Developing KYC solutions from scratch presents significant initial hurdles, particularly during the scoping phase.
According to Encompass Corporation, for corporate onboarding, this process involves meticulous planning to encompass all necessary KYC entity verifications, which often vary across different jurisdictions. Such solutions must manage various data sources and workflows, creating a challenging environment from the outset.
KYC processes often grapple with a vast array of available data, which can be overwhelming. Companies need to develop mechanisms to sift through this data deluge efficiently to extract and process the relevant information.
This involves fine-tuning systems to reduce irrelevant data and highlight critical data points, which is essential for effective KYC compliance.
Another major challenge is accessing data from sources like registries, which may lack standardized interfaces, thus complicating integration efforts. The use of outdated information in secondary data sources adds to this complexity.
Moreover, technical obstacles such as sophisticated CAPTCHA systems on websites pose additional hurdles for developers working on these internal solutions.
As a bank’s operations scale, the complexity and volume of data they manage also increase exponentially. Maintaining and updating KYC systems to handle this growth, alongside adapting to new regulations, requires substantial internal resources which can become a major operational burden.
While in-house KYC solutions offer customization, it’s critical for banks to assess the associated risks and costs comprehensively. These evaluations should extend beyond immediate resource allocation to consider long-term maintenance needs and regulatory compliance.
The integration of bespoke KYC solutions with existing banking systems often faces significant challenges due to differing system architectures and technologies. This not only requires extensive development work but also extends the timeline to achieve value from these projects, often leading to project creep.
In contrast to in-house development, outsourcing KYC processes to external vendors offers numerous advantages. Vendors specialise in KYC solutions and stay abreast of the latest regulatory changes, technological advancements, and best practices. Banks that choose to outsource can leverage this expertise to access state-of-the-art solutions without the hefty investment in internal development.
Advantages of outsourcing include cost reduction, scalability, customised solutions tailored to specific needs, quicker implementation times, expertise in data management, robust compliance expertise and enhanced analytics capabilities.
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