The Hidden Costs of KYC Processes and Tips to Reduce It
Financial crimes are the new age disrupters of socio-economic stability, and they are only becoming increasingly prevalent. Customer due diligence and Know Your Customer (KYC) programs are now essential to business continuity. A robust KYC process also contributes to seamless customer journeys, helps keep credit defaults in check, and reduces compliance costs. However, companies that do not enlist KYC outsourcing services, have reported that the cost of due diligence sometimes exceeds its benefits.
For instance, a few years ago, a Thomson Reuters survey found that most financial companies spent an average of $60 Million on KYC compliance annually. Tier 1 players, shelled out up to $500 million for authentic customers. Since then, regulatory changes like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) have complicated matters even further.
Why Is KYC Compliance A Revenue Drain?
Costly Data Management
In a digital world where data is king, companies are required to store and manage customer data meticulously. This requires a highly trained workforce. Companies that handle the KYC processing internally also rely heavily on manual labor to meet demands. This makes data management the primary reason for high KYC costs.
The high cost is just the tip of the iceberg. Manual data collection and recording of information is prone to human errors; it is also an extremely time-intensive process. Add overtime costs and bonuses to the equation and the company ends up making millions in losses.
Delay in ROI from Customers
The duration to onboard increases if KYC is primarily done internally. Research estimates that manual onboarding can take up to 34 weeks for banks. Even with partial automation, the timeline can just inch up to 12 weeks. Millennials who are used to instant services may not take too well to this. In such situations, it is not uncommon for customers to seek out alternatives. The delay directly impacts the ROI of the company and results in higher spend per customer.
Another cost driver of KYC and related anti-money laundering (AML) practices is the cost of up-to-date information. Incomplete customer data at the time of onboarding or changed details can send agents down a rabbit hole. The frenzy that follows to ensure verification and update of information causes delays in important functions.
Technology to the Rescue
KYC issues can be resolved by upgrading from legacy systems to a hybrid model. An ideal model should include technology upgrades and outsourcing of time-consuming processes to companies providing compliance monitoring financial services.
Tech-powered solutions provide numerous ways to automate KYC processes, reduce errors, and improve speed. New tech such as natural language processing (NLP), deep-learning tools, and voice biometrics are key innovations that make this possible.
Sophisticated AI-backed tools are also able to scan unorganized data sources accurately. This allows them to assess customer profiles and flag risky prospects. When combined, these tech levers and a trained workforce, bring KYC costs down significantly. Finding a KYC outsourcing service that can deliver both services is hitting the jackpot.
The Allsec Advantage
Allsec provides efficient KYC services powered by robust, scalable proprietary technology designed to reduce critical errors for businesses while maintaining strong customer relationships. Reach out to us for more information.
