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Perpetual KYC Has Transformational Power for All Financial Services: Old and New

Compliance teams see perpetual KYC (pKYC) as the future of KYC according to a report by Moody’s Analytics, Perpetual KYC: Transforming Risk and Compliance. The report sought to uncover the key challenges faced by implementers of KYC today and understand how organisations are transforming their approach to risk and compliance.

Know your customer (KYC) has traditionally been a manual and time-consuming process for companies, as a well as a technically challenging activity. There is evidence this is changing, and forward-thinking compliance teams are changing their approach to KYC.

Key findings from the report:
  • The research found that 76 per cent of organisations assess the digital sophistication of their own KYC approach as either poor (29 per cent) or mediocre (47 per cent).
  • The lowest-scoring firms tended to be traditional banks and professional services firms. These are firms that are weighed down with legacy infrastructure and, in some cases, paper processes during customer onboarding.
  • However, half of firms – 50 per cent – take an “enlightened” view of KYC and believe it brings the opportunity to improve ROI within their organisation through better customer experience.
  • Six out of 10 respondents are familiar with the concept of pKYC, and understand that if executed correctly it has the power to be transformational.

Perpetual KYC reimagines KYC, taking it from an activity that occurs irregularly every few years after onboarding to an automated trigger-based activity that works in real time. This shift to continuous KYC is an enabler for compliance teams, helping them transition from a purely regulatory business function to becoming a driver of revenue.

Positive compliance leads to various benefits

The report found that those firms with a positive view of compliance enjoyed benefits such as improved customer experience, better quality data, and increased opportunity to upsell and cross-sell to customers.

Keith Berry, general manager, know your customer solutions at Moody’s Analytics, said: “Compliance methods are adjusting to the new global reality, but there is still some way to go before they catch up with this new pace. Rather than just adhering to regulatory requirements, the future of compliance is one where organisations can tailor their KYC to their own risk appetite.

“Our research found a strong desire to automate KYC, and although all firms are at different levels of digital sophistication, for half of firms it is an opportunity to bring them closer to their customers. Perpetual KYC is key to transforming risk and compliance, helping compliance teams change their role from purely regulatory to enabling businesses to understand risks and make decisions with confidence.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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