Frictionless KYC is not a myth or a reality (yet), but it is an opportunity

The fintech industry has empowered millions of consumers in the Asia-Pacific region with access to basic financial services in recent years. From digital savings accounts and payment portals to microloans for small businesses, these services have enabled consumers to plan for a better future.

In addition, the rise of fintech disruptors has pushed incumbent financial institutions to invest in digital products in order to stay competitive, thus providing a more seamless experience for consumers.

The growth of the industry hasn’t been smooth sailing, however. Given the sensitivity and value of the data that they hold, financial institutions and platforms have been increasingly vulnerable to cyberattacks, data breaches, and fraud attempts.

Ponemon Institute’s 2019 report found that more than 50% of FSI organisations had experienced a cyberattack or had sensitive customer data stolen from them. Furthermore, a recent VMware study reported that more than 80% of financial institutions reported an increase in cyberattacks from 2020.

In response, authorities across markets have mandated that businesses offering digital financial services comply with stringent compliance measures and regulations. Know Your Customer (KYC) verifications are among the main compliance measures in place, and have become a critical pillar of security for financial services today. These processes help banks identify and verify the identity of their clients, making sure they are genuinely who they claim to be.

While there is little doubt that KYC fortifies the security of financial services platforms, the increasing complexity of these processes have led to frustration and resistance from customers. This is in spite of the hefty sums that companies dedicate towards KYCs: LexisNexis found that firms spent US$180 billion on financial compliance and risk management.

The conundrum, then, for FSIs and fintech platforms is: How might they adhere to strict international regulations, while making sure that KYC processes do not cause too much inconvenience for the customers?

The competitiveness of Southeast Asia’s fintech industry heightens the urgency for a KYC solution that is frictionless. After all, with consumers spoilt for choice when it comes to digital financial services, they could easily move on to a competitor when faced with a complicated user experience. In fact, in a Vesta survey among respondents in key SEA markets, “multiple verification and authentication” was identified as the most common problem users face in online payments.

Returning to the core of communication: voice

The two biggest challenges around facilitating digital KYC onboarding are: first, ensuring the security of storing personal and sensitive information while abiding by regulatory compliance; and second, providing a satisfactory experience for customers — something that is difficult for simple chatbots or IVRs to perform, given their inability to anticipate customer needs seamlessly.

To address this, across Southeast Asia, FSIs and fintech platforms have returned to the heart of communications to smoothen the KYC process. Voice — in particular, voice AI — is leading businesses back to the very basics of communication and allowing financial institutions to carry out these complex processes in a natural and easy manner.

By investing in intelligent technologies that can automate and optimise the KYC process, businesses can reduce costs and enhance efficiency.

With advanced natural language processing, conversational AI can restore empathy into customer interactions. By designing voice assistants to suit the needs of businesses, the technology allows FSIs and fintech platforms to understand and facilitate complex human conversations, making the KYC process more painless for the customer.

Streamlining onboarding with human-like voice AI

For instance, a digital cryptocurrency trading platform used voice AI to streamline its KYC verifications, as this onboarding process had been a major stumbling block for their customer acquisition. Put off by the high level of friction associated with verifying their identities, customers who had shown initial interest in engaging this digital platform eventually fell through the cracks, owing to complicated processes.

By designing an outbound voice assistant for this platform, the business was able to automate high-volume verification calls to contact existing customers, all while abiding by strict regulatory compliance in various countries.

With tactful and human-like voice assistants, they reached over 78% of their dormant customer base and increased their customer conversion rate. This also freed up their human customer service agents to handle higher priority calls, improving the overall customer excellence of the platform.

What is the future of KYC verification?

Digital transformation is set to accelerate, as the habits that consumers picked up during the pandemic stick. Gone are the days of manually checking customer documents and calling various institutions for fact-checking; the future of KYC onboarding exists online.

In this environment, it is essential to remember that customer experience is still key to business success. Despite rapid changes in the working environment and regulatory compliance, customer communication and experience should remain the central pillar of KYC verification processes.

With voice AI, financial services and fintech platforms have the opportunity to continue remaining accessible to and interactive with their customers, all while providing a seamless onboarding process.

By embracing the implementation of conversational AI technology, fintech firms can remain at the forefront of KYC onboarding and ensure that their customers have a frictionless experience, improving customer retention and business health at the same time.