A staggering 67% of global banks are experiencing client abandonment during the KYC onboarding process, marking a significant jump from 48% in 2023, according to new research by regtech firm Fenergo.
Fenergo’s 2024 Know Your Customer (KYC) and onboarding trends survey, which gathered insights from over 450 C-suite executives in global banks across the UK, US and Singapore, highlights the urgent need for financial institutions to improve their KYC procedures.
The survey points to a clear trend of disintermediation, with potential clients abandoning applications due to cumbersome KYC processes and opting for banks with more efficient onboarding experiences.
While it’s clear that technology adoption is taking place, there’s still a long way to go when it comes to automating KYC to create a strong client experience.
It’s more important than ever for financial institutions to improve their KYC procedures.
Global financial penalties for non-compliance with anti-money laundering (AML) regulations cost financial institutions US$6.6 billion in 2023, and more problems are on the horizon with fines surging 31% in H1 of 2024.
KYC can be time and resource-intensive, and a bank’s onboarding and review processes can shape their relationship with existing and future clients.
To add to the complexity, regulations around AML, KYC, and client due diligence (CDD) are constantly evolving, putting added pressure on banks to improve their KYC operations.
How Legacy Systems are Crippling Banks’ KYC
Banks need help with their legacy technology and approach. A lack of visibility when it comes to data has become a major bottleneck for banks looking to onboard clients.
61% of banks globally report that they have insufficient risk insight into clients during the onboarding journey.
Fenergo’s data suggests that banks need to work smarter, not harder.
Regulations are continually evolving, and banks risk falling even further behind if they do not adopt the technology available to keep them up to date with changing regulations worldwide.
Technology also enables banks to automate many of their processes so they can find the information they need without having to submit repeat requests to clients.
For many years there have been a multitude of point solutions that can each handle a single aspect of the client onboarding journey.
But embracing those rigid, sole-issue, solutions may have been a mistake for many banks.
Banks adopted these solutions early on to adapt to increasing regulatory demands and evidently still rely on them instead of moving to end-to-end enterprise solutions.
However, by automating the data-heavy elements of KYC procedures with an end-to-end solution, banks could reduce the risk of client abandonment during onboarding.
Banks that cannot overcome these challenges are already being disrupted by other banking services.
If they continue to lose ground to the competition, then they risk failing to engage customers and subsequently losing them to competitors that truly understand the customer.
Download a free copy of the latest Fenergo KYC trends report with global and regional data available here.
Featured image credit: Edited from Freepik
