3 ways that digital can improve the KYC experience

The FCA’s first ever financial crime report in 2018 found that financial institutions across the UK turned away 1.15 million prospective customers in the preceding year, largely due to the money laundering or fraud risk that those customers posed.

Current Know Your Customer (KYC) processes, therefore, are clearly preventing a portion of high-risk individuals and businesses from engaging in financial activity.

But, with financial crime costing the UK an estimated £7 billion each year and onboarding processes in some cases taking weeks, it’s no surprise that 40% of executives surveyed by Woodhurst identified KYC as an area that is ripe for digital transformation.

Digital transformation of the KYC process will drive two overarching benefits:

• Improved user experience as digital, automated tools reduce the individual touchpoints needed with a customer while shortening the onboarding time
• Reduced cost as intelligent automation replaces manual steps within the process and reduces the level of manual intervention required to investigate false positives

At a high level, there are three areas of the KYC process that could be enhanced by digital solutions:

1. Digitising data inputs

There are a wealth of tools now that allow banks to wipe out paper documents and manual validation processes from the KYC journey – but these still aren’t being embraced en masse across the industry.

Challenger banks have encouraged a step in the right direction. Tools like Onfido, which rapidly interrogates and validates digital identity documentation, can be integrated into a mobile onboarding flow to streamline initial document checks.

Furthermore, the move towards mobile and online account opening journeys ensures customer information can be digitised and validated at the first point of contact. This will increase the accuracy and completeness of data held on a prospective customer, reducing the need for manual intervention to resolve data issues.

Regular validation of customer information can then be seamlessly incorporated into an overarching digital experience, ensuring the bank always has an up to date view of their customer.

2. Flexible onboarding flows

Banks need to balance the time and effort required to collect data to sufficiently manage risk, with the need to provide a seamless, rapid onboarding experience.

Coupled with a streamlined, digital journey, this can be done by allowing different levels of product access depending on the risk profile of the customer.

Marcus by Goldman Sachs, for instance, is able to open a simple savings account for almost all customers following an initial risk assessment, and the majority of these will have full account access soon after without any further input. However, some customers that are identified as high risk may not be able to execute transactions or fund their accounts until further information has been provided and assessed. For the very small number that are deemed to risky to engage with, their accounts can be closed entirely.

This approach will greatly improve the experience for false positives – those customers that were initially identified as high risk but were later reclassified. Not only will they consider themselves to have immediately been onboarded onto the bank, but requests for further information can be integrated into an end to end digital journey.

3. Consistent approach

KYC requirements differ greatly between retail, small business and corporate customers because the potential risk exposure for the bank increases as the entity grows. But there’s an inherent relationship between individuals and companies which shouldn’t be lost by employing wildly different KYC approaches, tools and practices in different functions across the bank.

Every transaction, every touchpoint with the bank tells you more and more about the relationships that an individual or business entity holds. This relationship based data, if organised and then interpreted correctly, could provide valuable information in the fight against financial crime.

With the ability to source and analyse internal data more effectively than ever before, coupled with initiatives like Open Banking, banks should be striving to ensure that all functions and all business lines are able to access a consistent, single customer view.

This complete perspective of the customer can then be interrogated in a consistent manner to form a much more accurate assessment of the likelihood that that individual or business poses a risk of financial crime.

Digitise, automate, connect

Digital solutions can undoubtedly be utilised by banks to make the KYC process more effective, more efficient and more user centric.

KYC should be seamlessly integrated within the customer onboarding journey in a manner that provides flexible product access based on a measured risk profile.

Customer data should be digitised and validated at the first point of contact to streamline the experience and reduce the potential for data errors.

Once captured, this data should be consolidated and used across the bank to strengthen the risk profile of all customers across all functions – providing a thorough, complete digital customer identity.