The KYC (Know Your Customer) regulations that are now widely used around the world have perfectly good intentions. Their aim is to ensure that customers are who they claim to be. This, in turn, helps to prevent terrorists, criminals, tax evaders and money launderers from being able to use financial services. So, why is genuinely rapid KYC software so elusive?
The all-too-frequently costly, time-consuming and inefficient nature of KYC is far from ideal. Constant changes in both KYC and AML (Anti Money Laundering) requirements across the globe cause confusion and uncertainty. It can also often be less than clear what a specific jurisdiction’s KYC requirements even are. According to Thompson Reuters, the average onboarding time is 26 days! The amount spent to onboard new clients globally averages US$40m and FIs report an average increase of 15% each year.
Onboarding customers at organisations like banks and cryptocurrency exchanges can be slow. Financial services institutions (FSIs) often devise their own interpretations of KYC, in the absence of any greater clarity to guide them. So, what are the main obstacles right now to achieving a truly rapid KYC process? Even more importantly, what steps can we all take to overcome them?
A tough and expensive process that customers don’t even like
An overly long and cumbersome KYC process can serve to only irritate customers by taking up a great deal of their time. So if we can achieve both secure and rapid KYC, why wouldn’t we wish to aspire to this?
It seems difficult to consider that there aren’t many frictionless KYC software solutions available when the process can be so frustrating for customers and businesses. One recent survey found that in 2017, it took an average of 24 days to open a bank account in the US, with this process having become more long-winded in the last few years. Crypto exchanges also miss out on potential customers if they are subject to KYC requirements in their jurisdiction, but competitors in other parts of the world aren’t.
The cost of KYC is another big problem. Banks and crypto exchanges that don’t comply with KYC requirements in their location risk suspensions, penalties and even jail sentences. But even complying with KYC carves significantly into the profits of such institutions.
What can we do to address KYC’s current drawbacks?
Regulation doesn’t need to be a barrier to efforts to achieve rapid KYC. Indeed, legitimate crypto exchanges and blockchain firms tend to welcome sensible regulation, as it gives them a clearer framework within which to work. However, KYC regulations around the world are still too often vague and unhelpful.
We must strike a balance, then, between rapid KYC that helps to attract prospective customers, and thorough KYC that doesn’t bring a risk of penalties.
What about a truly innovative digital KYC approach that allows you to verify your customers and their documents remotely and securely? The customer only needs a smart phone, laptop or computer and to lend 3 minutes of their time to achieve something some banks 24 days to do. By using this kind of rapid KYC software at sign up stage, you can ease the business and customer pains associated with the KYC process.
Our own straightforward KYC software here at SmilePass draws upon biometric technologies in a simple to use platform to take the hassle out of verifying a new customer or employee. To find out a little bit more about how we do it, take a look at our brochure.