Banks have invested countless millions in Know Your Client and Know Your Customer verification, but they haven’t been able to use this knowledge beyond regulatory “check the box” procedures that can irritate clients and even cause some of them to switch banks. However, things don’t have to be this way. Banks can access deep customer intelligence and insights to improve risk management, the customer experience, and their own capacity to service customers, lower costs, and increase revenue by enhancing the quality of data collection and implementing the appropriate analytics during the know-your-customer (KYC) process.
In light of this, we examined the findings to calculate the advantages of better KYC verification processes and to determine the best methods for overcoming the related difficulties.
4 Reasons KYC Processes are due for an update
While banks have long faced KYC challenges, recent developments in the business environment have increased pressure on organisations to reconsider their KYC strategy and come up with effective solutions that will set them apart from their competitors. The following shifts are among them:
Regulators’ increased attention towards risk efficiency
The growing emphasis on risk effectiveness, efficiency, and innovation advises banks to enhance risk coverage and mitigation, automate manual operations to decrease human error, reevaluate offshore and outsourcing practices and take advantage of possibilities for utilities.
Customers looking for B2C-like interactions
More financial companies are offering a better KYC verification experience as customer demands for speed and ease, continue to rise. A study found that banks with the highest customer experience ratings had considerable benefits, including a 3% growth rate, a 15% gain in revenue, and a 4% increase in efficiency.
Generally poor data quality
According to recent research, duplicate and incomplete data, nonstandard data formats, and data quality issues can account for up to 26% of operating expenditures. Leading companies are aiming for real-time data and a single, global consumer picture.
Budgets are getting tighter and prices are rising
Banks must invest in the appropriate technology, data, and analytical skills to ensure sustainable development in light of rising KYC verification costs and constrained budgets. According to a poll, the average yearly operational expenses for financial crime compliance have increased by almost 43%, while the majority of participants believe that budgets for KYC programmes will drop by up to 25% from the previous year.
What do the latest KYC processes need?
The main challenge for banks is figuring out how to set themselves up so that enhanced KYC procedures can become a reality, despite the fact that the benefits associated with next-generation KYC processes are substantial and genuine. Here are the most important five elements—including both technology and human components—for maximising effectiveness and advancing the capabilities of next-generation institutional KYC verification:
Use customer-risk management and design that is driven by risk
Focus on customer-risk assessments to guide process design and policy creation for a more accurate, comprehensive, and near-real-time understanding of customer risk.
Digitize the consumer experience and make it better
Utilizing a self-service customer portal that is customised, digitise institutional client journeys. Employ a customer care crew to support that site who is knowledgeable with both local and worldwide KYC.
Apply data and risk analytics for KYC Processes
Establish a strict data-management procedure that makes use of dynamic and automated data inputs from both internal and external sources. Utilize the data to do sophisticated KYC-program-risk analyses to get a competitive edge.
Automate cases, processes, and policies intelligently
Improve capacity by automating case management, processes, and policy administration so that teams can concentrate on real value-adding tasks like customer risk assessment.
Establish a centre of excellence
Create a centre of excellence with strong performance management that makes use of balanced scorecards and accounts for the customer experience at every stage of the process (by integrating customer-experience indicators in the analysts’ scorecards, for example). Optimize location and resource allocation techniques and create career pathways specifically for KYC verification.
Banks must be proficient in each of these five areas, and they cannot achieve this just via the use of technology. For each of the five elements, they must develop a comprehensive range of technological and nontechnical competencies. Using nontechnical levers, it is possible to achieve several rapid victories and big improvements, such as establishing clear roles and responsibilities across stakeholders, resetting risk-based policy, streamlining risk procedures, and simplifying requirements.
5 Benefits of an improved Know Your Customer process
Improved data quality
You will get a variety of advantages with an enhanced calibre of data gathering that uses appropriate analytics during the KYC procedure. After all, data quality is crucial, it provides access to rich consumer knowledge and insights, that can help manage risks better and provide a better client experience as a result.
Additionally, customer service and experience are also significantly improved, expenses are cut, and increases income by enhancing the quality and accuracy of the data you gather.
A recent survey found that up to 26% of operational expenditures are presently caused by data quality issues. This is because a lot of businesses deal with duplicate data, missing data, and non-standard data formats.
Identity Verification API solutions effectively make use of real-time data in order to address the issues caused by poor data quality. These companies help businesses achieve sustained growth by making the appropriate technological and analytical checks in order to provide a best-in-class KYC verification solution.
