Alessandro Tonchia, co-founder and director of Finantix, discusses the merits of using AI in KYC and onboarding processes at private banks and wealth managers.

ai kyc onboarding

Alessandro Tonchia

According to recent research, KYC processes cost banks on average $60m annually with 25% of applications carried out in the UK being abandoned due to KYC friction. These statistics are alarming, even to the layperson. Only a wealth management professional will be aware of the exact business cost of these inefficiencies: the truly eye watering value of missed opportunities and the epitome of a waning business – unprofitable clients.

Much has been promised by AI in terms of how it can and will alleviate these inefficient processes and enhance business value to financial institutions, as well as a smoother experience for the end consumer. However, it is also true that the same tech that has been heralded as the industry’s saviour has also been looked upon with a suspicious eye by many wealth managers.

In truth, the glass-half-full approach is much more appealing. And very much possible. AI can save valuable manpower specifically surrounding manual KYC checks that are notoriously inefficient and error prone.

But frontrunners in the industry will be those who utilise AI technology to drive and enhance the customer experience. The benefits of adopting such a customer-centric approach from the start are clear. According to McKinsey, for every one-point increase in customer onboarding satisfaction on a ten-point Net Promoter Score (NPS) scale, the institutions in question enjoyed a 3% increase in customer revenue.

It is becoming an increasingly held belief that the customer journey starts way before they have signed on the dotted line. AI can help firms identify individuals that could benefit from their wealth management services – for example people owning fast-growing companies, benefitting from IPOs or company sales, receiving large inheritances or moving to new senior positions. It can reveal networks and referral chains by looking at news, social media and company registries.

Customer interaction is an area that is being enhanced all the time, from chat functionality and the ability to send more push notifications to clients. But it’s not just about providing good information, it’s about providing the right information at the right time. In order to create that intelligent, meaningful dialogue with clients, firms need ongoing touchpoints. For that they need to have the ability to harness data and take the most relevant pieces to tailor portfolios and enhance experiences. 

A solid digital foundation and the help of AI technologies will allow wealth management firms and other financial institutions to augment their knowledge about clients, automate expensive and regulatory tasks, to deliver higher added value to clients. But in terms of the technology that can actually do this, there are many more options in the market than there were five years ago, so it is vital that all relevant cost/benefit analyses are conducted.

For example, if a firm was to choose a fixed, end-to-end AI-enabled architecture that is perfect for today’s problems, there is no guarantee that will be the best solution in the next five to ten years as technology is advancing at such a rapid pace. Technology that is designed to slot easily into any legacy or digital wealth management platform via an API oriented and configurable architecture, is ideal here. Ultimately this will save valuable budget without compromising on future-proof technology.

Alessandro Tonchia is the co-founder and director, Finantix