data products, via a single restful API platform, the Encompass data product connections are pre-built. Not only that but they are consistently maintained to ensure the bank has access to real-time data. Rather than the burden of having to take responsibility for the ownership of up-to-date data. Mitigating against future integration needs and addressing the scalability challenge. Furthermore, a data architecture can be delivered to enable access to quality data by processing both structured and unstructured data sources.

In addition, rather than building a large flat file of data, Encompass conducts real-time searches to build live KYC digital profiles. Data is matched and merged to provide deeper customer insight. Furthermore, this can be achieved on a real-time basis and at a large volume.

To comply and satisfy the needs of the regulator, all client profiles are stored to create a dynamic audit trail.  Each profile is stored with source documents and full data attribute lineage. A full account of all interactions with the client is held within the single platform providing real-time access for both internal and external stakeholders.

Reducing KYC technical debt

For technology to be the engine of growth that it can be, banks need to break out of the cycle of technical debt and modernize. KYC process automation contributes to the acceleration of the reduction of technical debt which can account for 20 to 40% of technology budgets  and significantly slow the pace of development.

In addition, the simplification of the technology landscape can be achieved with a single platform to perform live searches.

Delivering the benefits of automation

Transformation of the KYC process utilizes technology to automate routine and repetitive tasks. But there is a process to follow if your technology team is to achieve maximum benefit. As a technical lead there are several key steps that should be taken, in collaboration with your bank’s operations, KYC and compliance leads:

  • Understand and review the customer data attributes and documents you need to collect assuming a risk-based approach to KYC
  • Define the KYC processes you want to automate: There may be existing processes that have crept in over time that are no longer effective or even necessary
  • Discuss the technical elements with KYC implementation teams
  • Develop and launch the KYC software: As a SaaS solution using single restful API technology deployment can be very quick and easy to achieve

There are clear benefits to be derived from KYC process automation:

  • Ongoing maintenance is reduced.  SaaS technology supports future growth as required changes are easier to implement from an ‘off the shelf’ solution
  • Access to, and mapping, new data sources is simplified through single restful API technology
  • Pre-built integrations with existing CLMs systems and workflows enables a digital eco-system to be built
  • Industry leading API capabilities that have been proven accelerate the implementation process

The future

Chief information officers and chief technology officers have a real opportunity to tap into KYC process automation which will drastically reshape the entire process and client experience. Rethinking the process holistically and truly embracing emerging technologies will capture value and present sustainable value to the bank.

Value can be built through improved productivity, growth, and a new technical business model. In addition, there is the benefit of accelerating technical debt reduction and dramatically reducing the manual effort from the front office right through to the back office and IT operations.

Author: Dipak Gorasia

Dipak Gorsia is Head of the Encompass Delivery Services Group. He leads a global team of KYC, Technical and Project delivery professionals. The team ensure a frictionless implementation for customers transforming their KYC automation journey with Encompass. Dipak has extensive knowledge and experience gained from previous roles delivering cutting edge technical solutions for credit risk decisioning and fraud detection companies.

LinkedIn Profile | Dipak Gorasia

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