Know Your Customer (KYC) is a focal point of modern financial regulations, particularly concerning anti-fraud and anti-money laundering requirements. But KYC is even more valuable for managing risks with bad customers, speeding up transactions, and getting more business on the books.
By Daniel Robus, chief revenue officer at Contactable
Banks, in particular, are very accountable to KYC and must regularly check and update customer information. Doing so is often manual and complicated, and this KYC maintenance requirement can constitute around three percent of a bank’s total operational cost base, according to PWC.
Why such a cost burden? Aside from the manual and resource-heavy nature of the job, KYC maintenance is often also treated as an event and not a continual process. That has been a reality for as long as KYC requirements have existed. But the picture is changing and for the better, thanks to digital innovations such as identity platforms. Specifically, we’re witnessing the emergence of perpetual KYC.
Perpetual KYC, or pKYC, replaces periodic KYC checks with an ongoing process to update and verify customer information. Using automation, integration, and data flows, pKYC automates end-to-end KYC review processes, and employees in charge of KYC can focus on the subset of more complex cases that require a personal touch. According to Moodys, it’s “the practice of maintaining accurate customer and counterparty records through an automated, integrated workflow of data checks that take place in near real-time.”
A pKYC solution covers the key KYC areas of customer identification, customer due diligence, and ongoing monitoring. It includes:
* Validate documents according to KYC requirements.
* Collect and add publicly-available identity information.
* Screen for people who are politically exposed, sanctioned, or have other credibility problems.
* Outreach to customers for information.
* Rate risks based on the customer’s evolving profile.
* Streamline reviews and approvals, including the four-eyes principle requiring two approvers.
More bluntly, pKYC modernises KYC from a manual and period practice to an ongoing and automated background process. By combining modern platform integration and workflow innovations, KYC becomes a continual presence that the enterprise and its employees can tap into. And it’s worth the investment: PWC estimates that mid-sized banks reduce their KYC compliance costs by between 60% and 80%.
How can companies establish pKYC? Identity platforms provide the foundation. They operate on automation, integration, and artificial intelligence principles that already improve identity management processes as a primary function. Such platforms are modernising KYC, product personalisation for retail, identity management in security, and accelerated employee enrolment. They have become essential as financial crime legislation expands into more businesses.
Banks stand to gain the most from this shift. Automating KYC into a perpetual low-maintenance information stream saves considerable time and money, and improves accuracy and reporting. It also improves the speed of KYC-related services that banks offer to their business and money market clients–pKYC is not just an internal improvement but an up-sell to banking clients.
And it’s within reach through identity platforms such as Contactable. Stop wasting 3% of operational costs, not to mention the time of skilled and valuable employees. Implement KYC as a continual, reliable, and organically compliant process.