Byron Fernandez, Executive Vice President and Group Chief Information Officer, TDCX
EITN: What are the key challenges that fintechs face when it comes to KYC? Why do these challenges occur, and what are the impact of these challenges, upon the lifecycle of the customer’s journey with that fintech/bank?
Byron: One of the biggest KYC challenges faced by fintechs is the lack of a global standard due to a complex interplay of factors such as geopolitical, technological, and cultural variations across countries. Additionally, differences in IT infrastructure make it hard to create a system that works for everyone. The level of the customers’ receptiveness to sharing personal information also varies across markets. For example, a research paper found that respondents in high-income countries are less willing to share personal data as compared to countries with lower income levels.
Fintech companies have to strike a balance between compliance and customer experience. They have to comply and keep up with changing regulatory requirements, and at the same time, satisfy customers’ expectations as they increasingly demand a more seamless process. Sometimes, regulatory requirements make the KYC process more onerous which then affects the customer experience. This makes finding solutions that balance both areas difficult.
Adding on to that, the issue of bad actors and scammers who constantly seek ways to gain access to valuable personal and financial information is becoming more widespread. To protect their customers and to maintain trust in their brand, companies need a strong response to more online-based risks such as data breaches, phishing attacks, and malware infections due to the nature of their business. Hence, brands also face the challenge of striking the right balance between security and customer experience.
Taking into account all these factors, these KYC challenges directly impact the customer journey as customers are progressively required to provide more information and documentation to verify their identity, leading to increased friction and frustration. The issue is more pronounced for underbanked communities, especially for individuals without traditional forms of identification or residing in remote areas.
EITN: Do these challenges affect traditional banks as well?
Byron: Traditional banks are also affected by KYC regulations but to a different extent. Compared with fintech companies that differentiate through their ability to provide a seamless, fast and convenient process, traditional banks may not face the same pressures to prioritise the customer experience.
Traditional banks however, have one advantage over fintechs. What I am referring to is the availability of a brick and mortar branch. When all online verification methods fail, traditional banks can offer customers the option of heading to a branch and provide an in-person experience to iron out the issues. Fintechs which tend to have a fully digital model are not able to do so.
In addition, fintechs tend to have a borderless business model given their digital capabilities. Traditional banks on the other hand, typically have a presence in the market they are operating in. This means that traditional banks tend to have on-ground expertise to help them navigate local requirements which could make it slightly easier for them than fintechs.
EITN: Having to balance seamless and pleasant customer experience vs remaining compliant – how many fintechs are able to manage this balance, how are they able to do so, and what more can be done to further fine tune this?
Byron: Regulations in the financial industry are often complex and subject to frequent revisions. According to TDCX’s recent report, KYC verifications pose a challenge for quite a proportion (37%) of even the most established fintech companies
Fintechs that are making headway in fulfilling their obligation to remain compliant while providing good CX exhibit the following:
● Collaboration with regulatory bodies
Efforts being made to deeply understand the compliance requirements and designing compliance strategies against the user experience, not the other way around.
● Investment in automation and technology
Using AI and machine learning to automate tasks such as document verification and risk assessment lessens the need for manual intervention; thus, reducing the duration of customer onboarding.
● Boost efficiency through outsourcing
Outsourcing providers often have specialised expertise in areas such as IT or customer service that may be expensive to develop in-house. It also enables companies to scale up or down quickly in response to changing business needs. For example, companies that outsource their customer experience needs to a specialist provider such as TDCX can be assured of their ability to maintain customer satisfaction levels during peak periods.
● Customer education
Helping customers understand why it is vital to provide accurate information reduces frustration and misunderstanding between fintechs and its users.
● Building a culture of compliance
Instilling compliance as a core value across the organisation enables harmonious interactions between customers and agents
EITN: Data analytics can help with personalising services and helping optimise decisions. Can we have more examples of how data analytics helps KYC processes?
Byron: Advanced data analytics can help fintech companies create a digital log of a customer’s banking activity, provide personalised services which consider an individual’s perception of risk, age, gender, wealth, and even relationship status.
Further, data analytics can also help fintechs analyse customer feedback to diagnose customer pain points. The collected data would allow them to identify patterns and draw accurate insights which can then be used to implement any necessary remedial actions. This also allows for hyper-personalised offers to be pushed to a customer at opportune times.
EITN: What is the optimal duration for KYC processes?
Byron: This is something that would vary depending on the situation or the institution. For example, timelines would differ based on a country’s regulatory requirements, specific requirements of an organisation’s internal policies and procedures, type of customer onboarding process (e.g. document-based KYC vs video KYC) and the extent of which due diligence activities need to be performed (e.g. an individual who has a higher risk rating would require enhanced due diligence).
EITN: How did data analytics help a global payment gateway provider identify that it needed to hire the right talent? What was the outcome of data analysis of that gateway provider’s KYC processes, and what else was done to help it optimise KYC?
Byron: There is much opportunity for companies to use data analytics to enhance KYC processes. We adopt such an approach for all our clients, ensuring that we continually analyse the data to identify gaps and to anticipate trends. For example, based on real-time feedback that was gathered over time, we helped the client identify that there was a systemic issue in a particular market on the way documents such as identity cards were being shared, resulting in back-and-forth correspondence. Through the feedback, the client was able to look into the process and make improvements to it.
