An astonishing 67% of global banks experience customer abandonment during the KYC onboarding process, up from 48% in 2023, new research by regtech firm reveals Fenergo.
Gathering insights from over 450 global banking executives in the UK, US and Singapore, Fenergo’s 2024 Know Your Customer (KYC) and Onboarding Trends Study highlights the urgent need for financial institutions to improve their KYC procedures. is highlighted.
The research points to a clear disintermediation trend, with potential customers abandoning applications due to cumbersome KYC processes and choosing banks with more efficient onboarding experiences.
While technology adoption is clearly on the rise, there is still a long way to go when it comes to KYC automation to create a strong customer experience.
For financial institutions, improving KYC procedures is more important than ever.
Global fines for violations of anti-money laundering (AML) regulations will cost financial institutions US$6.6 billion in losses in 2023, with further challenges on the horizon as fines jump by 31% in the first half of 2024 are.
KYC can be time- and resource-intensive, and banks’ onboarding and review processes can shape relationships with existing and prospective customers.
Adding to the complexity, AML, KYC, and customer due diligence (CDD) regulations are constantly evolving, putting further pressure on banks to improve their KYC operations.
How legacy systems are impacting bank KYC
Banks need help with traditional technologies and approaches. Lack of data visibility is a major bottleneck for banks looking to onboard customers.
61% of banks worldwide report that their onboarding process provides insufficient insight into customer risks.
Fenergo’s data suggests banks need to work smarter, not harder.
Regulations are continually evolving, and banks risk falling further behind if they don’t implement available technology to stay up to date with changing regulations around the world.
Technology also allows banks to automate many processes, allowing customers to find the information they need without having to send repeated requests.
Over the years, there have been many point solutions that each handle one aspect of a client’s onboarding journey.
But for many banks, adopting such a rigid one-size-fits-all solution may have been a mistake.
It is clear that banks were early adopters of these solutions to adapt to increasing regulatory demands and are still relying on them instead of moving to end-to-end enterprise solutions.
However, by automating the data-intensive elements of the KYC procedure using an end-to-end solution, banks can potentially reduce the risk of customer abandonment during onboarding.
Banks that cannot overcome these challenges are already being disrupted by other banking services.
If you continue to lose out to your competitors, you risk failing to engage with your customers and losing them to competitors who truly understand them.
Download your free copy of the latest Fenergo KYC Trends Report with global and regional data available here.
Featured image credit: Edited from freepic
