Reducing KYC Costs With Digital And Artificial Intelligence

Digital transformation is a hot topic across industries, especially financial industries, but many companies aren’t getting much of a return on their investment, according to a new survey by EXL Service and Harvard Business Review Analytic Services.

In some cases the term digital transformation is used to describe some basic functionality, such as electronic communication with customers.  The survey found that 82% of financial services firms said their desire to communicate with customers across their preferred channels — multi-channel or omni-channel in bank-talk lingo — was a key reason to embrace digital compared to 68% of all survey respondents. When it comes to more sophisticated digital areas, the numbers fell off — only 40% made a priority of predictive or prescriptive analytics.

Rohit Kapoor, CEO of EXL Service, said that a common mistake in digital transformation program is to start with technology rather than business.

“Then you are essentially taking a hammer and trying to find a nail. Instead, look at the business side first, understand the issue, and then use technology as and when needed and appropriate to fix the problem. Not all the problem

s need a technology solution. In many cases you need to orchestrate the right sets of technology to solve a problem.”

HSBC headquarters in London’s Canary Wharf.Getty

EXL Service worked for two years with HSBC to improve the efficiency of its Know Your Customer (KYC) processes that use automation, artificial intelligence (AI) and natural language processing.The company says Digital KYC, can reduce onboarding costs by 70% and reduce turnaround time by as much as 90%. HSBC decline to comment for this article.

A common problem in financial services, said Kapoor, is that firms let IT drive the digital journey .

“They end up becoming mega IT transformation projects that extend over a long period of time because they are trying to automate everything with the technology. After two or three years you have spent a lot of money but haven’t delivered on the business outcomes. We prefer to start with the business problem and start delivering bit by bit with agile methodology. It is  more palatable and effective, and you get results.”

Most American financial services firms have a variety of legacy, i.e. old, technology including mainframes that have been around more than 40 years. Add to that a few decades of M&A and you end up with systems often described as spaghetti.

“We have seen large financial institutions that have multiple platforms already in place —  disparate systems that don’t talk to each other,” said Kapoor. “Trying to replace all of them in one go is not practical and very expensive and very time-consuming.”

Simply trying to identify a customer issue, such as a customer who is not receiving statements on time, can require cutting across silos and platforms, he added. Robotic process automation (RPA) can automate and speed up work that is now being done manually, but it does not link in a systemic way two different systems.

Banks and other financial services firms need a complete transformation of from front to back office to grow revenue, reduce costs and improve the customer experience, he added.

“The transformation has to be holistic; if you do only one piece you will get stuck. I have seen very slick user apps on the front end that can take all the Information from the customer, but when it gets to the middle or back office it falls apart because no one can pick it up and respond to the customer in real-time. You need complete straight-through processing (STP) to reduce friction. Most organizations are not set up to serve the customer from end to end.”

Digital transformation can run into organizational roadblocks, like senior managers who know the industry and may be great at running large teams of people but haven’t invested time in educating themselves on newer consumer technology. Their expectations are very different from users’.

Customers expect real-time experience, whether it is changing an address or increasing the coverage in an insurance policy, while financial companies can often take 30 days to make changes. Executives need to understand that real-time expectation and align themselves with newer technology which can enable that.

source: forbes.com