Know your customer (KYC) guidelines, which require professionals in the financial services industry to verify the identity, suitability and risks involved with maintaining a business relationship, are a significant element in the fight against financial crime and money laundering.

But in the age of fintech and digital banking, traditional, paper-based KYC checks are becoming rapidly outdated, dragging the onboarding process on, and negatively impacting client experience, ultimately resulting in abandoned onboarding.

Not only that, traditional KYC processes are also time-consuming and require a lot of resources, placing a costly burden on businesses operating in the financial industry, especially smaller financial companies where compliance costs are disproportionately heavy.

A Fenergo research released last year estimates that the current end-to-end process of managing client relationships is costing financial institutions US$10 billion per year in lost revenue.

The survey found that, on average, more than one-third (36%) of financial institutions had lost customers and prospects due to inefficient or slow onboarding procedures. Meanwhile, 84% believed that client experience during the onboarding process seriously impacted the lifetime value of a client.

At a time when digital banking is rapidly becoming the new normal and customers are increasingly demanding seamless digital-first experiences, digital or online KYC and compliance solutions are emerging as powerful tools to offer customers a fast and convenient onboarding experience.

Digital KYC, also referred to as eKYC, is an advancement from the old method of KYC where customers need to visit a financial institution in-person and provide paper-based documentations. Instead, eKYC solutions use modern identification methods including video streaming, facial recognition and document scans, to check and confirm a potential customer’s identity.

Most digital compliance and eKYC providers focus on specific solutions, like Jumio, which uses artificial intelligence (AI), biometrics, machine learning (ML), and certified liveness detection to perform identity verifications, or IDNow, which provides financial institutions and fintech with solutions for video identification, electronic signatures, and more.

KYC.ch: a one-stop shop for digital compliance

The KYC process has changed from one-to-one identification to digital KYC checks. Holistic KYC ecosystems are the new way for the institution’s compliance processes.

In Switzerland, KYC Spider (KYC.ch) has developed a whole ecosystem for digital compliance and eKYC, where data input (i.e. onboarding/data collection from new customers), compliance and KYC check (i.e. checks for possible connections to politically exposed persons (PEPs), crime, blacklists and sanction lists), as well as data output (i.e. documentation/storage of data from the compliance and KYC checks) are processed through one system.

This holistic approach to digital compliance allows KYC processes to be carried out more easily, securely and in a faster manner. Not only that, it also enables the KYC process with no interruptions through a single interface.

KYC Spider provides the KYC Toolbox, a flexible, online tool for compliance that allows clients to implement their customer compliance process themselves. The KYC Toolbox has a modular design with access to all the features needed for KYC requirements.

The KYC Toolbox, which the company refers to as a KYC 4.0 offering, can be used to review risk criteria including sanction lists, PEP status, reference to compliance-relevant information, and country risk.

KYC Spider also offers KYC Expert, a service where KYC Spider implements clients’ compliance process using the KYC Toolbox. The goal is to help institutions to reduce their working effort for their compliance processes.

Through KYC Expert KYC checks are made by connecting clients’ database via API. All tools from the KYC Toolbox, for example KYC checks, address checks, onboarding assistant, MRZ checks or EDD assistant are available but are done digital via an API.

KYC Expert works in three steps: first, data input and registration are done by connecting a client’s customer management tool to KYC Spider’s API; KYC Spider then automatically processes the data in the Compliance Factory according to clients’ compliance concept; finally, data output is done, delivering key documents including the automated risk report to the person in charge on the clients’ end for final review and decision.

Featured image: Edited from Canva