By Steve Hadaway, Chief Revenue Officer, Encompass Corporation
With the financial landscape evolving rapidly, banks must balance meeting stringent regulatory-compliance demands with ensuring operational effectiveness to achieve long-term success.
The spotlight continues to be on the global issue of financial crime and combatting it, with the UK Government introducing the Economic Crime Plan 2 and other regulatory measures to bring about change. This makes it imperative for institutions to be vigilant and proactive in their actions to respond to a moving regulatory framework as the threat of financial crime remains while also prioritising driving the efficiencies that will contribute to their growth paths.
Within financial services, there has been an ongoing focus on the benefits of digital transformation as banks look to bring in the best that technology offers to bolster processes and meet increasing customer expectations.
In the case of Know Your Customer (KYC) processes, financial institutions have traditionally relied on manual approaches. And while these may have been sufficient in the past, the case for technological solutions, such as dynamic KYC-process automation, has never been clearer.
To deliver on customer and regulatory expectations as well as remain competitive in an increasingly crowded market, financial institutions must trust the technology available to them. Not only can outcomes be significantly improved now by doing so, but future benefits will also be realised as the KYC operation of the business is set up to both facilitate and respond to ongoing acceleration and growth.
Staying compliant with a changing regulatory framework
For institutions to achieve this meaningful growth, staying a step ahead regarding compliance is crucial. Keeping up with regulatory obligations relating to anti-money laundering (AML), particularly, requires money, time and resources—something that cannot be underestimated.
While non-compliance can undoubtedly prove costly, both in terms of the fines handed down and the consequential reputational damages, institutions also have a duty to protect their customers and their data. This underscores that investments should be made in technology that can provide peace of mind that compliance is assured, boost operations across the board and pave the way for success—both today and in the future.
At its core, KYC is an essential process that allows institutions to verify clients’ identities and flag potential risks. As mentioned, and having become more pertinent in recent years, the manual processes traditionally followed are time-consuming and labour-intensive, with analysts spending hours finding relevant data and even more time analysing it.
These procedures require analysing documents and cross-referencing data against various databases and watchlists. Done manually, this process is prone to human error, and it can take days or even weeks to complete.
This is just one of the points underlining the fact that the benefits of turning to automation are vast—not least regarding time savings. With automation, digital KYC profiles can be built in minutes. This removes KYC bottlenecks, takes a great deal of strain away from analysts at the centre of the activity and reduces the time to trade by more than 40 percent. This makes for a more rounded, smoother service that increases staff morale and brings satisfaction externally, resulting in increased loyalty.
Additionally, as regulations shift, compliance teams must stay up to date on these changes, which can be a challenge when working through manual approaches. KYC automation allows for consistent and streamlined processes, simultaneously enabling analysts to concentrate on cases that really need their expertise and intervention.
Crucially, automation also provides access to the critical data required for investigations while also assisting in monitoring regulatory changes and updating customer profiles in real-time. This results in a rigorous, effective approach that fully automates the KYC search in as little as eight minutes.
The costs of inefficient KYC
Ensuring that effective KYC systems are in place has never been more important. Looking at the impact on a global scale, the projected total cost of financial-crime compliance across financial institutions is $274.1 billion. In Europe, specifically, banks have had to contend with operating costs of €12 billion a year in connection with KYC processes.
It is when realising what it takes to meet compliance obligations for companies and corporates with complex ownership structures that these costs—both in terms of money and time—build up even more, and banks can spend as many as 47 hours carrying out the required tasks for each multinational or foreign corporate client.
Boosting long-term growth
For banks and financial institutions that have begun transforming their KYC processes, spending on technology that can have immediate and measurable impacts is critical, with the costs of inefficiency clear to see.
Within banks today, chief operating officers (COOs) in particular have much to consider and significant responsibilities in this regard. Ultimately, they allocate budgets and decide how to invest in new technologies. This means that these individuals focus on balancing high operational costs with the ability to onboard and monitor clients quickly. And while the economic outlook in the United Kingdom is certainly brighter today than it was at the end of last year, institutions are still required to be mindful when allocating these budgets. Spending is increasingly scrutinised, so institutions must concentrate on investments that will demonstrate positive changes across their businesses immediately and for a long time to come. Automation can do just that.
One way that success and growth can be maximised is by emphasising enhanced customer experiences and long-term satisfaction.
Manual KYC approaches, during onboarding and periodic refreshes, require extensive documentation and verification, often resulting in lengthy and onerous processes that can lead to frustrated customers. Additionally, the staff members involved in these processes are often left feeling overwhelmed by the volumes of checks and work required, which can cause dips in productivity and overall engagement.
In contrast, automating the manual due-diligence process undertaken by KYC analysts can decrease the onboarding period from 12 days to just 2 days, giving customers quicker, easier and more satisfying experiences, which, over time, will have direct impacts on revenue.
Meanwhile, having real-time access to the data required for investigations also reduces the need for customer outreach, resulting in simplified onboarding and enhanced customer engagement and retention.
In what is, without a doubt, a highly competitive sector, promoting the digital transformation of processes such as KYC, and the innovative solutions available, is central to banks reaching their goals and experiencing long-term, sustainable growth.
Forward-thinking institutions can use automation to get ahead of the competition, with technology providing some of the most valuable tools for any business. It is now up to organisations to unlock this potential across all business areas if they are to reap the rewards.
Ultimately, trusting in these solutions means institutions can progress with the confidence that, amidst all the changes around them, they can stay compliant while providing services that better satisfy customers and driving operational efficiencies in a way that promotes acceleration and growth in the long run.