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Biometric options expanding as KYC compliance cost reaches €50M a year

Biometric options expanding as KYC compliance cost reaches €50M a year

Digitizing identity verification with biometrics and other technologies could save a typical bank €10 million (US$11 million) a year according to new research from Mitek and Consult Hyperion. The cost of KYC compliance for banks as risen to €50 million ($55.2 million) a year with rising fines, while customer abandonment could also cost banks €150 million ($165.5 million) in the next five years.

The report “The Cost of Compliance and How to Reduce It” shows new EU Anti-Money Laundering (AML4/5) and Counter-Terrorist Financing (CTF) rules have increased the annual cost of non-compliance fines to €3.5 million ($3.9 million). Card ID theft also increased, however, by 59 percent in the UK to £47.3 million ($58.3 million) last year. In addition to fines and fraud losses, businesses can also suffer reputational loss, and in some cases the loss of a license to operate or personal liability among senior management.

“It’s no longer good enough for banks to simply accept the costs associated with inefficient processes – the consequences are now much more serious,” said Steve Pannifer, author of The Cost of Compliance and How to Reduce It and Chief Operating Officer at Consult Hyperion. “The biggest change in the past two years has been new EU rules around KYC related compliance. This has led to many more punitive fines for banks who fail to comply – and the size of the fines has grown in tandem. We’ve seen the Financial Conduct recently issue fines to several major banks, amounting to £176 million. Then, even that fine was dwarfed by the €775 million fine handed to a single bank by Dutch authorities.”

The customer abandonment rate has grown from 40 percent two years ago to 56 percent, as institutions try to meet increasing requirements.

“The future looks bleak for banks who don’t comply with KYC, or whose processes are so cumbersome that they can’t attract new customers,” said Rene Hendrikse, EMEA MD at Mitek. “But technologies such as digital identity verification could help banks overcome the hurdles holding them back. The technology enables customers to onboard themselves with just a selfie and a photograph of their ID document – online or on mobile apps. In turn, this drastically improves customer experience, reduces banks’ reliance on manual processing, and helps them avoid heavy fines from the regulator. To avoid falling far behind their nimble challenger rivals – and behind the traditional counterparts who are turning to innovation to survive – investing in the right technology at the right time will be crucial.”

India considers new options for fintech

The Indian government’s Steering Committee on Fintech Related Issues is recommending that video-based KYC and DigiLocker services be allowed, Outlook India reports, which would extend the options for biometric customer verification.

The committee has submitted a report to Finance Minister Nirmala Sitharaman, under its mandate to identify institutional regulatory upgrades to enable fintech innovation.

“The Committee recommends that various options, including possibility of video-based KYC, making available validated electronic versions of KYC related documents through DigiLocker, making these available for verification by service providers with prior customer consent, etc, may be considered early,” according to the report.

“Fintech firms have been affected by the judgment on account of legal infirmity in the Aadhaar law about online KYC not being permissible on a voluntary basis. The online KYC and authentication using Aadhaar was a sound system with considerable efficiency and convenience.”

The committee says that in light of the Supreme Court judgement against the use of online Aadhaar for KYC processes by the private sector, several alternatives need to be explored. It also made recommendations related to easing transactions for micro small and medium enterprises (MSMEs).

Neoris to offer FacePhi biometrics

Neoris has reached an agreement with FacePhi to add biometrics to its onboarding digitalization offerings for the financial sector.

Customers of financial institutions increasingly demand omni-channel and customized experiences, the companies say, and the partnership enables customer organizations to create digital ID based on facial biometrics and blockchain registration, allowing different kinds of transactions to be carried out across different channels.

According to FacePhi CEO Javier Mira, “the importance of closing strategic alliances with companies specializing in digital transformation, such as Neoris, to keep on developing our business plan and consolidate ourselves in a market as competitive as the one we operate in.”

“Thanks to this agreement, both entities will be able to bring our know-how in the technological field, which in the case of FacePhi has allowed us to develop a solid international presence,” says Mira.

Daon to secure Aion Digital onboarding

The facial recognition and biometric liveness capabilities of Daon’s IdentityX Digital Onboarding solution are being built into a new two-in-one platform for fully digital customer onboarding in the GCC (Gulf Cooperation Council) region, TradeArabia reports.

Aion Digital offers its “digital bank in a box” to augment the digital capabilities of banks, and the company says its digital onboarding platform allows customers to open bank accounts in less than five minutes, while cutting the cost of customer acquisition by 50 percent.

“We are pleased to partner with a visionary group like Aion to bring world-class biometrics and identity assurance to the GCC region,” says Daon CEO Tom Grissen. “Daon and Aion will deliver a joint solution that transforms digital onboarding practices and satisfies even the most highly regulated industries and entities while delighting millions of customers across GCC’s six thriving markets and beyond.”

Daon introduced IdentityX Digital Onboarding 2.0 in July.

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