Transforming FinTech: The 7-fold Benefit of Automating KYC Processes

In an era of growing operational costs, it has become a pressing necessity for banks to embrace efficient Know Your Customer (KYC) practices. The global spend on regulatory technology (RegTech) is predicted to ascend to $207bn by 2028, a forecast that urges banks to channel their investment into automating their manual KYC processes.

Encompass Corporation, recently delved into seven avenues through which banks can attain optimal value via dynamic KYC process automation.

A significant challenge banks face in financial crime compliance is the soaring operational costs, which have risen by about 25% from 2020 to 2022. The solution to counteract this surge and alleviate the administrative burden of managing an effective KYC programme lies in automation. In their daily operations, banks grapple with issues such as accessing reliable and precise data, navigating jurisdictional subtleties, and designating additional resources. An automated KYC system not only addresses these obstacles but also expands the potential for growth, scale, and efficiency, thereby meeting regulatory requirements and aiding in audit trails.

Inefficient KYC processes detrimentally impact not just customers but also the banks themselves. For instance, an onboarding period of up to 100 days for a new corporate client is far from uncommon due to inefficiencies in manual data collection. Encompass stated that an automated system can significantly expedite this process by sourcing data from global premium and public databases, thereby reducing the KYC outreach procedure by over 60% and enhancing the customer experience while simultaneously increasing the bank’s operational efficiency.

The rapidity of the onboarding process is directly proportional to the speed at which a bank can start realising revenue. Furthermore, it also allows banks to identify upselling and cross-selling opportunities early on. Automation bridges the gap between KYC and risk teams, providing all-access to central sources of invaluable data across the client lifecycle and reducing time to trade by over 40%.

The labour-intensive process of constructing a typical KYC profile is primarily focused on public data collection. By implementing a nearly 100% straight through processing (STP) with dynamic KYC process automation, banks can divert their resources to more critical tasks, such as unravelling complex beneficial ownership structures and risk decision-making.

Automation enhances consistency and reduces the risk of human errors that manual processes often entail. Additionally, the standardisation of KYC processes across the bank readies it for future growth, regulatory changes, and scalability across multiple jurisdictions.

The quality, accuracy, and timeliness of data are vital for efficient onboarding. Manual management of fragmented data, whether structured or unstructured, impedes the development of a single customer view and the effective unwrapping of ownership structures. By contrast, KYC process automation allows banks to integrate and analyse their choice of data products via a single platform, accelerating the unwrapping process and providing deeper insights than manual processes could offer.

Considering that global banking revenues are projected to grow by 9% annually until 2025, with corporate customers leading the charge, banks that can streamline their processes and onboard at scale will undoubtedly gain a competitive advantage.

Lastly, Encompass stated that remaining compliant with anti-money laundering (AML) regulations can be a daunting task, especially when one considers the manual labour required to compile necessary data and documents. However, automation resolves this issue by providing a dynamic audit trail and automatically storing a digital record of all KYC activities.

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