Know Your Customer (KYC) costs today have become breathtakingly high. Regulations pertaining to KYC compliance are changing rapidly, and the regulations themselves have become more complex. According to a recent Compliance Study report, the projected total cost of financial crime across financial institutions worldwide is $274.1 billion, which is an increase of $60 billion in a span of only two years. Financial institutions are dealing with a broader scope of compliance challenges, which makes them susceptible to failure in meeting all the regulatory requirements. The fines for failing to meet the regulations are no laughing matter either. In 2020, fines reached a whopping peak of $12 billion. In 2021, NatWest was fined £265 million by FCA for money laundering failures.
According to a report by Quinlan & Associates, one of the most common drivers of reduced profitability for financial institutions has been the increased cost of regulatory compliance. Particularly, compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.
Most companies still rely on KYC processes which require an exhaustive amount of manual labor during onboarding, as data is often still captured through emails and paper and becomes siloed between a financial institution’s front- and back-office operations. This labor-intensive process not only results in higher KYC-related costs, but it also results in more errors.
What is the true cost of KYC?
The true cost of a KYC verification is made up of five main components:
The salaries and wages of internal staff dedicated to reviewing identities and managing the KYC process.
The cost of licensing or developing the back-office technology required for identity verification and KYC processing.
The loss of revenue from an identification process which drives customers away through excessive friction.
The regulatory fines and cost of remediation associated with an insufficiently private and secure identity verification process, including the failure to vet the chosen identity verification partner for adequate data privacy and security.
The reputational harm and loss of customer trust due to a data-privacy or security-related incident such as a data breach.
Any criteria for determining which third-party identity provider to choose needs to include these considerations when assessing how the chosen provider holistically reduces the true cost of identity verification and KYC.
Let's look at how FNZ's approach impacts each of those areas identified above.
The automated and fully customizable identity verification platform, through its proprietary eKYC® technology enables customers of FNZ to fully integrate their onboarding process. This means that FNZ will take care of the entire onboarding process and embed a KYC system which is frictionless and fully automated. Having all the main components (listed below) under one roof not only lowers the cost of the KYC, but above all, ensures the whole process is highly efficient and delivers a best-in-class customer experience.
1. FNZ lowers the true cost of KYC by reducing the internal staff dedicated to KYC.
An automated KYC process means no internal resources need to be dedicated to manual identity verification, KYC or CTF checks. At many financial institutions, the average time for the KYC screening needed for a customer to open a new account is in excess of 18 minutes. A large portion of that time goes into an exhaustive customer identity verification process, customer risk assessments, and detailed documentation reviews.
FNZ’s eKYC®, AI-powered solution streamlines the screening process from 18 minutes down to 35 seconds, or less. Thus, greatly reducing the time spent by your internal staff on unnecessary manual work, reducing the headcount dedicated to this activity and further, empowering your staff to focus on the most important task instead: building relationships with clients.
2. FNZ lowers the cost of licensing or developing the technology required for identity verification.
FNZ is built by design to provide an end-to-end solution for your onboarding and compliance needs – with scale economics built in. This reduces the typical complexity inherent in a KYC screening process and further lowers the development, servicing and maintenance costs required to build and operate the infrastructure. It also reduces integration time as well, as connectivity to mobile apps and websites can take less than a week.
3. FNZ reduces the loss of revenue due to onboarding friction and customer dropouts
Customer onboarding is fundamental to any company’s success and growth. A slick digital experience — from onboarding, through compliance checks, to account set-up and ongoing service and investment management — is key to delivering personalized wealth advice and driving results for your clients and your business.
FNZ’s solution enables identity verification in under 35 seconds through AI-driven liveness detection, facial recognition, and automated data extraction from government-issued identity documents. Forrester Research shows that with the right process in place wealth management firms can improve client conversion rate by 5% and increase client margins by as much as 10%.
4. FNZ's approach helps to protect your company's reputation and market cap.
Businesses must also consider the impact of reputational harm, from which it can be extremely difficult to recover. Forrester predicted at least one major brand will lose a valuation of more than 25% due to a cyberattack in 2019. Following the Cambridge Analytica scandal, Facebook lost over $119 billion in market cap for breaching its users’ trust.
FNZ is a highly regulated firm that invests heavily in data security and processes to ensure that your customer data privacy requirements are fully met. The Identity Verification (IDV) solution itself does not store customer data.
An automated KYC process can reduce onboarding costs by over 70% and reduce turnaround time by as much as 90%.
According to the International Finance Corporation, the widespread use of KYC automation could deliver three major gains in addition to saving costs:
Improve the quality and accuracy of risk assessments with better customer due diligence information; prevent corruption, tax evasion, money laundering, and other criminal activities that can result in large fines.
Process information more consistently and at a lower cost, which makes financial services more accessible and profitable.
Provide better information management, which improves accuracy and reduces the risks of doing business with customers, while at the same time making it cheaper and easier to create new customer relationships.
… and here’s the cherry on the cake
Automated Identity Verification is a win-win situation for you and your customers. Not only are you saving company costs with more effective results but you are also reducing the time invested by your customers, who no longer need to show up in person for identity verification. Instead, they can enjoy a fast and frictionless onboarding process from the comfort of their own home and look forward to a pleasant experience with your brand and your products.
FNZ’s eKYC® — Automated Identity Verification that saves costs without compromising on security, compliance, privacy or usability. Scale faster while making investing more affordable.
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