Camunda in Banks: Know Your Customer (KYC) Automation
Watchdog agencies in the US, UK, and EU seem to be very serious about banks’ compliance with KYC and AML regulations. In 2022, Santander UK was fined £107.7m after the FCA discovered gaps in the bank’s anti-money laundering controls, and Deutsche Bank got a slap on the wrist for KYC issues the same year. According to Fenergo, the value of penalties imposed on financial service providers for failing to comply with AML, KYC, ESG, and CDD regulations surged 57% in 2023.
In trying to avoid financial and reputational losses associated with noncompliance, banks should strike a fine balance between meeting regulatory obligations and providing an excellent client experience. A KYC process adopted by a bank can be make or break for customers, while KYC automation with Camunda helps financial institutions hit a happy medium.
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How long does a KYC check take?
A quick search on the web shows that before a financial service provider can onboard and start serving a new client, the client may need to wait days or even months. For example, the US-based investment company Vanguard takes up to 5 working days to review documents to verify their retail clients’ identity, and HSBC, one of the largest European banks, promises to send a welcome email within 7 to 10 days of an account application being submitted.
Things get even worse in the corporate sector since, according to McKinsey’s stats, it can take up to 100 days to onboard a new corporate client. The same survey says that the KYC check takes up the majority of the onboarding time, amounting to 21-22% for new and existing clients. This could consist of 7-10% for credit due diligence and 12-16% for payment file testing.
What’s the cost for business?
Obviously, neither individual nor corporate clients are happy with slow and often duplicated KYC processes, which lead to far-reaching implications:
- Lengthy and challenging procedures make potential clients drop off and go elsewhere in search of a frictionless experience. Based on Signicat’s survey, 68% of clients abandon financial service onboarding because it doesn’t meet their expectations.
- Struggles with onboarding translate into a poor customer experience, which harms long-term customer engagement. The above survey indicates that more than half of the clients who encountered unfriendly onboarding procedures were less likely to use the company’s services in the future.
- Longer KYC checks and onboarding processes affect time-to-revenue, which is one of the key metrics for banks. In fact, the P.A.ID Strategies report states that European financial institutions lose over €5bn a year due to poor onboarding practices.
Moreover, instead of generating revenue from new clients, many financial institutions waste money trying to work harder, not smarter. In response to growing compliance demands fuelled by current political turbulences, they focus on attracting skilled KYC analysts and expanding their compliance teams, throwing more and more resources into KYC. According to Ondato’s research, an average European bank spends €22,984 on KYC programmes every day, most of which goes to compliance specialists’ wages. Only 26% of these expenditures are invested in technological solutions that could streamline the KYC process, improve the customer experience, and reduce operating costs.
How can modern technologies change the game?
Luckily, there are good examples to follow, such as Metro Bank, which onboards SME customers in 15 minutes through its Business Account Online, or Jyske Bank, which modernized its KYC journey and decreased the manual task time for employees by 80% with process orchestration powered by Camunda. Today, financial institutions have an abundance of high-tech tools for KYC automation, including but not limited to:
- RPA (robotic process automation), which can extract and populate data whenever a new application is submitted;
- Web scrapers capable of gathering publicly available information on applicants;
- Facial recognition technology used for scanning applicants’ faces and comparing them with ID cards;
- ML algorithms, which can learn from interactions with data and flag abnormalities in clients’ activities;
- Optical character recognition suitable for collecting data from paper documents and putting it into digital files.
At least some of these tools can completely replace humans in certain stages of a KYC process and get the job done faster and with fewer errors. However, one problem remains — how to make individual KYC automation solutions work as an integral whole.
How is KYC automation with Camunda different from other offers?
As a robust business process orchestration platform, Camunda goes far beyond RPA or FRT. Based on the low-code approach to automation, the platform allows FIs to build their KYC processes end-to-end with an easy-to-use visual modeling tool alongside open-standard Business Process Model and Notation (BPMN) and Decision Model and Notation (DMN). It brings together manual processing, bots, existing corporate systems, and all kinds of IT solutions aimed at KYC automation, which can be easily integrated with Camunda via APIs or out-of-the-box and custom-built connectors. As a result, banks can design, execute, and manage their KYC workflows across multiple endpoints using an open-source centralized automation platform, which ensures that separate tools communicate effectively and no data is lost along the KYC journey.
KYC automation with Camunda can help banks in many ways:
- Data collection. Camunda orchestrates RPA bots trained to recognise and extract structured and unstructured data from documents and apps, ensuring comprehensive and streamlined data collection for KYC.
- Data validation. Camunda coordinates AI-powered tools that can validate data against predefined standards, thus eliminating duplicates, fixing errors, and enhancing data accuracy and integrity.
- Identity verification. Camunda connects to ID verification software, leveraging machine learning, computer vision, and other technologies to clear government-issued IDs, verify the liveness and ID match of selfies, or compare information across multiple identity databases.
- Risk management. Camunda integrates with risk management platforms to maintain a seamless flow of information and orchestrate different systems involved in risk assessment for better protection of FIs from fraud and other types of criminal activities that KYC is aimed at preventing.
- Decision making. Providing access to an advanced DMN-based decision engine, Camunda enables decision-making automation, significantly reducing the time required to review applications.
- Ongoing client activity monitoring. KYC requirements don’t end with onboarding, and Camunda can provide better visibility into client activities over time for reviews required by KYC regulations.
These are by no means all Camunda’s use cases in KYC automation since the platform boasts great flexibility and scalability, allowing banks to create customisable KYC processes that can be adapted to unique needs and strategies.
What results do banks get with Camunda-powered KYC automation?
Apart from enabling banks to easily implement and update KYC processes for full compliance with regulations, Camunda delivers the following benefits:
- Improved data accuracy. By automating the KYC process with Camunda, banks can improve the accuracy and reliability of client data verification, which helps reduce the risks of illegal activities while ensuring the security of operations.
- Accelerated KYC processing. Using Camunda allows FIs to cut the time required to perform KYC checks, thus contributing to the faster onboarding of new clients, better retention of existing customers, and improved experience throughout a customer journey.
- Reduced operational costs. The implementation of automated KYC procedures works towards trimming expenses associated with manual document processing and conducting customer audits.
- Decreased administrative burden. More reliable, automated interaction between people, systems, and departments powered by Camunda removes the need to double-check work in progress and reduces back-office load.
- More efficient resource allocation. Since KYC automation relieves bank personnel from time-consuming manual tasks, they can focus on high-value activities.
- Better manual checks. Camunda supports human-in-the-loop automation, which allows people to intervene in the KYC process when a human approach is required while freeing up time for nuanced manual checks.
- Increased data security. Camunda ensures secure client data storage and processing, which helps banks comply with privacy protection requirements and prevent data leaks.
- Enhanced analytics and reporting. Camunda provides tools for analyzing KYC processes and generating reports on client activity for FIs to better understand their customers and identify potential risks.
- Greater visibility into the KYC process. With the easy-to-grab visualization of KYC procedures, real-time data on incidents, and powerful analytics opportunities, banks can easily spot bottlenecks and inefficiencies for further KYC optimisation and documentation improvement.
The above business benefits are confirmed by a study conducted by internationally acclaimed Forrester Consulting, which also revealed better collaboration between IT and business stakeholders, reduced process development time and other advantages of automation with Camunda. Being a Gold Certified Partner with more than ten years of experience in Camunda BPM, the IBA Group designs and implements efficient automated workflows for FIs, ensuring compliance with all applicable regulations. If your organization is looking for a golden opportunity to build a competitive customer experience while checking all the compliance boxes, fill in the form, and we will craft a solution to meet your needs.