Based on our ongoing dialogue with existing and potential CoorpID customers, we have identified five KYC challenges that financial institutions (FIs) are facing today. In this series of articles, we aim to break them down one by one. Right now, we’re taking a look at the challenge presented by customer outreach friction.
Having previously explored how a negative customer onboarding experience can cause a loss of business, we are now turning our sights to another challenge affecting FIs and their Know Your Customer (KYC) strategies: Customer Outreach Friction.
Customer outreach is fundamental to achieving KYC compliance. It describes the part of the KYC process where FIs ask corporates for information in order to carry out Customer Due Diligence (CDD). But FIs are required to carry out a difficult balancing act concerning customer outreach. Not asking for enough information (or the right sort of information), risks FIs being unable to meet AML regulations. Asking for too much information as part of an inconsistent, repetitive process risks damaging bank-client relationships – not to mention, increasing the cost of compliance.
What causes customer outreach friction?
Whether an FI is conducting a CDD investigation for a prospective customer or carrying out a review of an existing one, they are asked to collect a range of information in order to meet KYC obligations. Although much of this information can be gathered from trusted third-party data sources or internal databases, some information has to be provided by the customer directly. This customer outreach process can be a source of frustration for both the customer and the FI if it is plagued by inefficiencies. Unfortunately, this is surprisingly common, with research indicating that 80% of FIs view customer outreach as one of their top three challenges when performing KYC.
One of the causes of unnecessary friction in the customer outreach process stems from the way in which information is exchanged. Often, this not only involves onerous manual steps, but also presents a security risk – both for the FI and the customer. Unfortunately, some FIs continue to request and send confidential and highly sensitive information by email. Not only does this represent a privacy risk for both the FI and the customer, but it is also a hugely inefficient and unstructured means of communication.
A lack of alignment
FIs are not necessarily helped with their customer outreach by the fragmented nature of KYC regulations across different jurisdictions. Currently, there remains a lack of alignment between national and international interpretations of AML and CFT regulations. This represents a particular challenge for larger multinational firms that may have multiple entities operating across different geographies.
Even within a single country, however, KYC requirements can differ markedly between individual FIs (and even between the various departments of a single FI) due to the particular information or industry sub-sector they are engaged with. The task for FIs is to find a way to streamline the customer outreach process – transforming it into a positive customer experience. If they can achieve this, outreach should not be viewed as a potential hurdle but as an opportunity to gain a competitive advantage.
How to streamline your customer outreach
Manual requests for customer information increase the time taken up by KYC processes, as well as the likelihood of information being lost. A disconnect between KYC analysts and front office staff often further increases the frustration felt by the customer (and the FI). And yet, KYC is naturally an iterative process. It is never truly complete. Customer circumstances change all the time, meaning new information is needed to maintain compliance.
Digital regtech tools like CoorpID can reduce the friction surrounding customer outreach by enabling FIs to track the status of their KYC review requests and store information securely within a digital vault. They no longer have to scroll through email chains to find the information they need. CoorpID’s document management tool allows FIs and customers to exchange KYC-related documents in a safe, swift, and compliant manner.
“CoorpID is particularly great in allowing KYC forms to be reused by other banks. As a client, this cuts out a lot of the friction we encounter as a result of meeting repetitive requests during customer outreach. This is especially true when we are dealing with several FIs at the same time.” – CoorpID retail client
Digital tools can combine first-rate security while eliminating the kinds of inefficiencies that have long hindered manual KYC strategies. This streamlines customer outreach so FIs can achieve a balance between speed and compliance, while customers aren’t left mired in frustration. It transforms outreach into an opportunity.