The number of global banks losing clients to slow and inefficient know your customer (KYC) onboarding practices has surged to a record high this year, according to new research from Fenergo, the provider of solutions for KYC, client lifecycle management (CLM) and transaction monitoring.
A recent research study of 450+ C-level executives across corporate, institutional and commercial banks found that “more than two-thirds (67%) have lost clients due to slow and inefficient client onboarding and KYC, up 19% from 2023.”
Those based in Singapore have been hit hardest by the trend, with 87% of banks reporting lost clients, but every region reported “a year-on-year rise.”
The decline in successful onboarding applications is compounded by high costs for performing KYC reviews “at onboarding and periodically during the client lifecycle.”
According to Fenergo’s research, the annual cost for performing KYC reviews at a corporate and institutional bank* is estimated to be $60 million and $175 million for a commercial bank.
According to the findings, the high abandonment rate is attributed to a combination of “internal and external factors, including poor data management and siloed processes, as cited by the majority (86%) of banks.”
Other factors driving clients away include “poor customer experience and delays in processes, highlighted by 77%.”
Complex onboarding processes is the third “most popular factor, with just under half (45%) believing this the main reason for client abandonment.”
The news comes amid a push by regulators to address money laundering tactics, with KYC playing a role in ensuring compliance and “enhancing the effectiveness of anti-money laundering (AML) regulations.”
The growing volume of information financial institutions are required to collect and process to meet “regulatory requirements is believed to be exacerbating the internal challenges firms face regarding operational efficiency, resource allocation, and the ability to streamline KYC processes.”
The survey further revealed that merely 4% of banks have automated the majority of their KYC workflows.
That said, the survey findings suggest financial institutions are looking to AI to solve for “inefficiencies and data challenges.”
42% said that they aim to increase “operational efficiency with AI while 40% are focusing AI on improving data accuracy.”
Fenergo’s report, KYC in 2024, provides analysis into the time as well as cost implications for “regional and global banks conducting KYC tasks.”
As covered, Fenergo is the provider of AI-powered Client Lifecycle Management (CLM) solutions that transform how financial institutions, asset management and fintech firms and corporates “onboard and manage clients throughout their client lifecycle.”
Its software digitally orchestrates “every client journey” from initial Know your Customer (KYC) and digital onboarding, automating regulatory compliance and enabling continuous “monitoring throughout the client lifecycle (transaction monitoring, perpetual KYC), all the way to client offboarding.”
Fenergo is reportedly known for its financial services and regulatory expertise and rules engine which ensures FIs are “future-proofed” against evolving Environmental, Social and Governance (ESG), KYC, Anti-Money-Laundering (AML), tax and regulations across 120+ jurisdictions.
