US investment banks have less budget and workforce to devote to fighting financial crime and adhere to changing regulation, according to the 2023 KYC Banking Trends Report by Fenergo, the provider of digital solutions for Know Your Customer (KYC), Transaction Monitoring and Client Lifecycle Management (CLM).
Surveying high-level operations, risk and compliance, and information executives across the US, the study found “that 51% of respondents lost at least one client due to slow and inefficient onboarding.”
In the face of adverse economic conditions, respondents named operational risk as their #1 priority for technology investment “while legacy architecture topped the list of challenges banks seek to address with technology.”
Banks spend 35 days less per client to execute KYC reviews
According to Fenergo’s study, KYC reviews “for onboarding and maintenance now take a mean of 82 days to execute for each client, down from 117 days (circa four months) a year ago.”
The number of financial institutions (FIs) “that spent 121-180 days to complete a KYC review fell year-over-year (YoY) by 59%. US investment bank leaders recorded progress in optimizing KYC review processes using technology, reducing mean costs ($2475) to complete a review, with a 24% YoY drop in those that spent at the high end, $3000-$4000 per review.”
Stella Clarke, Chief Strategy and Marketing Officer at Fenergo, said:
“Investment banks are understandably concerned with operational risk as they grapple with inflationary pressures, reduced money supply, and geopolitical uncertainty. According to our data, there are fewer available resources within risk and compliance departments due to factors such as layoffs, outsourcing, and talent retention challenges.”
Investment banks are losing clients to onboarding problems
While the data shows that while automation has helped compliance and risk officers save time and money in executing KYC reviews, they are “managing anti-financial crime compliance and risk mitigation with significantly lower staff (-12%) and budget allocations. Half of the investment banks surveyed lost a client due to slow and inefficient onboarding. Reduced resources are challenging them to provide frictionless client experiences, sufficient products/services availability, and efficient processes.”
According to Fenergo’s study, legacy architecture (44%) and revenue growth targets (39%) top the list of challenges banks seek “to address with tech investment.”
Specifically, compliance and risk officers said they “are most challenged by incumbent transaction monitoring systems that produce high false positive rates, an inability to scale in response to increasing transaction volumes, and difficulty implementing new rules or adapting existing ones.”