Today, businesses must grapple with a rapidly changing economic crime threat landscape, ensure strict regulatory compliance, and provide a world-class digital customer experience. In the context of these demands, how might a business strike a balance between security protocols like KYC and the desire to not subject customers to admin that risks annoying customers or, at worst, losing them altogether?
A Novel Threat – The Rise of Customer Fraud
Today, businesses face a rapidly evolving economic crime landscape. The nature of existing threats is changing, with a greater emphasis than ever on the threat posed by external perpetrators of economic crime, especially customers.
PwC’s Global Economic Crime and Fraud Survey tracks the trends that define the economic crime threat landscape. In the survey’s various categories of fraud, the category of “customer fraud” was only introduced in 2018, due to its historically minimal threat to businesses.
However, in 2022, customer fraud has exploded and now ranks as the second most common type of economic crime – its incidence rate is three percentage points higher than in 2020. Notably, for companies with annual global revenues of more than $10 billion, customer fraud was the number one type of fraud experienced. For all companies with annual revenues of less than $10 billion, customer fraud was the second most common type of fraud experienced, behind cybercrime.
The growth of customer fraud represents a global trend in the increased threat posed by external perpetrators of economic crime. In total, 69% of all the fraud experienced involved an external perpetrator. The threat posed by customer fraud – and the broader threat posed by external perpetrators of economic crime – necessitates that businesses implement KYC protocols to secure business perimeters and their transactions with customers and business partners alike.
Striking the Balance – KYC, Without Compromising Customer Experience
Today, businesses operate in a rapidly changing world – threats of economic crime, regulatory compliance obligations, and customer expectations have all seen significant changes over the course of only the last several years. Seismic events such as the Covid-19 pandemic have accelerated the rate of change.
“Partly as a result of the pandemic, customer expectations are expanding beyond companies delivering high-quality products and services to them ensuring data privacy [and] providing a world-class digital experience to customers.” – Deloitte.
Growing consumer demand for world-class digital customer experiences pose a unique challenge for businesses. On the one hand, the pervasive threat of customer fraud necessitates the implementation of KYC protocols. On the other hand, businesses cannot afford to let these protocols worsen the customer experience.
“CDD procedures are among the main sources of dissatisfaction for customers. The process of collecting and verifying information is often difficult and strenuous, filled with endless requests for documents and additional in-person periodic evidence submissions.” – FATF.
However, the emergence of new technologies has transformed CCD/KYC procedures. In 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance down from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on the 2018 FINTECH100 list.
The transformation of FICA compliance – enabled by new digital technologies – allowed businesses to save time and money and ensure the highest levels of AML/CFT compliance, while consumers benefited from easier documentation provision and near-instantaneous personal information validation. Today, this innovation continues in the provision of excellent KYC services that can ensure security without compromising on customer experience.
Optimising Compliance – Tailored KYC Solutions to Fit Every Demand
Every business has its own unique set of requirements for security and KYC optimisation and service provision. Adapting digital security protocols to a business’s unique requirements is key to ensuring maximum effectiveness, minimizing costs, and ensuring the best possible customer experience.
“Be too passive and the organisation risks missing a fraudulent transaction, with all the financial and reputational fallout that follows. But be too proactive, and they risk alienating, or even losing, their customer base.” – PwC.
South Africa’s application of a Risk-Based Approach (RBA) means that every Accountable Institution (AI) has to design and implement a framework of security protocols that are to be deemed sufficient by the Financial Intelligence Centre (FIC). By using a tailored approach to risk, businesses can reduce due diligence requirements for individuals that are identified as being low-risk. Discussing the utility of revolutionary new technologies for enhancing the customer experience, the Financial Action Task Force (FATF) commented that…
“Innovative technology-based solutions – both digital ID and AML compliance transaction monitoring tools - can facilitate more accurate and up-to-date risk assessments at an optimised cost and provide greater confidence in the conclusions of that risk assessment, enabling greater use of simplified due diligence where appropriate.” – FATF.
Greater detail and accuracy in risk assessments save time and money by allowing businesses to conduct due diligence that is appropriate to the level of risk posed by an individual. This not only saves the business time and money but also provides a better customer experience.
KYC and Customer Experience – Have Your Cake and Eat it Too
Today, the availability of transformative technological solutions to ensure security and compliance – all of which can be tailored to the demands of a specific business – mean that organizations can strike a balance between security and un-intrusive administration, therein upholding the highest standards for security and regulatory compliance while simultaneously providing an excellent customer experience.
As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business and its customers, book a demonstration by contacting our team here.