Caitlin Sinclair, Senior Client and Commercial Strategist, KYC Industry Solutions, at Thomson Reuters discusses how innovation can solve the KYC burden of high costs and complexity.
There is an unmistakable global drive towards streamlining Know Your Customer (KYC) regulations in an effort to encourage more widespread adoption of innovative solutions.
Towards a global standard
This is one of the most positive global trends evident today and attests to a recognition among regulators around the globe that the development of a global standard will help both financial institutions and their clients to remain fully compliant, while minimizing the all-too-familiar KYC burden of high costs, slow account opening and rising headcounts.
Big challenges remain within the industry. Among the most pressing is client engagement and the methods used by end clients to submit their private documentation as part of the KYC process.
Watch video — How is KYC evolving in the future?
A continued drive towards a higher degree of standardization, plus greater acceptance across the financial services industry will help, both from a requirements and refresh perspective.
A further significant challenge exists around data. In order to find the right data to satisfy regulatory requirements without negatively impacting the client relationship, financial institutions need to leverage public information as much as possible, as this limits the amount of information that end clients need to provide.
Governments play a key role in this space, with the ability to make available key data in jurisdictions where public data is limited.
The industry is responding by expanding the scope of innovative offerings in this space and by working closely with financial institutions and their clients to understand their exact needs. This includes designing the most effective processes for both financial institutions and their clients, understanding platform requirements, and where the main pain points are encountered when fulfilling KYC and onboarding obligations.
Three key trends are evident in the KYC space today. Firstly — and this has been the case for many years — there is ever-increasing spend from financial institutions as they try to remain compliant with constantly evolving KYC regulations.
Secondly, jurisdictional utilities — where financial institutions come together to solve specific industry challenges that impact their ability to comply with local regulations — are gaining in popularity.
Finally, we are seeing that financial institutions and, critically, their clients, are playing a more active role in determining what they need from new generation solutions as they look to solve their KYC and onboarding challenges.
The global move towards standardizing KYC requirements, as well as the ongoing adoption of innovative digital solutions, is good news for an industry plagued by rising costs, slow onboarding times and pervasive ineffectual maintenance of KYC records.
Digital solutions are constantly improving and continued engagement between the industry and the regulator will help to resolve the many ongoing KYC challenges that stakeholders must manage on a day-to-day basis.