Share of Banks Losing Clients to Poor KYC Practices Surges to Record High

Sibos, Beijing – 22 October 2024 – The number of global banks losing clients to slow and inefficient know your customer (KYC) onboarding practices has surged to a record high this year, according to new research from Fenergo, the leading provider of solutions for KYC, client lifecycle management (CLM) and transaction monitoring. 

A global study of over 450 C-level executives across corporate, institutional and commercial banks found that more than two-thirds (67%) have lost clients due to slow and inefficient client onboarding and KYC, up 19% from 2023. Those based in Singapore have been hit hardest by the trend, with 87% of banks reporting lost clients, but every region reported a year-on-year rise. The decline in successful onboarding applications is compounded by high costs for performing KYC reviews at onboarding and periodically during the client lifecycle. According to Fenergo’s research, the annual cost for performing KYC reviews at a corporate and institutional bank* is estimated to be $60 million and $175 million for a commercial bank.  

According to the findings, the high abandonment rate is attributed to a combination of internal and external factors, including poor data management and siloed processes, as cited by the majority (86%) of banks. Other factors driving clients away include poor customer experience and delays in processes, highlighted by 77%. Complex onboarding processes is the third most popular factor, with just under half (45%) believing this is the main reason for client abandonment.    

The news also comes amid a continued push by regulators worldwide to address rising and increasingly sophisticated money laundering tactics, with KYC playing a critical role in ensuring compliance and enhancing the effectiveness of anti-money laundering (AML) regulations. The growing volume of information financial institutions are required to collect and process to meet regulatory requirements is believed to be exacerbating the internal challenges firms face regarding operational efficiency, resource allocation, and the ability to streamline KYC processes.  

The survey also revealed that only 4% of banks have successfully automated the majority of their KYC workflows. That said, the survey findings suggest financial institutions are looking to AI to solve for inefficiencies and data challenges. 42% said that they aim to increase operational efficiency with AI while 40% are focusing AI on improving data accuracy.  

Stella Clarke, Chief Strategy Officer, Fenergo, said:

“In today’s fast-evolving regulatory landscape, it has never been more important for firms to strengthen their KYC procedures. With regulators tightening their grip on illegal activities, the risk of fines has never been higher. In addition, banks that fail to streamline and improve their KYC processes risk frustrating clients, who have now become accustomed to the slick and speedy user interfaces in every other aspect of their day to day. As the financial and reputational cost continues to rise, enhancing internal procedures could turn effective KYC practices into a competitive advantage for banks across all regions. It can no longer take a back seat. With the advent of AI into KYC solutions, financial institutions can realise the benefits of automation faster, reducing risk while making significant operational efficiency gains and improving customer experience.” 

Fenergo’s report, KYC in 2024, provides in-depth analysis into the time and cost implications for regional and global banks conducting KYC tasks. The full study will be revealed during a webinar, click here for details. 

*Cost range based on a corporate bank performing KYC for 26,800 medium-risk clients ($2,250 per case) and commercial banks performing KYC for 83,800 medium-risk clients ($2,089 per case) per annum. 

About Fenergo:  

Fenergo is the leading provider of AI-powered Client Lifecycle Management (CLM) solutions that digitally transform how financial institutions, asset management and fintech firms and corporates onboard and manage clients throughout their client lifecycle. Its software digitally orchestrates every client journey from initial Know your Customer (KYC) and client onboarding, automating regulatory compliance and enabling continuous monitoring throughout the client lifecycle (transaction monitoring, perpetual KYC), all the way to client offboarding. Fenergo is recognized for its in-depth financial services and regulatory expertise and out-of-the-box rules engine which ensures financial institutions are future-proofed against evolving Environmental, Social and Governance (ESG), KYC, Anti-Money-Laundering (AML), tax and prudential regulations across 120+ jurisdictions.   

 For further information about Fenergo, please visit: www.fenergo.com