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Big Data

How Fintech can help banks harness KYC data

Neil Jeans, Keiran Child

15 Feb 2016

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FinTech innovation is having a far-reaching impact in many areas, not just retail banking and the new ways in which we make payments. In particular, technology is changing the approach to risk and regulation as institutions recognize that proper compliance is only possible with well managed and maintained data.

This also presents opportunities for the intelligent use of data where Know Your Customer (KYC) and client on-boarding can be structured to deliver a competitive advantage.

Banks have been early adopters of innovation and technology as they look to reduce the cost of everyday operations and show customers they want to match society’s desire to be more online and digital savvy.

Innovation also helps manage the finite resources within compliance by replacing some of the lower value work through the use of automation tools and better technology.

A crucial aspect to the adoption of innovation within the KYC space has been the willingness of regulators to engage with the industry in driving change.

There is a growing appreciation that KYC regulations were built in a pre-digital age and often do not accommodate or allow the user to reference digital techniques.

Regulators are trying to change that, with the UK’s Financial Conduct AuthorityAustralia’s financial intelligence unit AUSTRAC and the Monetary Authority of Singapore willing to work with the industry.

If institutions want to take advantage of innovation within KYC, they must incorporate a fundamental change in their approach to customer on-boarding.

The intelligent and considered use of big data will better help them to understand their risks and compliance responsibilities.

A lot of policies and legislation are focused on collecting data and documentation which is outmoded. There is a lot more data in their organizations and a lot of unstructured data externally which can be harnessed in order to address the different legislative requirements that they face.

For example, KYC data can support not only compliance with the Foreign Account Tax Compliance Act but other classification-based areas such as the European directives MiFID and EMIR and the Dodd-Frank Wall Street reforms. The holistic utilization of the data across multiple requirements is key to the innovation process.


By incorporating this into the customer on-boarding process, institutions can take advantage of a wealth of innovative data. If it is correctly organized and structured,it can become a competitive differentiator for financial institutions.

One of the key areas of development, especially when it comes to anti-money laundering legislation, is that there is a move towards a more wide accommodation of a risk-based approach.

For a better understanding of the overall risk of a client, such innovation and evolution within a firm’s own on-boarding procedures become an almost necessary approach in the digitized landscape.

And from a regulatory perspective, the approach and thinking must be from ‘outside-the-box’ to ensure that policy facilitates innovation and is not constrained by old models and procedures.


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