Know-your-customer (KYC) compliance seems to be one of the greatest challenges facing financial institutions today. Despite dedicating an increasingly large amount of time, energy, and resources into KYC and Customer Due Diligence (CDD) efforts, banks and other financial institutions continue to struggle significantly with compliance-related hurdles.
There are several obvious reasons for this: most notably, that the regulatory environment is becoming increasingly more complex, with more and more requirements placed on FIs in terms of data collection, analysis, and reporting. But there are still many tools and tactics that banks can wield to make KYC processes more optimized, efficient, and flexible than ever. Here are four ways that financial institutions can improve their compliance efforts in a way that will translate to better customer satisfaction and a stronger brand image.
1- Standardize KYC Processes with CRM in Mind
Know-your-customer procedures are burdensome because they require compiling and updating such a large and ever-changing amount of diverse information. Often, this information can be difficult to ascertain, particularly when it comes to determining ultimate beneficial ownership.
This process can significantly lengthen a bank’s customer boarding time, and can also have an adverse impact on the client-bank relationship. For financial institutions to toe the line between client satisfaction and due diligence, they ultimately need to find a way to make the KYC process as customer-focused as possible. Compliance experts and customer relationship management professionals need to work together to streamline and optimize all know-your-customer workflows.
2.Automate in All the Right Places
Evidence shows that it’s simply not enough to provide customers with a digitized on-boarding platform or process, with data suggesting that around 90 percent of customers who begin a digital self-on-boarding process will never complete it. But that doesn’t mean that technology isn’t the answer: automating and introducing technological tools at key steps of the process is crucial to improving know-your-customer due diligence. Workflow management tools, rule builders, artificial intelligence, and even blockchain technologies can all help streamline the KYC process when employed intelligently.
In particular, investing in high-quality analytical tools and technologies can significantly ease the compliance burden placed on financial institutions, while freeing up valuable resources within the organization.
3. Focus on Quality of Data
There are numerous reasons why the data collected by FIs may be of poor quality: inconsistent or poor documentation across various jurisdictions, insufficient or hasty data collection methods, or any number of other potential causes. One thing is clear though: it’s impossible to develop effective KYC processes - even well-automated ones - when data is either low-quality or incomplete.
4. Add Value to the Customer Experience
The biggest problem with know-your-customer compliance is that it can negatively impact the customer experience: the more complex the regulatory environment gets, the more steps customers must take during on-boarding and follow-up. The fact of the matter is that KYC regulations aren’t going to become any simpler in the near future: if anything, they’re likely to continue to place even greater demands on financial institutions. To offset this, banks should look to put greater emphasis on the customer experience across all touch-points – not only during the on-boarding process. This is yet another area where technology can be of assistance: investing in UX systems and customer visit management technologies can help round out and elevate the customer journey in a way that takes pressure off the pain point created by KYC due diligence. It’s also important to remember that KYC regulations aren’t necessarily the enemy here: when implemented in a way that is well-optimized and well-integrated into the rest of the bank’s operations, they can ultimately help FIs provide better service to their customers. The key is to look at KYC as part of the bigger picture, and to integrate it into the bank’s overall operations and procedures accordingly.