The KYC Onboarding Process for 2024: What’s Changed

Know Your Customer (KYC) procedures are critical processes for financial institutions and other high-fraud-risk organizations onboarding new customers. But as customers' preferences for digital onboarding emerge, traditional KYC identity verification processes aren't enough to ensure safety and security for customers or the organization.

KYC procedures are advancing and evolving, helping organizations improve efficiency and increase security, all while meeting and even exceeding changing customer demands. Keep reading to learn:

• How the KYC onboarding process has evolved
• What impact KYC changes have had on anti-money laundering (AML)
• How KYC has impacted fraud prevention and theft
• What KYC trends to look out for in 2024

What is the KYC Onboarding Process and How Does It Impact AML?

The KYC onboarding process is a series of steps that banks, financial institutions and other organizations at high risk for financial crime undergo to ensure new customers are who they say they are, and that they're using services appropriately. KYC procedures continuously assess a customer's risk and look out for potential fraud, money laundering or other suspicious activity.

KYC can typically be broken down into five stages:

1. Customer identification
2. Customer due diligence
3. Risk assessment
4. Ongoing monitoring
5. Reporting suspicious activities

KYC procedures are often part of a larger AML initiative, and while the two terms are sometimes used interchangeably, KYC is just one piece of a company's AML plan.

7 Know Your Customer Onboarding Trends in 2024

Customer onboarding is evolving to provide a better user experience when your customers create an account with your firm. Here are seven of the biggest trends.

1. The Emergence of KYC in Fintech

Fintechs often rely on easy-to-use apps to attract customers, and proper KYC processes can throw friction into their onboarding processes. Fintech leaders are increasingly recognizing the importance of using streamlined yet accurate KYC processes in fintech to mitigate financial risks.

Fintechs are putting customers first and turning to technology-driven KYC solutions for superior user experience. These solutions include automated verification tools and digital identity platforms. Advanced identification technologies can streamline KYC onboarding processes and improve verification and risk assessment accuracy while still ensuring compliance.

2. Document-free Verification

With document-free verification tools, new customers will not need to submit physical ID documents to verify their identity. Digital identities combined with advanced technologies such as biometrics, artificial intelligence and machine learning use digital information and data sources to determine if the customer is who they say they are.

Document-free verification can create a smoother onboarding process for customers and reduce the cost associated with identity verification. Artificial intelligence (AI) automation empowers businesses to verify identities faster and more accurately, saving time on labor costs.

Another benefit of these advanced tools is that human error and risk of document forgery and manipulation is minimized. Approval processes can also be completed faster and more accurately, freeing up team members to focus on more pressing tasks.

3. Streamlining the Customer Onboarding Process

A quick and easy onboarding process is key for enhancing the customer experience, improving overall efficiency and growing customer adoption rates. Thanks to advanced technologies - such as digital platforms that use orchestration to create dynamic workflows and use APIs for automated data integration - financial institutions can find opportunities to streamline onboarding without sacrificing quality or exposing new risks.

This approach reduces the amount of manual effort required of both customers and employees, and it expedites the overall onboarding timeline while maintaining KYC compliance.

4. Automation of KYC Processes

Automation is also making its way into the KYC verification processes themselves. Advanced software solutions that use AI and machine learning can automatically verify customer identities, process documents and run risk assessments. This approach allows financial institutions to complete KYC processes faster and more accurately.

Adding automation to KYC processes reduces the risk of human error, allows teams to focus on more important tasks and creates a competitive edge. Faster, more efficient customer onboarding processes can also improve the customer experience and boost satisfaction.

5. Emphasis on Digital Identities

A digital identity is a trusted, electronic form of identification that customers can use to verify themselves online. It offers a secure, reusable ID method that helps keep customer data protected, reduces fraud and makes verification processes easier for both consumers and companies.

By using digital identity platforms during the onboarding process, financial institutions lower their risk of fraud and enhance their overall security. Secure data encryption also keeps customer data more secure, lowering their exposure to risk.

6. Focus on a Risk-based Approach for Dynamic Risk Management

A risk-based approach allows financial institutions to allocate resources based on customers' risk profiles. Low-risk customers follow one process tailored to their requirements, while high-risk customers undergo processes with enhanced due diligence.

Managing risk based on customers' individual risk profiles optimizes KYC onboarding efficiency, improves threat detection and mitigates potential financial and reputation risks. Through dynamic risk management, companies can focus energy and effort on ensuring customers deemed to be high-risk get the oversight and attention they require while still maintaining compliance for low-risk profiles.

7. Collaboration and Standardization

As KYC onboarding continues to evolve, it's important for industry leaders and stakeholders to work together to share best practices and establish common standards. Working together makes it easier to solve ongoing challenges, identify areas of opportunity and improvement, and ensure customer satisfaction across the board. Consistent collaboration leads to streamlined KYC processes and more effective onboarding for everyone.

How Will the Transition to Digital KYC Processes Impact KYC and AML Compliance?

Improving KYC procedures is only beneficial if those processes still remain KYC and AML compliant. Thankfully, in addition to making KYC onboarding easier to manage, digital KYC processes also make it easier to comply with changing regulatory standards.

Digital KYC processes enable more efficient and streamlined customer due diligence (CDD) procedures and provide opportunities for more accurate authentication methods.

This reduces fraud risks and promotes compliance with KYC and AML regulations.

KYC APIs allow for real-time data integrations, so businesses are always working with the most up-to-date information on politically exposed persons (PEPs), adverse media, sanctions and other risk factors. Round-the-clock monitoring helps identify risks as they happen, allowing businesses to act quickly.

Know Your Customer Onboarding FAQs

How has the regulatory landscape around KYC onboarding evolved?

Regulations for KYC onboarding have become more stringent in an effort to combat growing financial crime. Financial institutions are facing a stronger emphasis on verifying customer data during the initial account opening phases, with prioritization on AML regulations and sanctions screening.

Are there any specific industries or sectors that have experienced significant changes in their KYC onboarding process?

Traditional financial institutions and money-service businesses are experiencing the biggest KYC onboarding changes, but emerging financial services industries, such as crypto, are also facing stricter regulations and AML requirements. Cryptocurrency exchanges and platforms are under increased scrutiny to ensure they're taking appropriate measures to prevent money laundering, fraud and other illicit activities.

How can businesses balance customer convenience and compliance in their KYC onboarding process?

Digital KYC onboarding solutions can provide customer convenience and efficiency while maintaining compliance and regulatory standards. Real-time identity verification enables quick and efficient customer onboarding without compromising quality standards or accuracy.

What are the benefits of an automated KYC onboarding process?

Automating KYC onboarding ensures consistent and accurate customer identity verification and reduces manual efforts, processing time and risk exposure. Paired with automated data integration, KYC data stays accurate and up-to-date, enabling better risk assessments and decision-making.

Streamline the Client Onboarding Process with Jumio

As technology continues to change the financial services industry, we can expect to see new evolutions in KYC onboarding processes - but those advancements should be something to celebrate. Jumio's industry-leading KYC and identity verification technology stays ahead of emerging trends to enhance and streamline workflows, improve the customer experience and make staying compliant easier than ever.

To learn more about how Jumio can help you streamline your onboarding process, contact us to speak with one of our solution specialists.

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