How to Create a Strong Competitive Advantage With Digital Onboarding and KYC Monitoring

Customer acquisition presents banks and financial institutions with the ultimate dilemma: thoroughly verify user identities per know your customer (KYC) standards while accelerating digital onboarding to avoid consumer dissatisfaction and churn. Put simply, digital onboarding methods and KYC compliance are tricky-to-win situations.

On the one hand, fast onboarding processes appeal to consumers but risk overlooking fraud—branding entities with consumer distrust and saddling them with noncompliance consequences. On the other hand, painstaking identity verification processes drive potential customers to open accounts with competitors.

But fine-tuning your digital onboarding process with the optimal technologies perfectly meshes with KYC fraud detection to prevent identity theft and other financial crimes. Below, we’ll explain how banks and financial service providers can turn one of their biggest dilemmas into a standout competitive advantage.

What are digital onboarding and KYC monitoring?

Digital onboarding and KYC are two sides of the same coin. The former is about getting clients or customers into your system, and the latter is about verifying that they are who they say they are. In financial services, digital onboarding requires KYC.

There are four key steps to the process, per our guide to digital onboarding:

  • Registering new customers by requiring personal information
  • Verifying the customer’s identity through digital analytics tools
  • Validating that the data and metadata are completely up-to-date
  • Creating an accessible account for the user within the system

And the KYC process breaks down into three key components, per Dow Jones:

  • A Customer Identification Program (CIP) to verify users’ identities
  • Customer Due Diligence (CDD) to analyze risks associated with users
  • Enhanced Due Diligence (EDD) to address risks classified as significant

According to the Center for Leadership Studies, early impressions, accessibility, and security are key elements of effective onboarding. Technologically enhanced KYC processes build these components into onboarding by default.

Leveraging technology for enhanced KYC processes

More specifically, the most effective KYC verification processes leverage cutting-edge technologies like artificial intelligence (AI) and machine learning (ML). Utilizing AI and ML allows banks and financial organizations to automate the digital identity verification part of the procedure, as ML models trained on countless legitimate documents (and illegitimate ones) to spot fakes or other frauds instantaneously.

Another major benefit is flexibility. These technological tools allow for KYC functions to be operated seamlessly from anywhere, enabling remote onboarding processes and mobile accessibility for customers who prefer to use apps and web browsers.

Compliance and regulatory considerations

Another key element of the digital onboarding KYC process is keeping up with global KYC standards. Many banks know US-based standards, like the Bank Secrecy Act (BSA) and USA PATRIOT Act, which codify KYC and Anti Money Laundering (AML) requirements. These are the primary regulatory hurdles to onboarding in the US.

However, there are also similar laws in other countries. For example, consider:

  • Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act
  • Various Anti-Money Laundering Directives across the European Union
  • The Act on the Protection of Personal Information in Japan

If your platform does business in these places or caters to clients within them, you’ll need to make sure your document verification processes are fully compliant. Making your services accessible to a wider global audience is one way robust KYC and efficient onboarding processes can create a competitive advantage over banks that don’t.

Digital onboarding as a competitive advantage

For banks and financial institutions, digital onboarding is more than just a way to streamline and optimize KYC processes. Beyond automating simple processes and answering questions like when KYC processes should be performed, these features create tangible benefits in the form of competitive advantages over other providers.

Namely, sound customer onboarding processes get clients integrated into a bank’s systems more swiftly and easily, reducing friction that could lead to churn. And they do so without sacrificing security—in fact, the best digital onboarding solutions include identity verification to ensure compliance alongside good user experience.

These features build user comfort while shoring up a brand reputation—a win-win.

Future trends in digital onboarding and KYC

The Securities Industry and Financial Markets Association (SIFMA) consensus is that the future of digital customer onboarding is promising. Stakeholders from across the industry are excited about options for collecting and operationalizing customer data, streamlining all elements of onboarding, and maximizing retention.

Other key takeaways from SIFMA’s whitepaper include increased adoption of digital tools and mobile device compatibility. Financial institutions are completing digital transformations, giving customers easier and better experiences with their platforms.

The upshot is that, moving forward, more banks will be leveraging KYC providers to optimize the onboarding process—neglecting it will be a disadvantage.

Revolutionize your KYC and onboarding

Moving forward, financial institutions will need to stay ahead of upcoming trends to keep their onboarding and KYC processes effective, secure, compliant, and efficient.

Doing so will require using technologically advanced digital onboarding solutions, like Microblink’s BlinkID. We empower banks and financial service providers to automate information collection for CDD and overall KYC. BlinkID is 5x faster than other solutions and boasts 95% accuracy across 2,500 ID documents spanning 170+ countries.

To learn more about the competitive advantage BlinkID provides, contact us today!

May 30, 2024

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