In much of the financial industry, businesses abide by regulations that govern what products they may sell and to whom they may sell them. And to stay on the right side of the law, they have to satisfy thorough know your customer (KYC) requirements before conducting business with new clients. The idea is to prevent illicit activities like money laundering and to maintain control of the money flowing around the globe.

But KYC requirements — particularly for startups and other small firms — are often burdensome. Those companies have to find ways to comply with the law without devoting too much of their revenue to doing it. And automation is fast becoming the tool of choice that's helping them to do that. Here are some of the ways that automation is used in KYC workflows and how it benefits the businesses that rely on it.

How Automation Fits into KYC

When you examine KYC requirements, you'll notice that they all revolve around data collection and verification. That makes KYC processes uniquely well-suited to today's automation technologies. The problem — and it's a significant one — is that humans still have to make the final decisions at the end of the day. But that doesn't mean there aren't several places where automation can streamline the process.

For example, intelligent document processing (IDP) technologies can speed up the ingestion of data into identity verification systems. From there, the process of checking identity data against centralized identity registries built to satisfy KYC requirements is another area where automation works well.

But those aren't the only areas where automation fits into the KYC puzzle. Financial firms may also use automation in concert with artificial intelligence (AI) to spot patterns that suggest fraud. It's the same way today's top identity protection firms try to spot suspicious account activity to protect consumers' finances. And because KYC exists to prevent things like money laundering, there's never a shortage of people and organizations trying to find ways around the verification process.

The Benefits of Automation in KYC

Since KYC processes are data-intense, they're often rife with repetitive tasks and time-consuming work. And automation technology excels at such things. That's why businesses that have started to deploy automation in their KYC workflows are already reaping plenty of benefits. Those benefits include:

• Reduced Overhead – The use of automation can streamline the KYC process and help businesses realize cost savings of up to 70%.
• Decreased Onboarding Time – Since automation can complete many KYC processes faster than human staff, it can cut onboarding time for new clients by up to 90%.
• Increased Accuracy – By eliminating manual data input from much of the KYC process, automation removes the potential for human error and helps businesses avoid regulatory issues tied to faulty recordkeeping.
• Simpler Scalability – Businesses subject to KYC requirements must abide by them no matter how many new clients they're dealing with. And automation can help them to scale up their verification processes when needed, without the need to hire and train large numbers of new employees.
• Better Customer Experiences – Although most customers know that KYC is required for financial firms, they still expect a frictionless process. Automation can speed up the data collection process and reduce the number of interactions a new customer must have to get verified, leading to a superior customer experience.

The Bottom Line

At the end of the day, KYC exists for multiple good reasons — and it's not going anywhere. On the contrary, the number of businesses subject to KYC requirements continues to grow with every passing year. Recently, newly-legalized online gambling companies and a tidal wave of new cryptocurrency startups have joined the ranks of businesses for whom KYC is a must.

All of that means that the global workload connected to KYC continues to grow. And automation is one of the key ways that businesses are meeting the challenge. It's already becoming ingrained in the KYC process for businesses of all sizes. And as companion technologies like AI make additional functionalities possible, there's every reason to expect that automation will become the key to KYC compliance for all businesses in the future.