Financial institutions spend enormous amounts of time and money manually processing checks, making client onboarding increasingly complex. How can your KYC verification process be carried out accurately, quickly, and without increasing the workload on your team?

This article will examine the traditional KYC process’ components, the difficulties financial institutions are having with their onboarding procedures, and the ways an automated client onboarding solution can streamline your company’s operations while still adhering to legal requirements.

TRADITIONAL KYC: WHAT IS IT?

Banks and other financial institutions use the Know Your Customer (KYC) process to gather information on their clients and confirm the accuracy of that information by cross-referencing it with multiple external watch lists and public record databases. AML and CDD, two crucial procedures that fall under KYC verification and involve routine checks and continuing customer monitoring, are also crucial activities.

The goal is to assess the likelihood of probable unlawful activity and to stop customers from abusing the companies’ services by committing identity theft, money laundering, terrorism financing, and fraudulent financial transactions.

Online and offline modes are both available for KYC:

Offline: 

The customer downloads the onboarding application, completes the information on paper, signs it, and sends it with copies of the necessary documentation.

Online:

The consumer fills out the necessary information in an online form and uploads the necessary papers. Manual reviewers who will communicate with the client to complete the process manually and verify the documents with online KYC.

Traditional KYC procedures rely primarily on people to do manual operations like data entry, approvals, approval sorting, and error correction. Banks have an increasing number of challenges when onboarding new clients and ensuring regulatory compliance due to this reliance on human resources.

DIFFICULTIES WITH MANUAL KYC

For financial institutions, maintaining compliance during customer onboarding may be a highly challenging process due to the strict and constantly changing regulatory environment. Banks must be financially sound enough to do so, comply with all local, regional, and national regulatory requirements, and guarantee that consumers have a positive onboarding experience.

When implementing traditional KYC, institutions must overcome a number of difficulties:

Data Entry by Hand:

The onboarding procedure for most institutions calls for the collection of data, which is still done via email and paper papers. This necessitates a significant amount of labour-intensive, manual effort, which produces mistakes and increases the expense of correction.

High prices:

Major financial institutions have estimated that their annual KYC/AML and due diligence expenditures range from $50 million to $500 million.

Internal salary salaries, third-party identity verification, technology development or third-party licencing, regulatory fines, and remediation costs are all included in the real cost of KYC. It makes sense that banks are frantically looking for methods to reduce the cost of onboarding.

Time-Consuming:

Internal teams spend hours manually entering data, checking information, fixing errors, and getting in touch with clients. Due to the laborious nature of KYC, businesses may invest more than a month in ensuring compliance for a single customer.

Human Resources Waste:

Due to the manual nature of KYC processes, valuable human resources are diverted from anomalous and more client-centric work to execute tedious, repetitive chores. Additionally, this might have a bad effect on how engaged employees are. Onboarding new client organisations take up an average of one and a half days per week for more than 50% of banking salespeople.

The difficulties listed above provide a brief overview of the struggles financial institutions encounter when onboarding consumers in the current regulatory environment.

KYC AUTOMATION: WHAT IS IT?

To make sure that your clients adhere to regulatory norms without heavily relying on internal resources, automated KYC verification makes use of cutting-edge AI and machine learning technology. 

WHAT ADVANTAGES DOES KYC AUTOMATION OFFER?

Lower Costs:

By using automated solutions to improve KYC procedures, onboarding expenses can be cut by 70%. Banks may dramatically lower costs by reducing data entry mistakes and rectifications, avoiding expensive non-compliance fines, and lengthening the onboarding cycle.

Enhanced Effectiveness:

Customers can construct a certified digital identity that can be checked instantly with fully automated identity verification. Automated solutions also have the added benefit of operating continuously, without downtime, because robots don’t need to sleep.

This shortens the onboarding process by up to 80% and enables financial institutions to onboard more clients overall each year.

Scalability:

Manual processes are difficult to expand without incurring significant labour expenses, and they do not readily respond to internal or external threats, as well as rapid changes in KYC verification regulations.

AI-powered bots may be implemented into your company’s infrastructure with little to no disruption and little to no downtime. They operate continuously and swiftly adapt to external requirements.

Increased customer satisfaction:

The secret to success is having happy customers. Through the elimination of the constant back-and-forth between the customer and the bank whenever new information is needed, automated KYC verification offers clients a seamless experience. Customers receive accreditation or identification that is quick and simple thanks to an automated process, which speeds up account opening.

Conclusion

In a sector that is heavily regulated, onboarding new customers might be challenging. Thankfully, technological advancements are making it possible for financial institutions to employ automated solutions that provide a wide range of advantages at a considerably lower cost than conventional operations.

Automation of KYC verification can help your company achieve regulatory compliance while lowering costs, increasing productivity, freeing up human resources, and improving efficiency.