The regulations are always changing in the financial sector and are accompanied by inconsistent KYC processes, which lead to a great financial burden on the fintech companies. Following are some of the factors of KYC faced by fintech companies:
Rising KYC costs: The costs associated with KYC processes are raising to the entirely new level. Thomson Reuters survey reported 10 percent of the world’s top fintech companies are spending more than $100M annually on the KYC processes.
Constantly shifting regulations: Rapid regulatory changes and the introduction of new rules lead the financial organization to constant refining, overhauling the policies, training, and systems once they catch up, again new regulations hit with more changes and create enormous churn.
Regulations come with penalties: The ever-changing regulations are costing fintech organizations in millions. They have to audit, test, and validate processes from internal and external groups. The continuously evolving rules and regulations are giving a lot to worry to the owners because they are being tensed about new regulations that may complicate the process further. Organizations have to invest more in the infrastructure to corroborate regulators’ demands.
Lack of skilled professionals: Shortage of Skilled professional leads to increased pressure on the organizations. It deduces the organizations’ capability to perform KYC procedures. Also, it has caused the senior members to devote their time towards the KYC processes leaving other critical revenue related works of the organization.
Increased customer friction: A financial organization, on an average spends 24days to complete onboarding process according to the survey conducted by Thomson Reuters. And the number of customers is increasing very rapidly. The customers resent having to provide all the information requested to them. Account holders may receive recurring requests for KYC information during the relationship with the organization for many reasons. According to the survey of Thompson Reuters 12% of the companies have changed their financial organizations because of KYC issues.
Fintech organizations should build a client-focused KYC and sustainable compliance program that supports communication, validation, and reporting of information between clients, counterparties and regulators. This will drive efficiencies and engage with clients in a new way.