Banks take, on average, 90 to 120 days to onboard a corporate client because of siloed and outdated Know Your Customer (KYC) processes. This includes an average of 51 hours spent doing manual tasks.
Manual “swivel chair” processes no longer cut it in today’s financial services sector. Automating KYC processes can streamline compliance and enhance customer onboarding, boosting the customer experience – key differentiators in an increasingly competitive market.
Technology has now caught up with the need to replace manual processes in the form of Corporate Digital Identity (CDI) – combining real-time data from public and private sources to provide comprehensive and accurate customer profiles. This allows financial institutions to validate and verify identities quickly, giving them a strategic advantage in today’s business climate where efficiency and security are essential.
KYC Hurdles
According to Chartis research, banks spend $9.9 billion annually on manual customer due diligence (CDD), while another $2.8 billion is dedicated to downstream investigations. However, the hidden costs associated with downstream activities, such as auditing and reporting, far exceed these figures. In fact, the financial burden of these manual processes surpasses $20 billion.
Corporate and institutional banks, in particular, frequently rely on fragmented data and disconnected platforms that complicate verification and create inconsistent audit trails. Manual methods, such as paper documents and internal spreadsheets, are one of the main roadblocks within KYC processes.
Other challenges include:
- Following up with repeated requests for information can frustrate customers.
- Inaccurate data can result in non-compliance with regulatory requirements, potentially leading to fines and legal repercussions.
- Difficulty in accessing global business data results in performance issues and extends the onboarding times for cross-border verification.
- Examining complex ownership structures and navigating jurisdictional differences is time-consuming and error-prone when performed manually.
- Siloed data across departments causes missed opportunities and can damage the customer experience.
Why CDI Matters
With CDI, financial institutions can validate and verify identities quickly, delivering a comprehensive, accurate profile of corporate customers, and improving downstream KYC activities. CDI profiles can be integrated directly into existing banking platforms to eliminate siloes and ensure a consistent, up-to-date view of the customer.
Alex Ford of Encompass Corp.
By leveraging CDI solutions, banks can save an average of 32% of the processing time spent on KYC onboarding, improving both efficiency and customer satisfaction.
Automated solutions can be tailored for each bank’s unique regulatory and business requirements, including market strategies and interpretations of local regulations.
Perpetual KYC
U.S. regulators continue to ramp up their oversight of financial institutions, increasing cost pressures for banks. The average cost of deposits for the U.S. banking industry has been projected to rise by 47.6% compared to 2023. This increase is largely due to stricter monetary policies and heightened regulatory requirements, which are expected to challenge banks' liquidity and capital management strategies.
Outdated KYC processes increase the likelihood of compliance failures, resulting in costly fines and reputational damage. Banks that fail to embrace technology risk falling behind faster, more efficient rivals.
Perpetual KYC (pKYC) is a forward-looking model where client information is continuously monitored and updated in real time.
However, pKYC relies on high data quality. Event-driven triggers, such as ownership changes or regulatory shifts, can be effectively managed only if banks have access to accurate and complete client data.
CDI acts as the foundation for this model, enabling banks to build and maintain holistic client risk profiles that power successful pKYC operations. This, in turn, supports ongoing compliance efforts and reduces the risk of fines or reputational damage due to outdated or incorrect client information.
To fully leverage CDI and pKYC, financial institutions need to invest in an ecosystem of technology. This might include in-house solutions, third-party regulatory technology (RegTech) or a hybrid of both.
These systems drive how data is stored, structured, and accessed, ensuring that KYC triggers can be managed across the entire customer lifecycle. Customer lifecycle management (CLM) systems are particularly important here, as they connect different workflow components, allowing banks to manage compliance and customer data in a seamless, integrated manner.
Stay Ahead of the Curve
According to McKinsey & Co., banks that prioritize customer experience can see a 20% rise in customer satisfaction. Automation streamlines data gathering, handling and management, for seamless digital journeys and happy customers.
The integration of real-time data also ensures that banks can quickly react to changes in client information, maintaining compliance and efficiency throughout the KYC process. Automated creation of a client profile using public and private information, paired with regular updates, is essential. This allows banks to stay updated through on-demand synchronization with government databases and international registries. This approach provides a holistic view that accelerates onboarding and improves the overall experience for both banks and clients.
Strong executive sponsorship is crucial to drive KYC transformation initiatives, aligning stakeholders across departments to support both compliance and business innovation.
As banks pivot away from manual processes, CDI offers a pathway to enhanced compliance, improved customer satisfaction and sustainable growth in the competitive financial services industry.
Alex Ford is corporate digital identity provider Encompass Corporation’s chief revenue officer and president of North America, based in New York. Since joining the company in 2012, she has had executive responsibility for functions including customer success, operations, marketing, product and delivery. From 2015 to 2020, she was based in Glasgow with the launch and expansion of the U.K. operation. Ford serves on the RegTech Association board and co-founded Women in RegTech New York.
Topics: Data
