Building a Successful Digital Compliance Program

One of the biggest parts of completing digital transformation is by modernizing the compliance procedure. The digital compliance process should be in response to regulations set in place to prevent fraud, money laundering, terrorist financing, and so on. Customer Identification Program or more commonly known as KYC (Know Your Customer) is a major part of the compliance process.  

It is common knowledge that traditional methods of complying with these regulations can be time-consuming, expensive for the institutions, and result in poor customer experience. A complicated and inefficient CIP(Customer Identification Process) leads to an increased rate of customer drop-off and application abandonment during onboarding. Customer trends are changing and with the rise of technology, customers demand fast, efficient, and secure onboarding processes. Every 10 seconds added to the application process is directly responsible for a 5% increased customer drop-off rate. Building digital compliance services can help your businesses in various ways. 

That’s where the technological solutions come in. The right solutions like instant document verification technologies can help banks and other institutions streamline the process. It can also increase customer experience while making sure all guidelines are followed. To make the best out of these technologies, banks should follow best practices for digital compliance.

Strategy for Building an Efficient Digital Compliance Program

1. Build Separate Online and In-Branch Experiences

As banks focus on their digital banking compliance, they should also focus on re-defining the in-branch experiences. Customer preferences and customer expectations change based on the channel they are operating on and customers that operate online desire faster services in comparison to traditional banking. 

During a manual account opening process, banks hand out printed documents about the customer application, these disclosures are used in a PDF format by banks. When it comes to online account opening, a new tab opens for downloading the PDF disclosure of the application. This takes away the focus from the application page. Instead of doing this, banks should focus on building solutions that don’t take away customer focus from what they’re trying to achieve. 

While opening the account in the branch, the bank requires physical customer ID & address documents for verification. In a digital environment, most customers see this step as a barrier. Most customers abandon the application process instead of putting in the effort to submit digital documents. Now that the Federal Financial Institutions Examination Council (FFIEC) and other entities have allowed non-document verification, banks should look past documents. However, not using online documents for verifying customer ID can lead to an increased rate of fraud. This is a conundrum banks have to deal with. 

With third-party solutions like DIRO online document verification API, banks can build trust between customers that their personal information is safe. Also, instant document verification reduces the time significantly which in turn leads to a better customer experience. Technologies help in improving the process of digital risk and compliance.

2. Utilize Multiple Data Sources for Identification

To verify customer identity, which meets up compliance requirements, banks should look to leverage multiple data sources across the online account opening process. Usually, when applying for a new account, a user might be asked to provide information like name, date of birth, social security number, address, phone number, and email address. Banks need to utilize digital compliance services that use multiple data sources to cross-reference information.

Importantly, this automatic data comparison has to be behind the scenes without interrupting or slowing the customer user experience. DIRO verifies documents and cross-references customer data from thousands of sources.

3. Use Real-Time Data for Effective Risk Management 

Online banking is what the customers demand at this time. As banks roll out online account opening capabilities, they have to anticipate potential risks in the customer application approval process. Banks have to accurately assess risk to approve or deny applicants. 

To be able to do that, banks have to come across a range of data, including transactional data, social media, and more. This process can be automatic and occur in real-time, which helps both banks and customers. Customers love a fast and efficient process with as few barriers as possible and banks benefit from highly accurate and fast KYC compliance that reduces the possibility of fraud. Real-time data processing, reporting, and monitoring can improve risk management capabilities. Using real-time data for effective risk management is one of the best practice for digital compliance.

4. Encourage Greater Transparency with Digital Record Management

While digital channels may present compliance challenges. And online account opening allows record-keeping as opposed to in-person account opening. For example, DIRO provides 100% proof of trust for verified customer documents and then places the documents on the blockchain. Documents that are placed on the blockchain are immutable and easy to maintain. Record management is invaluable for compliance purposes, as banks can provide the auditors with highly detailed data.  

Making Compliance Easier with Automation

Regardless of the numerous advantages of digital banking, financial institutions sometimes hesitate to develop digital channels just because there’s a lot of uncertainty around compliance. By combining the right kind of technology with a compliance strategy, banks can successfully build digital compliance that keeps up with CIP and other regulations. 

best practice for digital compliance