Corporate frustration with KYC is evident as our annual survey highlights excessive contact from FIs, inconsistent requests and security concerns experienced by the corporate clients of financial institutions.
Sapped by the time-consuming demands of Know Your Customer (KYC) processes, corporate decision-makers have made clear their continued discontent with onboarding issues.
For many, their pain is so great that they have been forced to change banks.
In particular, corporates want action on excessive contact and the lack of consistency in KYC requests, as well as concerns over security.
Watch: KYC Pain Points for Financial Institutions: A Global Perspective
A global perspective
The survey was completed by 1,122 corporate decision-makers from the UK, Germany, South Africa, the United States, Australia, Hong Kong, Singapore and France.
It comprised a mix of small, medium and large organizations and, moreover, a range of different organizational roles — including treasury, risk management, compliance, finance directors, financial controllers, procurement, corporate secretaries and general counsel.
The survey was accompanied by a similar study involving financial institutions in which it was disclosed that the average onboarding time is now an average of 26 days, up from 24 days in 2016. However, corporate customers claim that, on average, it takes 32 days.
Worryingly for parties on all sides, half of FI respondents thought the time taken to onboard was likely to increase in the coming year.
Corporate pain points
In our survey of corporate decision makers, a wide variety of KYC-related pain points were revealed:
- The demands of many banking relationships
Corporates tend to have several global banking relationships and each one requires them to supply KYC documents and information. However, there is no global standard.
The risk-based approach allows FIs to dedicate more time and attention to their greatest perceived risks, but also leaves room for differing interpretations of regulations.
This leads to different banks imposing different requirements on their clients.
Survey respondents reported an average of 10 global banking relationships — each one placing different demands on corporates, resulting in frustration, rising costs and wasted time.
- Excessive contact
Whilst FIs say that they contact their clients, on average, four times during the onboarding process, corporates report a global average of eight times.
This may be as a result of duplication of requests from FIs.
- Obligations around material changes
Corporates reported a global average of six material changes (for example, a change in the directors or controllers within the organization or a merger or other corporate action) per organization during the 24 month period preceding the survey.
There is a reporting requirement for corporates to update their FIs when a material change occurs, but our survey reveals that many are not fulfilling this obligation: under a third (30%) confirmed that they make their FIs aware of these changes.
A possible explanation is the sheer time involved in updating each FI with each material change (especially considering the number of banking relationships reported by corporates).
- No consistency or common standard
Turning to the challenges that corporates experience when asked to provide KYC documents and related information, the top issues selected by respondents across the board (37% each) were “having to deal with many different people within the bank” and “different banks asking for different documents and information, with no common standard”.
- Security concerns
The third most frequently selected challenge (32%) was concerns about security and who was viewing personal documents.
The nature of the information requested by FIs is often highly personal — for example, the passports of company directors — and it is therefore unsurprising that security concerns were voiced.
Is there relief on the horizon?
These pain points were highlighted by our last survey a year ago, but still persist today.
It is easy to see why corporate frustration levels are growing. According to the survey, many are voting with their feet, with 12% reporting that they had changed banks as a result of KYC issues.
On a more positive note, the digital solution space is already offering answers to these dilemmas and we expect increases in the adoption of automation by FIs to streamline KYC procedures and reduce touchpoints.
Globally, FIs report that their compliance costs have been rising. This trend is likely to continue as firms overhaul systems and digital solution spend increases.
When these investments come to fruition, we anticipate much-needed relief for corporates grappling with the real-life challenges reported.
KYC as a Service enables institutions to identify and classify a client’s risk category, verify their identity, and screen all related parties to create a KYC record.