This article is part of Kyckr’s new Future of KYC Compliance series, which interviews leading industry professionals and thought leaders to learn more about the trends that will shape the future of KYC compliance.
The following is an interview we have recently had with Joe Ciccolo, Founder of BitAML.
What’s the current state of KYC compliance?
JC: KYC compliance is going through a technological renaissance. Consumers expect to be able to open an account and send or receive funds as easily as ordering an instant pot on Amazon. Realistic or not, institutions are working harder than ever to remove as much friction from the onboarding and transaction process as possible. While rearranging buttons and redoing wireframes might aid in reducing this friction, it only goes so far. KYC, which has historically been high-touch or more manually intensive, has presented a much larger gap to be closed. Thankfully, we’ve seen some amazing advancements in KYC technology that continue to evolve, iterate, and improve to meet the challenges of consumer and marketplace expectations.
How has KYC compliance evolved over the past 5 years?
JC: KYC compliance has changed dramatically over the course of the past five years. This is due in large part to innovative solutions catering to the growing number of digital-native consumers, which has necessarily compelled institutions to identify KYC solutions that can keep pace. Consumers who have come to expect instantaneous transactions and other banking activities with the simple click of a mouse or swipe of the mobile touchscreen are not inclined to tolerate a 2-5 day business day hold so their customer information can be screened and verified.
KYC technology continues to meet the mandate of disruptive fintech and cryptocurrency applications through new and innovative solutions that less than five years ago were largely unthinkable within professional compliance circles.
How has KYC compliance changed in the midst of COVID?
JC: There is no question that consumers are increasingly transacting remotely, using online and mobile apps, and making use of contactless solutions. More and more users are turning to these products and services out of necessity, and in the process discovering their convenience and utility, beyond the obvious safety benefits in the current environment.
Unfortunately, the bad guys enjoy these same features. We’ve seen a rise in ransomware and data breaches with record numbers of people working from home, scams involving purported stimulus payments and medical devices, and money launderers advantageously hiding among the sharply increased volume of legitimate remote transactions.
Institutions must rise to meet these unique challenges and properly reallocate their KYC resources to reflect the changing habits of consumers, without compromising or neglecting higher touch products and services.
What are the top trends shaping the future of KYC compliance?
JC: Operationally, KYC compliance will likely continue to become much more automated with stronger intelligence capabilities led by machine learning, stronger algorithms, and a desire to remove friction from the process in stronger alignment with customer experience of fintech, crypto, and online/mobile banking applications. While advancements such as sovereign digital identity and artificial intelligence are likely several years away, perhaps even further out, iterative improvements in technology will continue to yield an increasingly seamless KYC process, as well as faster and stronger review and remediation.
What’s the future of KYC compliance?
JC: The future of KYC compliance is much more digitized, less manual, and more customer-friendly. Regtech companies continue to challenge the status quo of KYC technology solutions, rising to meet the demands of fintech, crypto, and online/mobile banking applications. While technology will continue to automate and increase efficiencies, KYC will never be without a human component. Advances in KYC technologies have instead freed up compliance professionals to focus on more intricate and crucial details that cannot be done without a human touch. Reallocation of compliance personnel and the integration of new KYC technologies may be easier said than done, especially among larger or more legacy financial institutions. Regardless of subsector and technology prowess, financial institutions must stay on top of innovative KYC technologies and methodologies in order to keep pace with the ingenuity and creativity of illicit actors, while meeting the customer experience demands of an increasingly digital native customer base.