Banking CFOs and COOs increasingly raise the subject of global inflation in our conversations.
Prior to their digital transformation and adoption of automation to manage the heavy lifting of KYC due diligence, many banks rely heavily on strategies of wage arbitration, employing large teams of specialist analysts and IT professionals in India and other Asian countries.
In India, the annual inflation rate now runs at over 6%, at the very top of the Reserve Bank’s target range. Wage inflation is higher, now at over 9%. These facts undermine cost predictions and challenge budgets established in the previous era of very low inflation.
Banking executives are adapting their strategies with the goal of minimizing the impact of inflation on their operating budgets. In turn, their expectations of tech suppliers are evolving.
Inflation sharpens the battle for talent. KYC analysts and IT professionals are in high demand; an employer perceived to be lagging the market in adjusting salaries for higher inflation is at increased risk of losing talent. Because high rates of attrition increase staff acquisition costs, banks recognize automation and digital transformation of KYC as opportunities to improve customer service levels at onboarding and remediation, and to improve work satisfaction for KYC analysts.
Without automation, KYC due diligence involves much rote work: finding facts buried deep within multiple sources, collating and analyzing these to establish corporate structures and identify those individuals with control and ownership. Transforming this work to automate rote tasks increases employee satisfaction. Skilled KYC analysts who relish the more demanding cognitive tasks that consume most of their time once automation does the heavy lifting, are less inclined to leave and join a bank where KYC remains manually operated.
Previously, some banks made the decision to build their own KYC automation technology. As with all development projects, the costs of maintaining and updating technology soon overtake the initial build cost. Wage inflation is causing some rethinking of the economics of build-versus-buy. Executives re-evaluating the market for KYC automation SaaS technology require their vendors to deliver cloud native software. As more registries and other external sources relied on for KYC become available as APIs and as information suppliers adopt push technologies to support emerging perpetual KYC (pKYC) use cases, banks recognize that technology with continuous innovation and continuous deployment capabilities offers the benefits of these advances with minimum disruption to their operations.
The obligation to comply with regulations designed to counter financial crime complicates customer on-boarding to the degree that no single data or tech vendor offers a comprehensive solution to a bank’s requirements. This means that banks must create their own digital ecosystem to support customer on-boarding and remediation.
Banking executives are wary of vendors offering a solution – they understand that they own the solution, and welcome vendors capable of partnering to deliver automation as part of a broader digital transformation initiative. Automation can bring more data, faster to a KYC analyst but this alone leaves the analyst with more work and cannot deliver higher levels of customer service or productivity. A transformative approach involves taking a fresh look at KYC informed by what can be automated and then designing a new way of working, taking advantage of the strengths of technology and of human expertise, to create workflows where the analyst and technology work together to do more work, faster and with fewer opportunities for error.
At Encompass we are customer centric and actively seek to engage with partners. Many of our meetings with our banking customers involve a team with representatives from other technology companies, particularly vendors of Customer Lifecycle Management (CLM) and Customer Intelligence technologies, with information vendors, and with banking industry experts from a systems integrator. Together, we work with the bank’s own experts to share the automation capabilities available within each vendor’s technologies and to create new workflows that transform the work of due diligence to improve customer service and radically reset the economics of KYC. Costs of the emerging multi-vendor digital ecosystem are amortized across many banks helping to limit the impact of wage inflation and improve work satisfaction for KYC professionals.
Author: Roger Carson
Roger co-founded Encompass and has brought the company’s vision to life, expanding our reach and impact from Australia to the UK.
His global outlook is informed by a highly successful international sales career, with Andersen Consulting then Unisys in the USA, South Africa, and Australia, as well as leadership roles in Asia.
Prior to Encompass, Roger founded Pacific Advantage Services, raised Capital from Europe for Asian distribution, and completed a trade sale to IM Invest.