Automating the Customer Onboarding

Context

Within this article, we are going to explore KYC solutions that enables a company to automate their customer onboarding. In particular, we’ll focus on some of the common questions that we often hear, and we’ll try to provide some points to consider, as you review your current processes.

Why should you pay special attention to your KYC processes? Despite a record $180 Billion spent on AML compliance in 2021, and regulated companies raising armies of specialists focused on financial crime; financial institutions remain one of the primary ways used by criminals to move funds. Shortfalls in good AML practise resulted in fines totalling $10.4 Billion in 2021, an increase of more than 80% from 2019. Notable fines in previous years include $5.1 Billion for UBS, $3.9 Billion for Goldman Sachs and $1.3 Billion for Westpac Bank.

Beyond avoiding regulatory fines and providing internal costs savings, institutions also recognise that customers want a seamless experience. Perhaps unexpectedly, these two things can go hand in hand.

In modern times, customers have grown accustomed to speed and ease-of-use when making purchasing decisions. Woolworths, Blockbuster, and HMV have been replaced with Amazon, Deliveroo, Google and Netflix. Customers want things quickly, easily and without effort.

Companies respond to the higher costs of AML compliance with more automation and more digitisation, carving efficiencies and pulling away from previously manual processes. The following explores some key questions to consider when embarking on this process.

1. Is there one KYC vendor who can provide everything

Companies occasionally approach us specifically looking to purchase their entire KYC package from one vendor and there are advantages to this. For example, there are benefits to having one partner who understands the customer journey and predicts the future requirements; if questions need an answer or problems arise, one partner from which to get support; or just one partner to process through the procurement channels, an often-onerous procedure.

There is however more to consider and to start that process we can think about KYC solutions as split into Software and Data.

For data, there are fundamental elements that support the automated customer journey, these include AML screening data (Sanctions / PEPs) and ID Verification data (auto-verification of an individual’s identity). Beyond that there is a universe of additional data that can be consumed, depending on the specific need of the company.  Director and UBO data (for onboarding companies), Bank Account verification, Crypto Wallet verification, Digital Signatures, Fraud checks, Criminal Record checks, Credit Checks, Adverse Media Screening, Social Media Screening and much more.

While one provider can supply both data and software, there is no current supplier who will provide solutions for the entire range of data that is available. For this reason, modern KYC suppliers can open their clients to an eco-system of third-party data solutions, which integrate with their own technology, giving a best-in-class Software/Data package.

The solution that is right for the company depends on the complexity of the operation, along with the customer demographic and the existing technology in place. For some, this is one vendor providing both software and data; for others it is a combination of separate data providers, integrated into a software solution.

2. More expensive vs less expensive: what’s the difference?

Buying something that is either cheap or expensive should give an idea of its quality – in theory. But even if that is true, quality needs to be somehow quantified to determine if the additions are relevant to your requirements. Here are some things to think about:

• Screening coverage is especially important. ‘We cover Sanctions’ could mean just named, explicit sanctions or could include implicit sanctions, sectoral sanctions, and further information that is de-duplicated and structured, helping to find exactly what you are looking for, or be confident that you’ve checked all the data available.

Equally, ‘we cover ID Verification in a given country’ could mean that the system is resolving the data against just one source or [in more costly solutions] against multiple sources.

• Algorithms vs Humans: Some companies will take large amounts of data, write a search algorithm and present the results. Other companies will hire armies of analysts to pick through and sort the data, with the results being more concise. You will typically find the analyst approach in more costly solutions, as this will save the time manually picking through the data yourself. A slight caveat on this is when dealing with huge quantities of data that can frequently change. In this situation, an algorithmic approach is sometimes the only way to effectively offer results.
• Aside from the actual solution, there are other ways that the vendor can add value or that the buyer can save cost. On the higher end of the scale, a vendor can support their client with staff dedicated to the account, including analysts, specialists, and customer success; IE people available to ask questions on the solution or specific industry related questions. Vendor locations can be multi-regional, with multi-language capabilities and specific local knowledge. Support lines can be open longer, offering greater access in times of need, such as when being audited. Higher numbers of technical staff can ensure the wait for new development is shortened and larger R&D teams means that best-in-class solutions can be maintained.

Any part or even all of this can be sacrificed in less expensive solutions and best fit again depends on the requirement.

3. How do we use automated KYC while still giving a personalised customer experience?

When the customer is especially valuable from a revenue perspective, companies can occasionally think that automated KYC would be impersonal or just too onerous for their customers to complete.

An example of industries where VIP treatment is especially obvious, could be in Wealth Managers dealing with High Net Worth or Ultra High Net worth individuals; or vendors of High Value Goods, where the cost of the item warrants special attention.

However, we can be drawn into the notion that ‘the customer’ is an entity, with a common requirement. While the customer can be very traditional, with expectations of person-to-person service, they can also be tech-savvy with expectations of fast, automated, and secure environment in which to deposit their personal details.  Emailing an ID document or waiting to see someone in person can be as abrasive to the tech-savvy as asking your HNW elderly individual to take a biometric selfie.  The key note is that one approach to KYC does not necessarily fit every situation.

Luckily, it does not need to. A good KYC provider will understand your customer demographic and put solutions in place that allow that tech-savvy customers to fly through the process, while simultaneously putting technology into the hands of the client advisor for those face-to-face encounters.  The company will benefit from consistency and uniformity in the approach to customer onboarding

4. How do we integrate this with our current solutions?

It is often the case that KYC solutions do not act in complete isolation from the rest of the technology embedded within the company. Depending on how companies engage with their customers, they might need to consider their website, CRM system, core banking platform, databases or other solutions that make up their technology stack. While it is possible to link these systems together via API connections, it is important to involve internal IT teams from an early stage of the process. IT teams can give guidance to what is possible and to what resources you might need to consider. In some instances, API builds might be needed to connect third party systems, with software re-configured to display new data fields. If this is possible, depends on the configurability of the software in place, which you can get guidance on from your vendor.

Another point of consideration are the existing customers, which could be within a current KYC platform, CRM system, customer database or stored on excel files. To ensure uniform screening amongst new and existing, it might be necessary to upload existing customers onto the new system; ‘bulk upload’ functionality (where available) will help you to do this. Once uploaded, the customers may need to be rescreened against your new datasets, and time should be factored in to do this. Occasionally vendors will have remediation services, where you can outsource the activity, it is useful to ask these questions at the beginning of the process.

5. We want to raise this subject at senior levels, what should we think about when justifying the spend?

Bringing a new solution to the business typically involves a process of trying to tangibly quantify the benefits which it will bring. Here are some things to think about:

• KYC is not just a compliance tool. The operational side of the business will benefit significantly from a seamless onboarding experience, from time saved for client advisors collecting documents to a reduction in customer dropouts.
• Also consider the time automation will save for the compliance team. Auto-pass through for low-risk customers and auto-escalation for high-risk; automated handling of rescreening and systems that show you which customers to focus on. All this will free time for compliance teams to focus on more technical cases.
• GDPR issues from sensitive documents littered over staff emails.
• Alignment of policy across the organisation delivered through the system. No longer relying on compliance training for non-compliance staff resulting in inconsistency of delivery. This is particularly relevant when compliance policy teams make policy changes that need to be quickly deployed across the company.

Quantifying revenue lost from customer dropouts; salary and resource required for document collection; potential revenue generation from a fully automated customer experience; potential revenue loss from fines and cost of getting it wrong. These numbers combined should give a useful commercial business case for a digital onboarding solution.