Not for the first time, the need to balance efficiency and a positive client experience with the demands of KYC checks is proving difficult for a number of major banks, so this report suggests.

The length of time it takes to onboard clients at global banks means that KYC processes cause banks to lose business, with those in Singapore being hit the hardest, according to Ireland-headquartered finech Fenergo – a firm which provides KYC, client lifecycle and transaction monitoring solutions.

Fenergo’s study of more than 450 C-level executives across corporate, institutional and commercial banks found that more than two-thirds (67 per cent) have lost clients due to slow and inefficient client onboarding and KYC, a rise of 19 per cent from 2023. 

Those based in Singapore have been worst affected by the trend, the report said. Some 87 per cent of banks reported lost clients. Every region of the world reported a year-on-year rise. 

“Banks that fail to streamline and improve their KYC processes risk frustrating clients, who have now become accustomed to the slick and speedy user interfaces in every other aspect of their day-to-day [life],” Stella Clarke, chief strategy officer, said. “As the financial and reputational cost continues to rise, enhancing internal procedures could turn effective KYC practices into a competitive advantage for banks across all regions.”

The annual cost for a commercial bank to carry out KYC reviews at a corporate and institutional bank is estimated to be $60 million and $175 million for a commercial bank, the report said. (The cost range is based on a corporate bank performing KYC for 26,800 medium-risk clients ($2,250 per case) and commercial banks performing KYC for 83,800 medium-risk clients ($2,089 per case) per annum.

A high abandonment rate is blamed on factors such as poor data management and siloed processes, as cited by the majority (86 per cent) of banks; poor customer experience and delays in processes (77 per cent), and complicated processes (45 per cent).

There has been no let-up in the worldwide push by regulators to address rising and increasingly sophisticated money laundering tactics.

“The regulatory requirements are believed to be exacerbating the internal challenges firms face regarding operational efficiency, resource allocation, and the ability to streamline KYC processes,” Fenergo said. 

Only 4 per cent of most banks successfully automated their KYC workflows. That said, the survey findings suggest that financial institutions are hoping that AI will solve inefficiencies and data challenges. Some 42 per cent said that they aim to increase operational efficiency with AI while 40 per cent are focusing on AI to improvie data accuracy.