How innovative KYC practices can help financial institutions stand out

Wherever you look in the financial sphere, the competition is fierce. Attention is at a premium in the modern digital world, meaning financial institutions need to find a way to grab this attention with both hands.

Challenger banks and neobanks have been blazing a trail with customer-friendly onboarding processes in the world of finance. Many of them have made it part of their brand ethos to provide seamless and convenient digital customer experiences – helping them win over reams of new customers and followers in the process.

Likewise, the RegTech market has expanded out based on its desire to support FIs in onboarding customers in a safe and seamless fashion. However, these companies really began to stand out when it came to convenience and compliance in the world of KYC.

How can the financial services industry learn about how to make these necessary changes? A recent post by RegTech firm PassFort has outlined the ways FIs can begin to stand out from the pack when it comes to digitally competing.

During the first wave of RegTech, most of the focus was on providing access to data and giving financial services firms the data they needed to satisfy compliance requirements. RegTech was mostly aimed at helping FIs verify customers were who they claimed to be.

PassFort detailed that it was this first wave of RegTech that started to bring customer onboarding online and began the process of digital transformation in compliance. However, this evolution was followed by another, when digitising data access led to the possibility of digitally transforming more complex elements of the customer onboarding journey.

PassFort said, “RegTech was no longer about point solutions for accessing data. It was about aggregating data and giving product and tech teams the ability to orchestrate compliance workflows. Digitising risk policies, creating workflows of data checks, and automating key tasks to operationalise compliance and arrive at onboarding decisions. Better for businesses and better for customers.”

Following the first, the second wave of RegTech saw the development of customer lifecycle management solutions that dealt with end-to-end onboarding processes as well as risk monitoring and perpetual KYC.

Add onto this the effects of the pandemic, which have had a big impact on customer expectations when it comes to onboarding – something that is mostly now being done online thanks to the trends baked in due to Covid-19 and its effects. In 2022, it is vital KYC processes can be done digitally and seamlessly, with customers expected to do anything financially related online now.

PassFort remarked, “The challenge for the FinTech and RegTech industries is to segment bad actors from the everyday consumers who just want to access financial products and transact. These everyday consumers want convenient experiences and expect onboarding to be like any other part of their life as a consumer. This is what’s driving innovation – balancing customer experience with regulatory compliance. This is what makes KYC innovation important to FIs, because it is these experiences that provide competitive advantage.”

The company detailed how over the last five years, digital customer onboarding journeys have moved on massively. Many neobanks and challenger banks got a head start in this area, even if was seen as slightly unfair as they could design their compliance processes from scratch. However, as PassFort noted, neobanks and incumbents ‘have all come a long way towards solving their compliance challenges’.

PassFort explained that there were still key areas in this space that needed finessing, including ensuring operating models work for employees as well as customers, allowing collaboration between internal departments, simplifying escalation and handoff points between people and enabling people to work globally and across different jurisdictions.

PassFort concluded, “Overwhelmingly, the story of digital transformation from manual onboarding to digital onboarding is one of positivity for financial institutions, their customers, and employees. Getting this right can enable the growth of businesses, great customer experience and compliance with regulation.

“Think about the fastest scaling FinTechs and the fact some of them are receiving more than 300,000 download requests a day. How would it be possible to onboard this volume of people without the support of great RegTech solutions that orchestrate workflows, integrate data access and automate risk-based decision making?

“It’s essential to have the right processes, the right tech, and to harness the next wave of innovation to make onboarding scalable while dealing with customer demands that will enable firms to win the day. “

Read the full post here.

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