KYC Done Right: When to Use Managed Services vs. In-House Teams

People don't wake up in the morning and think, " Today, I will go and buy some KYC software.”

More often, people wake up and think, “Today, I will go and fix this pain point I have related to KYC.”

The point is that not every problem can be solved (only) by software, and most often, you also need to look at processes and people/competencies.

This realization led us to start an advisory and managed service two years ago.

Not because this was part of the plan but simply because we had customers who loved our technology platform but did not have the processes or people to run the process. In other words, they wanted to get as much as possible off their table.

There are a few pros and cons for using managed services...

Pros

✅ You get started faster, as you don't have to hire and train a team.

✅ You utilize best practices, thereby minimizing regulatory risks and increasing quality.

✅ You avoid having to hire KYC people on the team, maintain their competencies, and generally incur the overhead costs of an increased team.

✅ You get more financial flexibility, as you can more easily reduce the costs and capacity.

Cons

❌ You don't build internal competencies and rely on your outsourcing partner.

❌ There are probably no cost-savings, as the outsourcing partner will take any gains from efficiency as their profit.

❌ You need to monitor performance/quality control to ensure compliance and that you get what you pay for.

In general, I recommend utilizing managed services if you are early in your maturity, thereby missing basic framework elements (policies, SOPs, etc.) and having few or no people on board. This way, you can get started super fast, and with a strong policy/SOP framework, you can always insource it and start running it yourself as you grow.

You should require that your outsourcing partner perform their own quality control so you can utilize this, and you should ensure that you can access all collected KYC data on the same platform as the outsourcing partner is working on.

Make sure you can easily get the data out of the platform - preferably, you own the license to the platform that they use, so if you want to insource or move to another partner, you just shut their access down.

Also, check which people are on the outsourcing partner team so they don't present the A-team and end up giving you the B-team when it's time to start.Competence is everything when performing high-grade KYC.

Sune and his team are helping multiple firms with all sorts of use cases for KYC sharing, collection, and screening.

If you need help, just give us a call.