Common Challenges in the KYC/KYB Refresh Process: Navigating Legacy Communication Channels

In the fast-paced world of finance and compliance, a seamless KYC and KYB refresh process is crucial. Unfortunately, many organisations still rely on outdated communication channels like phone, post, email, and paper, leading to numerous issues, not to mention the staggering cost implications. This article highlights common challenges encountered during the KYC/KYB refresh process when using antiquated channels. By understanding these issues, businesses can make informed decisions about adopting modern solutions that streamline their operations, enhance data security, save costs, and ultimately improve the customer experience.

The blog is the first of a two-part series, Stay tuned for the second blog where we will reveal how you can overcome these obstacles and accelerate your refresh process. Alternatively, save time and download our free eBook, which provides a comprehensive guide on transforming your KYC/KYB programs  

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The many pitfalls of legacy channels 

KYC (Know Your Customer) processes often involve manual and time-consuming methods, relying on traditional communication channels to obtain information. Unfortunately, these outdated processes create frustration for customers, leading to dropouts, decreased satisfaction, and higher operating costs. In KYC refresh, these issues are exacerbated as customers perceive little value in the process and only complete it to avoid service termination.

Organisations must navigate the challenge of balancing KYC due diligence with reducing this customer friction. Although some digital technology offers opportunities for faster and more efficient processes through third-party data collection, authentication, document scanning, and biometrics, legacy methods like paper, email, and phone still contribute to friction and weak controls during customer communication. It is now crucial to use more efficient communication methods to address these challenges to minimise friction and mitigate information security risks in the KYC process.

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‍The Drawbacks of Paper and Postal Methods‍

Using paper and postal services significantly slows down the KYC refresh process, adding a whole day to the procedure in the best-case scenario. The inherent risks in mailing documents are worrisome, as they can easily get lost or disregarded, especially in the current age when unexpected letters are often treated as junk. Moreover, sharing papers in communal areas poses a security threat. From customers' perspective, sending information via mail is cumbersome and inconvenient, which doesn't align with today's expectation of seamless experiences. Additionally, this outdated method jeopardises data security and causes unnecessary delays. When firms receive information by mail, errors are commonplace due to the lack of thorough checks and varying handwriting quality. Moreover, the expenses related to printing and postage can be exorbitant, particularly when handling substantial volumes.

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‍Frustrations in KYC Refresh Telephony‍

The challenges associated with telephony during the Know Your Customer (KYC) refresh process are numerous. For customers, being compelled to engage in a phone call, especially when more convenient digital channels are available, can result in a negative perception, impacting brand satisfaction. Outbound calls face high rates of non-response due to inconvenience, perceived lack of value, and suspicions of unsolicited marketing calls. Inbound calls pose further inconveniences, requiring customers to find time within call centre hours, navigating complex routing systems, encountering delays and speaking to a different agent each time they call. 

Authentication processes during calls add significant operational effort, especially when information is not known or compromised. The call itself is an inefficient means of communication, demanding time for information gathering and hindering multitasking. Post-call, data is hard to process, with inconsistent and poorly documented records. This inconsistency complicates future interactions, as agents struggle to get up to speed with prior conversations, further amplifying time and inefficiency issues in high-volume contact centres.

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Email obstacles in KYC Refresh Processes 

Email, a modern digital channel, offers advantages over traditional methods like paper/post and phone calls. However, it comes with the major drawback of being a prime channel for fraud and spam. Similarly, other channels like SMS, WhatsApp, and Facebook Messenger lack security features for sending sensitive information, making them unsuitable for processes like KYC refresh due to the ease of impersonation and compromised accounts. 

Despite security concerns, email remains the primary choice for communication, even though it introduces friction points. Spam prevalence can lead to misplaced emails, causing delays, and the perception that email does not require an immediate response leads to slow correspondence between the customer and financial services firm. 

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Labour-intensive KYC Practices

When legacy channels are integrated into human-intensive KYC refresh processes, it introduces additional costs and inefficiencies. One of the challenges is dealing with the variable skills and knowledge of individuals involved, which necessitates robust quality assurance and control processes to ensure a consistent level of quality. Moreover, there are overheads related to recruiting and training staff, as well as providing them with the necessary hardware, software and support services to effectively carry out their roles. Another drain on resources is the considerable amount of staff time required to rekey data and organise information into digital filing systems. This is often a result of using disparate and siloed systems and technologies as part of the KYC refresh process. 

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Conclusion

Legacy communication channels pose significant challenges in the KYC/KYB refresh process, hindering efficiency, increasing costs, and compromising data security. By recognising these challenges and embracing modern solutions, organisations can overcome these obstacles, streamline operations, and enhance the overall customer experience. 

Stay tuned for the second blog in this series, where we will delve deeper into strategies for overcoming these hurdles and accelerating the KYC/KYB refresh process. Alternatively, if you wish to explore this topic further, download our free eBook today.