Since the implementation of the Patriot Act in the United States, one of the most important regulatory compliance functions in financial services has arguably become Know Your Customer (KYC) – it applies to every customer of every financial services institution, needs to be frequently updated, and non-compliance carries high penalties.
While financial institutions have met the challenges to meet KYC requirements, it is important to highlight several operating challenges related to compliance that are now pervasive and how technologies like Blockchain may provide a pathway to more efficient compliance.
High Costs
As the importance of KYC has increased, the time and money spent by financial institutions to meet KYC requirements has also increased. Average annual spending on KYC activities is approximately $60 million with the largest institutions spending as much as $600 million[1]. In the past decade, hiring and spending on compliance activities has increased materially and in the near term this trend is likely to continue.
Decreased Customer Revenue
Onboarding a large corporate client usually takes about two months, with some customers having to wait up to four. Multiply that time by all new clients and it can quickly be the equivalent of a year or more of revenue. While a new customer is waiting for the new provider to be ready, that customer – on average – will have eight bank interactions …. that is, revenue opportunities. If reducing the time required for KYC can be accomplished, potential revenue opportunities rise.
Diminished Customer Experience
In a survey of some nearly 900 geographically diverse corporations, 89% responded they did not have a favorable KYC experience[2]. This should not come as a surprise as the KYC compliance process is extended over months and often requires multiple submissions of the same information (due to siloed organizations) when transacting with a new department.
More Efficient Compliance Through Blockchain
Red Chalk Group’s dedicated Financial Services and Blockchain practices are at the forefront of applying distributed ledger technology to solve real-world challenges in back office operations. Red Chalk Group has developed a unique Blockchain KYC solution where customers provide documentation quickly and securely, and only once due to a Blockchain-First architecture. The streamlined process is less labor-intensive and reduces processes time – thereby improving the customer experience and accelerating revenue opportunities.
Moving Forward with Blockchain Implementations
Financial services continue to lead Blockchain development and regardless of your stage of Blockchain discovery, from Blockchain 101 to implementation, Red Chalk Group provides the advisory and technology development work you need to meet your goals.
To arrange a discussion with our team and learn more about our client lab where you can access our Blockchain prototypes, please contact us.
[1] Thomson Reuters “Know Your Customer” survey, May 2016
[2] Ibid
