KYC or Know-Your-Customer is a practice carried out by institutions to verify the identity of their clients in compliance with legal requirements and current laws and regulations. It’s a significant element in the fight against financial crime and money laundering, among others.
However, in the “Rethinking Fintech Customer Experiences” report by digital customer experience (CX) solutions provider TDCX, it was revealed that almost one in two (49%) fintechs have identified KYC checks as their top challenge.
The KYC challenge affects even the most established fintechs, with nearly 4 in 10 (37%) mature fintechs echoing the sentiment. This could be due to the lack of a uniform global KYC standard and increased financial crime compliance requirements in global sanctions.
For example, TDCX observed that the KYC process is hampered when documents such as identity cards are not shared in a consistent manner (photo vs scanned, colored vs grayscale), resulting in back-and-forth correspondence, which sets a poor tone for building good customer relationships.
In a similar vein, underinvestment in technology continues to hinder the onboarding of new customers.
Other key challenges for fintech leaders that were mentioned in the report were the need to maintain sufficient operating hours, a worldwide client base, and the availability of quality, responsive services.
Fintechs with a business-to-consumer focus found it more challenging to manage KYC (55%). This was consistent with findings from a separate survey that more consumers abandoned financial service applications due to lengthy forms and excessive personal data requests. While it is compulsory for fintechs to collect customer information, complex onboarding processes can deter potential customers.
“KYC has become a key focus for fintech companies. Not only is KYC essential for regulatory compliance, it is an unavoidable part of the customer onboarding process which will either lead to a seamless customer experience or a highly frustrating one,” Ricart Valvekens, Chief Client Solutions Officer, TDCX, said.
“With the amount of required information for due diligence increasing exponentially over the past few years, fintechs are looking for ways to balance the need to provide their customers with speed and convenience while remaining compliant,” he added.
Data analytics an area of opportunity
The report also found that only 21% of fintechs use data analytics to support their KYC processes and 35% of them outsource their KYC processes. Fintechs were most focused on using data analytics for personalized marketing (55%) and helping customers make financial decisions (40%).
“While it is unsurprising that fintechs are dedicating more resources to revenue generating activities, it would be beneficial in the long run to leverage data analytics to enhance their KYC processes. We have also observed that more clients are looking for ways to drive business performance through transformative CX solutions,” Valvekens said.
“To that end, we recently launched our digital CX Center of Excellence to provide greater support to our clients. One of our goals is developing best practices in data science and analytics to help businesses enhance cost efficiency,” he shared.
One of the companies that has tapped TDCX for its KYC needs is a global payment gateway provider. TDCX supports the company in hiring the right talent with the requisite skills to conduct KYC checks and enhanced customer reviews. With TDCX’s support, the company has been able to complete its KYC processes more quickly, translating to a 20% increase in productivity.