KYC Challenges in Digital Environments: Part 1

KYC Challenges in Digital Environments: Part 1

Amidst evolving regulations and the continued rapid adoption of a digital landscape—digital banking included—many financial organizations still face challenges when it comes to bridging the gap between their brick-and-mortar operations and the newer digital channels.

The Challenges of Digital KYC

While face-to-face (F2F) Know Your Customer (KYC) has no shortage of hurdles, compliance and risk professionals must meet all KYC regulations on any channel across jurisdictions worldwide. Though KYC regulations had previously been primarily written with F2F interactions in mind, they are continuing to evolve. Meeting the consumer demand for fast, safe, secure and compliant digital transactions is a tall order.

KYC processes and procedures are subject to the same set of laws and regulations, whether digital or F2F, and examiners won’t be more lenient in an online setting. In fact, because the FI and the potential customer are not at the same physical space, more care is needed due to the higher risk of fraud.

A digital environment for an FI’s product/service will bring about many benefits but setting up the business for online channels will also create a new set of requirements that Compliance and Product teams need to think about in terms of operations, cost structure and user experience.

The Importance of Working Together to Go Digital

A common misconception is considering digital KYC a technology-only issue when it can also be considered a cultural challenge, even as digital adoption is growing. Redesigning KYC processes and procedures for a true omnichannel customer experience will require a close partnership between Risk & Compliance, Product and IT functions. Bringing down data siloes, integrating different data management systems, normalizing data taxonomies and building effective cross-functional teams is an “all-hands-on-deck” exercise. Choosing solution providers that make it easy to access data and deploy technology across business units and teams will greatly aid these efforts of a true digital transformation that translates to revenue growth.

Overcoming Digital Adoption Challenges

Externally, while digital adoption has become more common over the past few years, it can still be a social and generational challenge. Some will be more wary of digital channels than of physical branches, and vice-versa. The reasons are varied: corruption, distrust of foreign providers, less experience with technology and so on. Accordingly, FIs must adapt customer onboarding and KYC processes to match their customer preferences, on top of remaining compliant with the specific regulatory framework.

The generational challenge is an important point when analyzing customer wants, needs and expectations. Organizations and FIs need to stay relevant to their current customers while attracting new ones. Creating user-friendly, omnichannel experiences that include automated KYC, and even allow customers to shift seamlessly between channels and devices, is key to keeping loyal customers and being competitive in gaining new ones.


Stay tuned for the next blog in this series to learn more about the KYC challenges that can be faced in a digital environment and the importance of secure digital identities for alleviating those pain points.


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