A European bank which serves 10 million customers could save up to €10m annually and avoid fines if they improve technology behind know your customer (KYC) processes, study from Mitek and Consult Hyperion states.
“The Cost of Compliance and How to Reduce It” claims that new rules on anti-money laundering (AML4/5), and counter-terrorist financing (CTF) has boosted KYC requirements has increased annual cost of punitive non-compliance fines to €3.5m. However, fines could rise to tens or hundreds of millions.
Additionally, failures in KYC could also increase the chance of reputational loss, license loss, and personal liability of senior management.
Through the report, the companies found the potential cost of losing just a few per cent of new customers due to complex and manual KYC processes is can be up to €10m. After five years, the cumulative lost opportunity could reach up to €150m.
Consult Hyperion COO and author of the report Steve Pannifer said, “It’s no longer good enough for banks to simply accept the costs associated with inefficient processes – the consequences are now much more serious.
“The biggest change in the past two years has been new EU rules around KYC related compliance. This has led to many more punitive fines for banks who fail to comply – and the size of the fines has grown in tandem. We’ve seen the Financial Conduct recently issue fines to several major banks, amounting to £176 million. Then, even that fine was dwarfed by the €775 million fine handed to a single bank by Dutch authorities.”
There is a 56 per cent abandonment rate for banking customers during an inefficient and cumbersome onboarding process – increasing from 40 per cent two years ago. The report states that a lot of falloffs occur because an applicant is asked to go to the branch for a face-to-face meeting with their passport and utility bills.
Mitek EMEA MD Rene Hendrikse said, “The future looks bleak for banks who don’t comply with KYC, or whose processes are so cumbersome that they can’t attract new customer. But technologies such as digital identity verification could help banks overcome the hurdles holding them back.
“The technology enables customers to onboard themselves with just a selfie and a photograph of their ID document – online or on mobile apps. In turn, this drastically improves customer experience, reduces banks’ reliance on manual processing, and helps them avoid heavy fines from the regulator. To avoid falling far behind their nimble challenger rivals – and behind the traditional counterparts who are turning to innovation to survive – investing in the right technology at the right time will be crucial.”
Last year, card ID theft in the UK rose by 59 per cent to £47.3m.
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