Compliance and KYC digital trends in banking 

Compliance requirements in banking and finance are evolving exponentially. Now, more than ever before, banks face tremendous pressure to put the right compliance policies and practices in place that address their unique business needs while maintaining compliance across jurisdictions. This issue is further compounded by ongoing regulatory changes such as PSD2, GDPR, FATCA, and CRS.

At the same time, today's consumer expects a digital process at every turn, and those businesses that fail to adapt do so at the risk of customers finding services that meet their digital expectations. 

Compliance departments within banks are having difficulty finding the balance between the need to serve their customers and the bureaucratic demands that regulatory-led KYC processes require. The need for a digital banking environment that can reduce non-compliance risks and meet customer demands cannot be overstated. 

Banks can approach their risk and compliance strategy as an opportunity to deliver a better customer experience while cutting costs and reducing risks. We identify the trends we see evolving for digital KYC, compliance, and risk operations, which we believe will help financial institutions respond to these challenges and opportunities.

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The impact of digital trends on compliance and KYC processes

Banks are looking at technologies including cloud, mobile, and open APIs to improve the customer experience while maintaining compliance.

A recent EY survey of 400+ financial service firms across 14 countries found that nearly one-third (32%) of respondents expect the highest priority for investment in their KYC function over the next two years will be digitizing the process.

The next great challenge in banking is to find the right balance between customer experience and risk management. Banks that successfully strike that balance will find themselves with a solid competitive advantage over those who continue to hold on to the traditional way of conducting compliance and KYC. 

KYC requires collecting data from the customer, and this process is often manual and frustrating for both the bank and its customers. The burden of proof forces banks to seek evermore invasive data to prove the identity of their customers. 

Customers, who are already annoyed with long wait times, slow service, and little-to-no positive experiences are now required to expose more sensitive personal information (e.g., utility bills, physical addresses, or passport numbers.) These requests take time and are difficult to reconcile. Customers begin to rebel against the process and surge toward other banks that present a more user-friendly approach.

A recent Accenture survey found that 87% of respondents would share their personal information if it meant faster access to services. This is where banks have an opportunity to respond to consumer demands. With digital KYC journeys that make it easy to comply with regulations like KYC for onboarding and AML while giving customers seamless access to their information, banks can create a compelling brand experience to increase loyalty and customer satisfaction.

In the same Accenture survey, respondents said they don't have to sacrifice convenience for security. More than half (59%) would pay higher fees for service with better identity verification technology, and 41% would be willing to share their personal information if they believed it would result in a better customer experience.

KYC processes don't have to be a barrier to a great customer experience

However, rather than embracing digitalization, we see too many financial organizations sitting on the sidelines instead of implementing a digital transformation in banking. Many point to regulatory demands and KYC requirements as barriers that prevent them from serving their customers optimally. As older, legacy businesses, many prefer to continue doing things the way they have always been done. 

Predictably, consumers are starting to look for alternatives to traditional banks. PWC's 2021 Digital Banking Consumer Survey found that 20%-25% of consumers would prefer to open an account digitally but cannot do so today. According to the report, younger people increasingly take their money outside the traditional banking system. 57% of millennials and 64% of Gen Z consumers have accounts with nontraditional players, including FinTechs, neobanks, and direct banks. 

This data should be giving banks great pause and drive their digital transformation plans forward. Failing to adapt and find innovative solutions that meet consumer expectations have destroyed companies with long traditions, including Kodak, Blockbuster, and Borders. Banks are no longer the only option for holding money or transferring funds.   

KYC process as a digital journey

The best way to address this challenge is to make KYC processes more digital. A great first step is to think of the KYC process as a journey that spans all touchpoints across the customer lifecycle. This means including simple, secure tools for consumers to find their information and manage it themselves, rather than asking them for sensitive personal data.

Many banks start this journey off on the wrong foot with their customers by making KYC a one-time customer interaction and never bringing it up again. The reality is that identity proofing and verification must be an ongoing experience for everyone involved in the financial service industry: consumers, companies, and governments. When new regulations arise or additional information is requested, the KYC process must be easily accessible and easy to complete.

A large part of simplifying onboarding lies in automating manual processes while providing customers secure access to their data via a self-service portal that lets them control how they share information with banks and other organizations who need it to meet regulatory requirements. This includes separate, more secure, and updated data that organizations will use for risk management and customer authentication.

This approach may be even more important for AML compliance, an area where many banks are still lagging behind. The Financial Action Task Force (FATF) recently released a revised guidance paper on how financial institutions should manage risks related to KYC and AML with FinTech startups. According to the guidance, more robust customer due diligence is required for e-wallet providers when establishing new relationships, including the ability to identify beneficial owners. Banks need access to vastly more up-to-date information about their clients than ever before to do this effectively.

As important as it is to ensure banks have access to the necessary information, there is an even greater emphasis on giving customers control over their data. To deliver a great customer experience that fits into an individual's busy lifestyle, financial organizations need to empower consumers with tools that provide them secure digital access to their personal and business data and documents, whether they are at home or on the go.

This is a challenge for banks as they must provide customers with full visibility and control over their data while abiding by strict regulations governing customer confidentiality. The key is to think of KYC as a digital journey that starts early in a relationship between the bank and the customer, is iterative, and designed to keep pace with changing regulations and growing threats while providing a fluid customer experience.

The KYC process is an ongoing experience for all players involved in the financial service industry: consumers, companies, and governments.

The no-code approach to KYC digital journeys

While the KYC process is a journey, many banks still treat it as a siloed project. In reality, there are significant benefits to leveraging a no-code approach to efficiently automating the entire digital identity journey. 

A no-code approach allows organizations to implement new processes and technologies quickly, without costly software development resources that may be in short supply.

Most importantly, no-code approaches increase efficiency and make compliance departments agile in responding to evolving compliance regulations without the need for lengthy software development projects.

Banks can achieve compliance with emerging regulations, such as KYC, while improving their customer experience at the same time by introducing streamlined workflows and consistent data governance standards across departments. Digital KYC journeys that can be adjusted and changed as required by ever-evolving compliance rules and standards are key.

In short, a no-code approach provides banks with better visibility into existing processes and workflows so they can identify gaps or opportunities for improvement to enhance the entire digital identity journey from KYC and account opening to personal detail updates and transfers. 

To learn more about how to implement a no-code approach for your bank's KYC digital journey, book a demo with our team today.