pKYC, or proactive Know Your Customer, is an innovative approach that initiates real-time reviews as changes in a client’s KYC profile are detected.
According to Encompass, this method maintains current customer information and risk categorisation, significantly reducing the need for repetitive manual reviews when no significant changes have occurred.
With the tightening of KYC regulations, the demand for more efficient compliance solutions has increased, leading to a heightened interest in pKYC. This model allows for immediate risk assessments at the moment changes are detected, offering significant benefits such as enhanced compliance and improved operational efficiencies. Technological advancements are facilitating this shift, making it easier for banks to implement and benefit from pKYC.
The primary challenge in adopting pKYC is the digitisation of client’s KYC profiles, a process that can extend up to three years. It requires continuous effort and investment. A staggered implementation strategy is recommended to manage this transition smoothly, securing executive-level sponsorship to ensure necessary funding and emphasizing the importance of this initiative across the organisation.
Additionally, building trust in this new model is crucial, which can be achieved by partnering with trusted RegTech firms like Encompass to leverage their expertise and control the transition process effectively.
Despite the challenges, 2024 shows promising trends that could lead to wider adoption of pKYC. These include the deployment of AI to automate data analysis, enhanced data integration, and improved customer experiences through minimal and precise outreach. Strategic partnerships with FinTechs specialising in pKYC are also speeding up this transition, leveraging their technology and expertise.
Corporate Digital Identity (CDI) plays a significant role in enhancing pKYC processes. It provides a digital representation of a company’s identity, integrating data from various sources to offer a comprehensive view that is crucial for effective monitoring and risk management. By incorporating CDI, banks can streamline the pKYC process, reduce repetitive data submissions, and enhance overall customer experience.
The future of pKYC looks promising yet challenging. Establishing trust in the technology and gaining regulatory compliance are still significant hurdles. However, as banks continue to balance innovation with reliability, and as stakeholders aim for improved outcomes, the adoption of pKYC is expected to gain momentum, provided the investment appetite aligns with the perceived benefits of this advanced model.
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