By James Adie, VP of Sales, EMEA, Ephesoft
If you work in the financial services sector, you’ll know that a customer’s decision to choose your product or service is just the beginning of the story. Ahead lies a treacherous onboarding journey during which your customer may abandon you at any point. And one of the most likely points at which to lose them is during the process of checks and verifications that take place to ensure compliance with the Anti Money Laundering and Know Your Customer (KYC) regulations that are required of financial services organisations.
The reasons behind the regulations are entirely valid; no financial services company wants to be the unwitting provider of the means for a customer to launder money for criminal or terrorism purposes. It’s essential to make sure that the customer is indeed who they claim to be. But the way things stand, the process for making these checks is far too onerous.
Most financial services providers are aware that customers see onboarding as a necessary evil to access their products and services, yet for many customers, the KYC regulations are a major deterrent. At the very least, a name, photograph, residential address and date of birth all need to be checked against official documents. Frequently this involves an in-person visit to a bank or an office, at which point a high percentage of customers decide that it’s just not worth the hassle. One large UK retail bank reported that a staggering 60% of potential customers abandon their application when asked to present their documentation in person. This is hardly surprising. Few financial sector organisations still have a UK-wide network of high street offices, with more than 3,500 bank branches closing in the past five years. So, even without a global pandemic the simple request to visit an office is already a significant challenge. Furthermore, we are still asking customers, who are used to transferring money between accounts at the touch of a button, to produce proof of residence via a paper utility bill, something which is itself now largely obsolete.
Let’s make things easier
It needn’t be like this. Technology in financial services has advanced enormously in the past two decades and KYC compliance does not need to remain trapped in the 1960s.
- Capture the data
The first step is to help the customer to provide the information needed. Most paper documents can be scanned via a mobile phone, while online documents can be converted into an image or a PDF; there should be no need to stuff a sheaf of papers into an envelope. The important element is to use software that can learn to recognise different types of documents and then classify and extract the relevant data. It should be able not only to distinguish between a gas bill and a birth certificate but to extract the vital details – such as name, address, and date of birth – from each. By capturing these details from every single document, you can be sure that they are consistent before submitting the customer record for further AML or credit checks. Any discrepancies can be flagged early and fast.
- Check the data
Having verified the essential information, a whole variety of further controls can be applied according to the level of scrutiny required. This might include biometric verification such as facial recognition via a video selfie, but in all cases, the data in the documents can be crossed-checked against the information submitted in the customer’s application. Figures on a bank statement, for example, can be compared against the stated income or monthly spending declared by the customer. Again, if discrepancies arise, they can be flagged quickly, rather than waiting weeks for a manual check to take place.
The new breed of fintech is already ahead when it comes to onboarding. Monzo, for example, with no branches, invites customers to “open a new current account while you wait in the queue to buy your lunchtime sushi or sandwich.” All documents are submitted online, with further KYC information, such as changes in income, gathered during the lifetime of the customer. Revolut also promises new customers that they can join “in minutes”.
The sheer convenience of these services will be stealing the next generation of customers from the established banks if action is not taken soon. In order to stay ahead of these competitors, insurance companies and other financial institutions need to make changes quickly. Investing in the right technology can slash administration times and improve productivity, cutting costs for the company and transforming the customer experience. There’s everything to play for, and a vast market of potential customers for whom onboarding can become a smooth, painless, and rapid process.