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While the primary aim of KYC is customer identification, it is enabling the banks to manage and utilize customer data for business development.
FREMONT, CA: Traditional approaches to enter customer data into the database of a bank were tedious and time-consuming. The digital age offers an alternative to this legacy approach with faster and transparent data recording capabilities. However, the technology-driven approach must also consider the ever-changing customer data such as geographic location as well as compliance policies. Know your customer (KYC) addresses the above issue by capturing the relevant customer details while ensuring compliance challenges. Here are some of the primary ways in which KYC is transforming the banking sector.
KYC Leads the Way to Modern Banking
Modern customers are more likely to be positively influenced by the incorporation of KYC data sharing capabilities. The secure and transparent exchange of customer information brings digitally equipped customers in a collaborative platform. Thus, KYC stresses upon data exchange to be carried out digitally with customer knowledge and consent over the data will be shared with the financial institutions.
Fighting Financial Crime
The primary purpose of KYC is crime prevention. According to a report, financial crime ranging from bribery and corruption to money laundering costs up to $1.4-3.5 trillion per year. While digital transformation in banking is encouraging data sharing, it poses a risk for misuse of the data Burdened with the responsibility to check financial crimes and compliance issues, financial institutions are increasingly collaborating with third-parties to track fraudulent activities.
KYC can play a key role in financial crime prevention by enabling financial institutions to manage customer data without having the banks to worry about data leakage.
Process Optimization with AI
Technology and automation are the future of KYC that will add adaptability and flexibility to the complex KYC processes. Incorporation of AI into the KYC platform is allowing the banks to filter large volumes of user information to a smaller and much relevant data subset. Further, AI will enable the banks to cut down on false positives, thereby enhancing the customer onboarding process.
While KYC will continue to evolve with time, system integrations and compliance will also have a major role in customer data management.
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