Despite significant investments by industry leaders, KYC remains challenging in the financial sector. As per report by Global Newswire, by the end of 20026, the market size of global digital KYC is projected to reach $ 1,015.36 million, with an annual average. Similarly, Compound Annual Growth Rate (CAGR) of is expected to be 22% between 2019 and 2027.
Did you realize that banks along with other financial institutions will have to pay record fines for violating KYC/AML laws in 2020? These fines worth 12.09 billion Euros. In addition to heavy fines, customers unable to comply with KYC has to go through multiple consequences including businesses undergo damaged reputation, loss of customers as well as incompetence to comply with regulations.
Due to the pandemic, a lot has changed, so does the finance sector. Therefore, it must be well-organized to encounter what KYC has brought in 2021 and beyond.
An identity verification system, KYC, verifies the identity of customers to engage legitimate customers and to prevent fraud. With advances in technology, the AI-based KYC system includes certain controls that authenticate government-issued identification documents and validate the live presence of the end user through facial verification.
Today, KYC is a basic constraint for all financial institutions. A lot has changed at KYC today. From customer expectations to rigid regulations, hence, there's a lot to talk about.
In 2021, KYC regulations around the world has changed. Regulators have modified their laws to make them inflexible. These laws have created an active line of defense against financial crime. The FATF has changed some guidelines, while the UK is now The Europe region is now following the Sanctions and Money Laundering Act of 2018 and activated by six AMLDs. On contrary, FINTRAC and AUSTRAC have also adopted new KYC regulations. In addition, the Southeast Asian regions are also procuring KYC and AML regulations in order to combat fraud.
In addition to regulatory changes, customer requirements have changed over time; they struggle for a higher level of relief and are not at all attracted towards lengthy processes.
Digitally equipped customers are looking for simple but interactive processes, which is why the need for digital KYC is growing. Predictions should have a transparent identity verification process that is regularly updated to meet rapidly changing customer expectations.
Many changes can be expected in KYC in the remainder of 2021 and the coming years. Some KYC trends to look forward to beyond 2021:
Budgetary pressures among businesses in the financial sector have evolved over the time and the pandemic has played a fundamental role in this. Currently, the business world demands operational efficiency to decrease costs as much as viable, or else adaptation to change may not be as effortless as the need of the industry in the upcoming years is to optimize the KYC process in a consumer-centered way.
Those days are gone, when financial institutions rated their customers based on high-risk ratings. Corporate entities now have a better way to verify their identity and update customer information in a timely manner. As the regulatory framework continues to tighten in the coming years, the future of KYC is eternal. Financial institutions need real data and regularly update customer information based on customer preferences. Only in this case can the enterprise guarantee the uninterrupted operation of the customer's KYC.
Technological advancements are helping companies to take preventive measures against fraudsters, and criminals are looking for better ways to satisfy their illegal desires. Hereafter, the regulatory environment will take effect, and law enforcement will ensure that banks and other financial institutions take all necessary measures to combat fraud. In the next few years, the financial sector will have to face stricter rules, that is, the strengthening of artificial intelligence support. KYC will be inevitable.
Organizations should consider working diligently with compliance teams to share more customer data and seek more suggestions in order to acclimate the changing KYC ecosystem.
Since the acquisition of real-time data is based on the latest technology, the traditional KYC process is automatically automated. For instance, customers no longer need to manually collect business information, structure, UBO, and shareholder information. There is also no need for an automated KYC process. It requires human intervention.
KYC has undergone a lot of changes, and today there is a “know your customer” authentication system based on automation or artificial intelligence. Given the significant increase in criminal activity, the demand for automated KYC is also increasing. In addition, the digital world needs a solution that understands your customers, that can screen customers, connect quickly, and perform effective law enforcement. Therefore, Eternal KYC is likely to conquer the world in the next few years. The need to manually update consumer profiles will no longer be a problem.