The evolution from manual KYC practices to Corporate Digital Identity (CDI) represents a significant shift within the banking sector.
According to Encompass Corporation, initially, manual KYC methods posed numerous challenges, including high costs, prolonged customer onboarding times, and a suboptimal customer experience. This article delves into how CDI is addressing these issues and the benefits it brings to the table.
Banks have historically struggled with manual KYC due to disconnected systems that complicate information consolidation and verification. Human errors from paper documentation and spreadsheet management often lead to inaccuracies. These inefficiencies not only slow down the onboarding process, typically taking 90 to 120 days, but also result in client abandonment, costing the industry an estimated $3.3bn annually. Furthermore, manual processes elevate the risk of regulatory non-compliance, potentially incurring hefty fines and damaging the banks’ reputation.
In corporate banking, distinguishing between public and private data is critical for streamlining KYC procedures. Public data, sourced from governmental and regulatory bodies, forms a fundamental layer of entity information. However, the reliance on clients for private data can make the onboarding process tedious and increase the likelihood of client dropout. Continuous requests for information that banks already possess exacerbates this problem.
The challenge of scaling KYC operations is compounded by high employee turnover and a lack of seasoned analysts. Internal development of KYC technologies is not only costly and complex but also difficult to future-proof. The disconnection between multiple records and systems further hinders effective data management and scalability. Despite these challenges, 88% of banks encounter difficulties in acquiring essential private data for KYC purposes.
CDI is poised to revolutionise KYC operations by enabling a dynamic, real-time customer view. It integrates data from trusted public sources and private customer details, offering a comprehensive risk profile tailored to a bank’s regulatory and business needs. With CDI, banks can streamline their processes, reducing the reliance on manual interventions through automated data collection and real-time public data updates.
The shift to CDI offers substantial benefits. Over a five-year period, it could save up to $470m and cut client abandonment by 40%, significantly enhancing customer retention. Automated and integrated KYC processes not only foster business growth but also improve customer and employee satisfaction, thereby strengthening risk management.
By transitioning to CDI, banks are setting a new standard in KYC processes, characterised by significant efficiency gains and a solid foundation for continued compliance and innovation.
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