Self-service bank KYC portals - unveiling the real pros and cons

Know Your Customer (KYC) and Customer Due Diligence (CDD) is a crucial process that both banks and their customers must get right. However, recent McKinsey data shows that, along with account opening, due diligence accounts for over 40% of the banks’ customers’ onboarding time. As a result, 50% of the banks surveyed have developed their own self-service portal to ease friction within the KYC process.

However, from Avallone’s conversations with Treasurers, it’s clear that the experience of using KYC portals is less than ideal. We often hear the portal process referred to as “time-consuming” and “needlessly complex”. And yet, most banks are entirely unaware of the frustrations they cause.

The evolution of KYC questionnaires: From paper to portal

Decades ago, KYC questionnaires started as paper forms which needed to be filled out by hand, but in the past years, it’s been common to get digital files in PDF, DOC or XLS formats and, most recently, self-service web portals. In late 2022, online portals or ‘equivalent smart client interfaces’ were the number one investment priority for banks, with 86% planning to allocate budget to this area within the year.

So, how do these portals work? First, banks issue their Treasury contact with a login for each legal entity and that person then logs on to populate their responses. The KYC portal process can be beneficial as it:

• Reduces workload for banks
  After sending the KYC request through the portal, the bank sits back and waits for the information to appear. If needed, reminders can be automatically generated. Once the information is received, banks can easily reuse the data to manage ongoing due diligence and to predict trends. 

• Boosts speed and efficiency
  In theory, KYC questionnaires hosted on an online portal should be quicker and more efficient for customers than downloading, completing and returning a pdf version, making it then also more productive and expedient for the banks.

• Improves accuracy‍
  Portal responses should also include fewer errors, compared with questionnaires completed by hand.  

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The problem with portals 

We can hardly blame banks for embracing digitization, especially when this approach works so well in personal banking. The trouble is, KYC questionnaires sent through these portals often create more issues than they solve. A 2019 survey revealed that 93% of Treasurers found KYC requests more challenging compared with the previous five years - reminiscent of Aldous Huxley’s cautionary words: 

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“Technological progress has merely provided us with more efficient ways of going backwards.”‍

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Specifically, online portals present the following issues for corporate organizations:

1. Too many requests to manage

Large corporations often work with many banks across multiple countries. The Treasurer will get a portal login for each legal entity and for each banking partner – even if the bank is the same but just based in a different country. In addition, certain types of funds (e.g. funds within the real estate industry) have thousands of legal entities, each needing their own unique portal login. The result is often an overwhelming number of portal logons that can be hard to keep track of.

Once Treasurers have access to the right portals, they need a place to save the multiple questions and responses – triggering massive Excel spreadsheets and headaches for everyone involved.

2. Collaboration challenges‍

Typically, only the Treasury team has access to the portals, requiring them to have the main responsibility to source and collect all the relevant responses. Internal collaboration either takes place over email, within Excel files on Share Points or messy data rooms, potentially resulting in inappropriate handling of sensitive information.

Consider emailing a Board Member for a scan of their passport and then saving it in an internal drive - which can be accessible by any employee. It’s time-consuming for all parties, not to mention highly insecure. It also relies on the right people remembering where the correct version is saved for next time it’s needed for future KYC. Cue more emails to an already frustrated and busy Board Member with little time or patience. 

In order to make sure all tasks are completed properly and on time, the Treasury team must also create and maintain some kind of internal checklist. This not only adds another layer of work, but can also prove extremely irritating to manage.

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3. Issues with questionnaire visibility

Unlike paper or pdf questionnaires, online portals don’t allow for full visibility of the entire questionnaire. That is, very often the portal will have nested questions or conditional, follow-up questions that only reveal themselves after an answer is provided. This means that Treasurers can spend hours sourcing the answer for a specific question, before later realizing that more information is needed. Multiple follow up emails ensue, which is inefficient and annoying for all parties - internal and external.

In addition, each bank also formats their questionnaire differently, making it challenging for organizations to respond consistently and efficiently.

Enter the new phase of KYC questionnaires 

It’s unsurprising that, before partnering with us at Avallone, one of our customers was about to hire two full-time employees just to manage their banks’ KYC and due diligence requests. Instead, his existing team was able to easily migrate all their KYC information and files to the Avallone KYC Responder - becoming their “source of truth” digital KYC database. Now his bank requests are managed seamlessly, securely and with minimal stress – all within one single platform. He’s also saved the company a significant payroll cost - as well as the time and energy needed to recruit, interview and onboard new employees.

Digitization of information and files leads to the next phase in the evolution of KYC questionnaires: open API access between banks and their customers. By investing in flexible API technology, banks will be able to seamlessly access their corporate customers’ relevant KYC information. This interconnectedness will allow for up-to-date, securely managed, real-time KYC information. No frustrating emails back and forth; no duplicate questions; no insecure data rooms. That’s the KYC dream.