The benefits of taking KYC measures digital

The process of Know Your Customer (KYC) is yet another that has not escaped the pull of digital transformation. And would we want it to? The events of recent years have forced companies to quickly adopt more digital solutions faster than previously anticipated. With the increase in digital onboarding and interaction, there was a clear need to implement clear anti-money laundering (AML) and KYC measures in a digital context.

And yet the reality is that for companies that have needed to hastily move their processes to a digital context, they’re facing the threat of seasoned online criminal activity. It’s therefore crucial to implement solutions that both ensure compliance with regulations as well as help prevent misconduct.

In addition, the right digital solution can help to provide a much more positive experience for both the customer and the employee by streamlining and automating a large part of the process, with integrations allowing for easy handling of data to systems already used by the business.

Why KYC is important

Any business that deals with managing money on behalf of a customer is required to adopt a risk based approach to fulfill AML measures, and KYC is an essential part of this process.

Gathering detailed information about your customers’ backgrounds, such as their presence on a sanctions list, potential connections to politically exposed persons, their financial sources and tax obligations, is important not only to your business but on an international level to help prevent fraud.

As a company dealing with financial and AML obligations, knowing the background of your customers can help you not only to avoid fines and other potential penalties, but can also help prevent damage to the reputation of the business.

The impact of digital transformation on KYC/AML processes

It’s clear that the covid-19 pandemic has had a major impact on the steps required for completing the KYC process. But even before the onset of the sudden necessity to move towards digital solutions, many businesses were already pursuing a digital transformation agenda.

It’s no secret that the pandemic forced companies to build or integrate digital solutions to workflows that were typically handled in person. In fact, a study by Mckinsey & Company showed that the pandemic accelerated the adoption (and expectation) of online interactions by 3 years - that means that companies were looking to jump 3 years into the future of their digital plans.

A study by Deloitte (Financial Industry Risk & Regulatory | Risk Advisory 2021) found that 41% of customers were having trouble with the onboarding process with financial institutions at the beginning of the pandemic, showing the need for secure end-to-end digital workflows.

The KYC process, one that typically comes with the full array of tedious checks and information, was important to adapt to the new digital requirements. New solutions have helped to make the entire workflow digital - improving the customer experience by adding flexibility and security, and also having a positive impact on the employee experience by helping to automate and organize detailed information on customers.

How a digital KYC experience is better

Clients today have certain expectations when it comes to ease-of-use and accessibility. It’s arguable that most people have come not just to appreciate but in fact require the option to deal with forms and onboarding paperwork in a digital setting.

However, the benefits of digitalizing a process such as KYC go beyond improving the customer experience, they also have an impact on the day-to-day work processes of the employees of a company.

Let’s take a closer look at the benefits to a business:

Speeds up processes for customers - onboarding with KYC measures traditionally required in-person meetings at the very least to verify the identity of the customer. In addition, paper-based processes typically come in a standard set, with superfluous pages that might be unnecessary for every customer.

Digitalized KYC solutions can offer a more efficient and tailored experience, requiring only the details necessary for their particular situation and allowing them to authenticate their identity online through forms and verified electronic signatures.

More efficient workflows for employees - managing due diligence measures for onboarding can be less tedious and work intensive with more solutions that automatically tailor based on the customer’s previous answers. This data is then gathered and seamlessly delivered via simple integration to backend systems, providing employees with a faster, more efficient process and only the pertinent details.

This addition of automation and customization built-in to the onboarding process for the customer takes countless hours off the plate of the employee dealing with seemingly endless paperwork and data entry/analysis.

Bolstered security measures - by moving the KYC process to an online environment, a number of different security measures can be put in place to not only ensure the safety of the personal data of the customer, but also to help prevent fraud for the business.

Identity authentication combined with restricted access to the documents and workflows can drastically increase the levels of security for both the customer and company. Some digital solutions offer activity logs, which can be a great help in tracking the actions (and who took those actions) on a document.