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Technology Building Blocks that Enable Real-Time KYC

Financial Institutions (FIs) know the benefits of frictionless client experience, but with Know Your Customer (KYC) compliance and other regulations to consider it can be hard to strike the right balance.

A real-time KYC integrated technology platform can help FIs to manage KYC policies and regulatory compliance from initial Client Onboarding to KYC reviews, event-triggered KYC reviews and ongoing operational activities.

In a recent webinar, we discussed the technology building blocks that enable real-time KYC and create a more positive customer journey. In this post, we get under the hood of real-time KYC and look at those building blocks in more detail.

What’s driving FIs towards real-time KYC?

Client Onboarding, KYC checks and various other regulatory processes can mean that clients experience a high-level of contact and data checks from FIs. We all know that this can lead to friction. Often, clients don’t understand why they are being contacted and asked for information, particularly if they have already supplied the information on a previous occasion.

Fenergo finds that the churn of potential customers due to a poor experience can add up to $10 billion per year in losses over the client lifecycle. FIs are looking to technology to solve the problem and foster a more streamlined client experience and this is a key driver towards real-time KYC.

Improving the overall efficiency of operational activities is another key driver. Real-time KYC enables FIs to greatly reduce repetitive, manual work and save valuable working hours. Reducing the amount of time spent on KYC checks and reviews enables FIs to focus more time on activities that add value.

The essential components for real-time KYC

Creating a framework for digital KYC relies on a range of different technologies that deliver workflow, data and document automation, risk assessment, Anti-Money Laundering (AML) screening, and dashboards for complete control.

These building blocks include:

1. Client Interactive Portal

Today’s customers expect a digital touchpoint, such as an app or website, so they can access their financial information and make transactions quickly. As well as being an essential customer service, an interactive portal can also encourage clients to update their details and empower them to self-serve.

2. Digital Signature and ID&V

Enabling clients to use digital signatures and verifications where appropriate reduces the time and cost involved in printing, sending and processing documents. KYC compliance and other operational Activities that require signatures or verification can be carried out quickly by the client, taking far less time than the traditional paper-based approach and supporting a more positive client experience.

3. Digital Data & Document Capture

When using technologies that enable digital data and document capture, manual uploading activities are reduced, saving time and money. Data is typically captured via Optical Character Reader Recognition (OCR) and Natural Language Processing (NLP) technologies. Once it has been processed, it can be compared with external data via third party integrations and flagged if there are any irregularities. Data from structured documents is generally easy to capture, but manual upload may be required when dealing with unstructured documents.

4. AML Screening

The vast majority of the US$26 billion that Fenergo identifies as having been issued in global fines globally since 2008 – plus around another US$5 billion issued since the research was released – were for anti-money laundering (AML) violations. With the right AML screening technologies in place, FIs can be confident that they are following best practise and adhering to the laws, regulations, and procedure across all geographic regions.

5. Digital Regulatory Risk Assessment

Digitizing risk management enables FIs to streamline initial and recurring risk assessment processes and share data with their AML teams. Using a trusted out-of-the-box rules engine ensures that risk is measured across a broad variety of categories, including geographic, client, industry and product risk. Data from KYC, Customer Identification Program (CIP) and Customer Due Diligence (CDD) can be re-used and reviewed during the risk assessment process.

6. Straight Through Processing (STP)

Automating payment transfers and trades with Straight Through Processing (STP), enables FIs to accelerate processing and improve the client journey.

Getting started with Real-Time KYC

Technology plays a key role in creating a real-time KYC strategy, but it must be strongly supported by robust data management plan and human intervention when required, such as high-risk situations. The aim is to automate wherever possible to achieve compliance and operational efficiency.

“Financial institutions at the start of their KYC journey need to ask themselves; ‘where are we today, where do we need to be and how do we take people on that journey?’ It’s much harder to bring decision-makers along when it’s a vision, they need to see results. So, if you have a three-year KYC project, think about what quick wins you can achieve in the first six months.”

According to Greg Watson, Global Head of Corporate & Institutional Banking at Fenergo, many organizations are struggling to articulate the problem they’re trying to solve.

Keep a close eye on developments in digital KYC, because things are changing fast. We will see Distributed Ledger Technology (DLT) and Blockchain become more mainstream, although it’s still early days for these technologies.

For more tips about how to make digitalized compliance a reality, visit our KYCSmart Review