Know-Your-Customers (KYC) is a vital practice undertaken by companies to ensure the verification of their clients’ identities in adherence to legal requirements and regulations like Anti-Money Laundering (AML), General Data Protection Regulation (GDPR), etc. This process is time-consuming and resource-intensive for both the customer and the party performing it. Hence, banks are obliged to perform rigorous KYC checks to onboard clients.
As a result of Open Banking, banks and financial institutions can share customers’ account information seamlessly and securely. This has a profound impact on KYC. With customers’ consent, Open Banking allows access to bank data, simplifying KYC.
Third parties leverage this shared information to perform KYC checks more efficiently and accurately. This innovative approach results in an optimized customer-centric experience. Let’s look at some examples.
Enhanced Accuracy in Credit Risk Management
Credit risk assessments require a careful but swift onboarding process for users. Collecting substantial information from new customers helps understand their profile and associated risks. This helps the lender make informed decisions regarding the default risk. However, excessive information requests can discourage legitimate customers. Open Banking streamlines this KYC process and improves the operator’s credibility, paving the way for a win-win scenario.
Additionally, with Open Banking traditional banks can also improve KYC checks’ accuracy and reduce fraud likelihood by obtaining supplementary customer data from other financial institutions.
API Aggregators Automate Customer Verification
API aggregators play a pivotal role in Open Banking, unifying APIs from various banks and creating harmonious data exchanges. They provide significant advantages for KYC procedures.
For example, third parties can perform KYC checks more quickly and accurately, reducing errors and strengthening customer verification. This is without compromising the user experience.
Customers benefit from an improved experience as they no longer need to provide redundant information or undergo multiple KYC procedures. With their consent, bank verified data is automatically shared across platforms.
How Open Banking Aggregators Can Optimize KYC Efficiency and Customer Satisfaction Across Industries
Open Banking API aggregators have proved their value acting as more than just technical integrators. They have revolutionized business processes. Here’s an example of an energy company:
To optimize their KYC process for new SEPA Direct Debit customers, an energy company will investigate the benefits of partnering with Open Banking providers. Once partnered, the company will benefit from:
- Expedited access to customer data.
- Reduced KYC processing time.
- Improved customer verification accuracy.
- Minimized KYC-related costs.
- Increased customer satisfaction.
Open Banking, alongside API Aggregators, offer a promising future for KYC processes. The focus extends beyond process optimization, aiming to create enhanced, efficient, and secure customer experiences. Embracing this evolution is vital for the success of changing KYC landscape.