Additionally, digital identity verification solutions also use structured data management procedures that make use of automated and dynamic data flows from both internal and external sources. Which helps carry out advanced analytics procedures that provide businesses using them a competitive edge when it comes to KYC.
As a follow-up to the aforementioned, the leading financial institutions are also utilising automation as a type of best practice for KYC. This ensures organisations can cut expenses, speed up the onboarding process, and increase accuracy.
By using KYC APIs to automate the KYC verification process, you can make sure that both KYC protocol compliance and end-to-end anti-money laundering compliance are met.
You can rapidly verify your clients’ identities, screen them against PEP and sanctions watchlists, look for negative media and information, and continuously monitor them with our AML and KYC compliance solution.
In only six seconds, a user’s identity can be verified using an automated and precise identity verification method.
In order to increase conversions, the solution usually also checks for liveness, using AI capabilities to aid in verifying faces and ID data extraction.
Reduced False Positives
A false positive AML alert will be generated if your customer’s identity coincides with the name of someone on a politically exposed persons (PEP) watchlist or if they seek to make a legal number of business withdrawals in a business day but unintentionally over a threshold.
Usually, an AML compliance team must carefully review each AML alert. Therefore, if your procedures produce a lot of false positives, you can be squandering a lot of time and money. Additionally, if you freeze a customer’s account after they’ve generated a false positive, the inconvenience can lead them to switch service providers.
There are actions you can do to ameliorate the number of false positives you create, even though it’s very hard to completely eradicate false positives. You can, for instance:
- Reorganize your data, focusing on names
- Ensure that the data is correct and pertinent.
- Review your procedures frequently and make adjustments as necessary.
- Utilize cutting-edge AML Screening API solutions that use artificial intelligence and machine learning
Improved Customer Outreach
In a KYC verification process, customer outreach is a crucial stage. It refers to the data that a company needs from its clients in order to carry out the customer due diligence (CDD) procedure.
Your conversion rate will be lower the more difficult your client outreach approach is. This is due to certain consumers’ reluctance to divulge private information. Others, meanwhile, will grow more and more irritated if they are required to submit the information that they have previously provided or if the procedure is unduly slow.
You need to assess your consumer outreach procedure in light of this. Using a digital KYC verification solution ensures your client outreach process is seamless even if you must ensure you collect all the information to comply with consumer due diligence regulations.
Last but not least, it is difficult to discuss KYC best practices without addressing cost. Even though KYC verification is required, it may be quite expensive if your processes are inefficient and too complicated. This is especially true when you take into account elements like manual labour hours, personnel additions, and the cost of any compliance tools. This is even before the hidden cost of users quitting their application due to KYC difficulty is taken into account.
Thankfully, cutting your KYC expenses won’t be difficult if you heed all of the recommendations we’ve provided above. This is because you’ll streamline the procedure and make it far more structured and user-friendly using an intelligent KYC verification solution, that does all the work at minimal expenses.
Returning to the automation discussion, using an automated solution saves money and conforms to your budget in addition to freeing up staff time.
IDcentral’s KYC API solution
How IDcentral uses Artificial intelligence (AI) & Machine Learning (ML) for KYC
IDcentral links all pertinent data to provide a thorough, 360-degree perspective of risk when analysing large, global third-party networks. The following are some ways that machine learning and/or AI is used:
- Intelligently categorising facts, events, locations, and people across millions of documents quickly creates richer material that is simple and accurate to search.
- information deduplication to find and group related or redundant stuff.
- Making a connection between a specific entity and any prospective risks, to establish reliable entity-to-risk relationship mapping.
- Event-based deduplication divides material into event clusters, enabling users to concentrate only on the entity and event combinations that interest them.
Permanent IDs being used
Every piece of information, human, entity, and the transaction is given a permanent identification, such as an immediate ID code, which is a machine-readable, unique identifier that makes it possible to link data clearly between content sets.
Cloud-based API engineering
In-house compliance workflow systems that fetch industry-leading data and insight straight from this technology, enabling compliance professionals to make knowledgeable risk choices.
Digital Identity Verification Techniques
IDcentral’s Identity Verification API provides reliable flags that help rapidly verify users and raise the chance of completing transactions, lower fraud, and facilitate retail onboarding. By combining cutting-edge algorithms with proprietary and third-party data, KYC verification can now be completed in seconds.
Try IDcentral’s KYC Verification API with AI-based ID Authentication & Face Verification
Sumanth Kumar is a Digital Marketing Consultant at IDcentral (A Subex Company). With hands-on experience with all of IDcentral’s solutions, he loves to compare and create indispensable digital content.