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Is perpetual KYC the future of compliance?

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Compliance teams see perpetual KYC (pKYC) as the future of KYC, according to a report by Moody’s Analytics.

The report, Perpetual KYC: Transforming Risk and Compliance, was published today and looks at the key challenges faced by implementers of KYC and how approaches are transforming.

Perpetual KYC takes KYC from being an activity that occurs irregularly every few years after onboarding to an automated trigger-based activity that works in real time.

This shift to continuous KYC can be an enabler for compliance teams, helping them transition from a purely regulatory business function to using it as a driver of revenue.

Read more: Fintech sector is in its fourth wave of innovation

The report found that those firms with a positive view of compliance enjoyed benefits such as improved customer experience, better quality data, and increased opportunities to upsell and cross-sell to customers.

It acknowledged that generally fintechs are more digitally advanced or “digital natives”, but the report found they still face challenges, including the lack of a long-established customer base.

“A factor that emerged from our research is that fintechs also face a skills shortage as they compete with a wider range of firms, and this includes ‘Big Tech’ players branching into their sector”, the report stated.

The research found that 76 per cent of organisations assess the digital sophistication of their own KYC approach as either poor (29 per cent) or mediocre (47 per cent).

The lowest-scoring firms tended to be traditional banks and professional services firms. These are firms that are weighed down with legacy infrastructure and, in some cases, paper processes during customer onboarding.

Read more: Grupeer spots gaps in KYC checks among investors

However, 50 per cent of firms were found to take an “enlightened” view of KYC and believe it brings the opportunity to improve ROI within their organisation through better customer experience.

Six out of 10 respondents were familiar with the concept of pKYC, and understood that if executed correctly it can be transformational.

“Compliance methods are adjusting to the new global reality, but there is still some way to go before they catch up with this new pace,” Moody’s Analytics Know Your Customer Solutions general manager Keith Berry said.

“Our research found a strong desire to automate KYC, and although all firms are at different levels of digital sophistication, for half of firms it is an opportunity to bring them closer to their customers.

“Perpetual KYC is key to transforming risk and compliance, helping compliance teams change their role from purely regulatory to enabling businesses to understand risks and make decisions with confidence.”

Read more: New KYC solution launched to combat financial fraud



Read More: Is perpetual KYC the future of compliance?

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