Navigating the new normal – how to redefine KYB and enhance the SME experience
The “one size fits all” approach to compliant onboarding is simply no longer relevant.
The business landscape in 2020 remains on a knife edge. For small-to-medium sized enterprises (SMEs), how the next 12 months develop could be the difference between survival and liquidation. The stakes are higher than they’ve ever been and, as a result, financial service providers find themselves in an equally precarious position.
As risk within the SME market grows, providers need a better understanding of the businesses they’re building products for. The key to this? A new way of approaching know your business (KYB), one rooted in fast, comprehensive and real-time digital strategy.
The perfect storm
For the last decade or more, financial service providers and SMEs alike have been moving ever-closer to an all-digital relationship. This forward momentum gathered unprecedented pace as the global pandemic hit in early 2020.
According to McKinsey, “the digitisation of customer interactions was accelerated by three years” in Europe, something that has rapidly increased demand for digital products.
As a result, banks have had to start overhauling their strategies to accelerate digital transformation; the “one size fits all” approach to compliant onboarding is simply no longer relevant in a landscape evolving by the day.
The urgency to support SMEs in a time of crisis is tempered with an apprehension from banks and service providers that see the market as one fraught with risk. “SMEs are in financial distress,” McKinsey said in August 2020, “with 40% stating they will likely be out of business by the end of the year if current economic conditions continue.”
The need for a different approach – and, more specifically, to invest in one – is more prevalent than ever. For financial service providers that want to not only survive, but succeed, this has already become a top strategic priority for 2021 and beyond for almost nine in ten senior leaders in financial institutions, according to a recent study carried out by Lloyds.
Rip it up and start again
Google “KYB” and you’ll find millions of results, many of which discuss the semantics of a term rooted in compliance and financial conduct. While these definitions still hold water, KYB is now much more of a dynamic part of business strategy than previously given credit for.
Digital onboarding, for example, is no longer a box-ticking exercise – and the legacy systems and infrastructure that are traditionally used to onboard customers are cumbersome and expensive to maintain. It’s no longer much use simply knowing your customer to “a certain degree”, and then moving them through the process anyway – particularly as the consequences of regularly making a wrong decision at this juncture are too costly to maintain.
Instead, we must now see KYB as a continuous process. Where it was once one part of a wider – and enforced – Know Your Customer (KYC) strategy, it now stands out on its own as something that needs to be maintained throughout the onboarding process and beyond, ideally by dedicated in-house teams.
Now, we should approach KYB with much more flexibility. The best strategies out there are company-specific, and driven by APIs. This not only makes them contextualised, but fast and frictionless, too. The technology now available to financial service providers means that a real-time approach is easily attainable, garnering in-the-moment data and insights on both potential and current customers.
The state of play
Innovators in the space, like Santander, are already investing in KYB strategies to account for the rapidly changing consumer expectations brought on by accelerated digitisation.
“The changes in retail consumer experiences in particular have changed expectations about customers” Jonathan Holman, Head of Digital Transformation at Santander UK Corporate & Commercial, said in a recent DueDil LinkedIn Live.
“It’s not just the advent of mobile, but the sharp increase in remote working, digital banking and the fact that people want to engage with products that fit around their lives.”
Consider the volume of SMEs actively seeking help this year and next, and then consider the time it would take for banks – already under government and public pressure – to manage these requests without the right systems.
The market opportunity for SMEs is huge, but whether banks are able to embrace it relies heavily on their willingness to leverage automation to implement a seamless onboarding experience.
So, what next?
The key to success is being proactive, rather than reactive. With the right technology in place, banks can process and verify thousands more applications at much greater speed, with automatic approvals and straight-through processing (STP) saving even more time.
Beyond onboarding, financial institutions can utilise these technologies to their advantage to continuously monitor their book to identify and flag real time risks and opportunities. Building out these decision models to automate KYB checks, and continuous monitoring, represents a perfect platform to develop a strategy fit for the fast-paced, ever evolving times we live in.
As regulatory changes continue to gather momentum, financial service providers find themselves in a sweet spot of opportunity. The time is now – not only to adapt and survive, but to succeed and shape the future for SMEs when they need it the most.
Founded in 2011, DueDil is a company intelligence platform that delivers insights on every UK and Irish company and the people behind them. DueDil provides a complete view of the UK and Irish market so the SME onboarding process is as robust as it is frictionless. All of this is available in a single KYB for Life platform that ensures compliant onboarding and proactive risk monitoring.
In March 2020 DueDil was named RegTech Partner of the Year for the second year running at the British Banking Awards in recognition for its work transforming the digital customer journey for tens of thousands of UK SMEs. DueDil has a number of well-known clients, including Santander, Metro Bank, Funding Options and TSB Bank.
Investors include Augmentum Fintech plc, Oak HC/FT and Notion Capital.
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