Opportunity to enhance data analytics capabilities to improve the KYC process
According to the Rethinking Fintech Customer Experiences report conducted by TDCX, (NYSE: TDCX), an award-winning digital customer experience solutions provider for technology and blue-chip companies, almost one in two (49 per cent) fintech companies have identified “KYC” or Know-Your-Customer checks as their top challenge.
The report adds that the KYC challenge affects even the most established fintech companies, with nearly four in 10 (37 per cent) mature fintech companies echoing the sentiment. This could be due to the lack of a uniform global KYC standard and increased financial crime compliance requirements in global sanctions.
For example, the TDCX report observed that the KYC process is hampered when documents like identity cards are not shared in a consistent manner (photo versus scanned, colored versus greyscale), resulting in back-and-forth correspondence, which sets a poor tone for building good customer relationships.
Similarly, underinvestment in technology continues to hinder the onboarding of new customers.
In the Philippines, the typical KYC identification process includes the following:
- Gathering of identification information (e.g. full name, date of birth, sex, citizenship, address, contact details and specimen signatures or biometric information);
- Presentation and/or submission by the customers of an original and clear copy of at least one (1) identification document (ID), which refers to any evidence of identity specifically enumerated in the AMLA IRR (e.g. IDs issued by the Philippine government, including its political subdivisions, agencies and instrumentalities).
The KYC guidelines and regulations in the Philippines for financial services also require that professionals try to verify the identity, suitability, and risks involved with maintaining a business relationship.
As a general requirement, covered persons must implement and maintain a system of verifying the true identity of their clients, including validating the truthfulness of all information provided and confirming the authenticity of the identification documents presented or submitted by the customer using reliable and independent sources, documents, data, or information.
Accordingly, covered persons are required to conduct face-to-face contact and/or personal interview at the commencement of customer relationship, as part of the customer verification process. Use of ICT in the conduct of face-to-face contact and/or personal interviews is allowed.
Other key challenges, according to the report
The other key challenges for fintech leaders cited in the report include the need to maintain sufficient operating hours, a worldwide client base, and the availability of quality, responsive services.
Fintechs with a business-to-consumer focus found it more challenging to manage KYC (55 per cent). This was consistent with findings from a separate survey which said that more consumers abandoned financial service applications due to lengthy forms and excessive personal data requests.
While it is compulsory for fintech firms to collect customer information, complex onboarding processes can actually deter potential customers.
Ricart Valvekens, Chief Client Solutions Officer of TDCX, said in a press statement, “KYC has become a key focus for fintech companies. Not only is KYC essential for regulatory compliance, it is also an unavoidable part of the customer onboarding process, which could either lead to a seamless customer experience or a highly frustrating one.”
“With the amount of required information for due diligence increasing exponentially over the past few years, fintech companies are now looking for ways to balance the need to provide their customers with speed and convenience while remaining compliant,” he explained.
Data analytics as an area of opportunity
The report also found that only 21 per cent of fintech companies use data analytics to support their KYC processes while 35 per cent of them outsource their KYC processes. Fintechs were most focused on using data analytics for personalized marketing (55 per cent) and in helping customers make financial decisions (40 per cent).
Valvekens further states, “While it is unsurprising that fintech firms are dedicating more resources to revenue-generating activities, it would be beneficial in the long run to leverage data analytics to enhance their KYC processes.”
“We have also observed that more clients are looking for ways to drive business performance through transformative CX solutions. To that end, we recently launched our digital CX Center of Excellence to provide greater support to our clients. One of our goals is developing best practices in data science and analytics to help businesses enhance cost efficiency,” he added.
One of the companies that have tapped TDCX for its KYC needs is a global payment gateway provider.
TDCX supports the company in hiring the right talent with the requisite skills to conduct KYC checks and complete enhanced customer reviews. With TDCX’s support, the company has been able to complete its KYC processes more quickly, translating to a 20 per cent increase in productivity.
The Rethinking Fintech Customer Experiences report aims to understand the latest fintech strategies and challenges regarding customer experience. For this report, TDCX surveyed 200 senior fintech executives globally between September to October 2022. The report is now available for download here.