Many of today’s “Know your Customer” (KYC) process designs at banks and other firms are inefficient, cost-intensive due to manual processing and are therefore not only a thorn in the side of the banks themselves, but also for the customers and their entire customer experience in the context of the onboarding. As a result, it is high time for banks to invest in automation in order to transform their KYC process.

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High customer expectations and constant regulatory changes, such as the strict obligations to comply with the Anti-Money Laundering Directive 6, are putting banks under increasing pressure. KYC violations are an absolute no-go and not only result in damage to the bank’s image, but also incur heavy fines.

Banks are trying to counteract this with time- and resource-intensive measures, or in other words, with more employees who manually take care of the KYC processes and customer background checks in the background. New customers (private individuals) can usually fill out the registration form with their personal data directly via a cell phone application, plus a scan of their ID to verify the data entered. But if a team of employees with different interfaces has to manually check the correctness of the data and perform further checks, the whole onboarding can be delayed for several hours or even several days. The “now” effect, which is so essential nowadays, is therefore immediately gone. So, that is not what you would call an excellent customer experience. In addition, the differences and requirements of onboarding business customers are much more complex. But more about this later.

The potential of a robust automation is accordingly great here, and in order not to lose touch with innovative FinTechs and challenger banks, banks should integrate automated solutions into their KYC processes for both private and business customers. This is where AI-based document extraction comes into play. Put differently, OCR software that is supplemented with the flexibility and other advantages of specifically designed artificial intelligence.

KYC onboarding for private customers using AI-based OCR:

  • The customer starts the identity check by photographing the ID or passport in the application with the cell phone camera
  • The software extracts all relevant data, including signature and photo, and converts it into a computer-readable file. This happens within a few seconds
  • In the next step, the new customer sees the extracted data of the ID automatically entered in the form and only needs to validate it
  • A “selfie photo” and a digital signature are now used for biometric verification
  • The software also processes this data and compares it with the data of the ID
  • If they match, onboarding in the user interface is complete and the new customer can make use of the bank’s services. The entire KYC process therefore only took a few minutes

For business customers, the KYC process is more complex and usually requires the submission of a relatively large number of documents. Nevertheless, onboarding can be completely automated using powerful technology.

KYC onboarding for business customers using AI-based OCR:

  • The customer uploads all relevant documents into the bank’s system. Using software, all relevant data is extracted and automatically entered in the forms
  • The customer sees the completed forms for verification and can submit missing documents if necessary
  • A quality check for completeness and topicality is carried out, again by means of software
  • Finally, an automated screening is performed to verify identification, all in real time
  • If the data matches, the onboarding is complete and the business relationship is successfully concluded. Here too, the entire KYC process becomes immensely more efficient

But not only the KYC process at the customer’s onboarding benefits from automated document extraction through OCR. Due to the above-mentioned, increasingly strict anti-money laundering guidelines, existing business customer relationships and their documents must also be constantly checked. By means of OCR software, the already existing documents are checked for up-to-dateness and the customer can be promptly requested to submit a subsequent document if it is incomplete. In other words, if documents are missing, a corresponding message can be sent automatically so that the customer can submit them subsequently. The test results of it are directly visible by the immediate initial control of the software. These automated process steps ensure that the documents are always up-to-date, thus preventing backlogs and greatly reducing the workload of employees.

As a result, highly automated KYC processes result in significantly shorter throughput times and significantly lower process costs. Such a digital and automated solution is a must for the bank of the future.