Digital preservation is the key to Know Your Customer requirements

Posted 3 December 2018 10:31 AM by Melanie Berg

In financial services industry, knowing your customer is imperative in order to provide optimal services and experiences. Know Your Customer (KYC) laws require banks in many countries – from the EU to the US – to take specific steps to verify customer identities and monitor customer transactions.

More than just another necessary regulatory burden, the driving force behind KYC can help banks better serve their customers and stay competitive as the industry landscape shifts, by implementing policies that include a digital preservation mandate.

Know Your Customer: a critical principle in banking

Though the names and specifics of KYC-type laws may vary from country to country, their common chief purpose is to manage risks from activities such as money laundering, illegal financing and identity theft. Typically, KYC controls include the collection and verification of identity documents, a determination of risk, expected transactional behavior and the monitoring of transactions against these expectations.

But there’s a significant benefit to developing a multifaceted snapshot of customers based on their financial history, services, products and other data. Specifically, the deeper the knowledge banks have of their customers, the better they can deliver differentiated offerings and tailored recommendations that seamlessly meet their customers’ needs. As with a doctor making a diagnosis, restricting oneself to using only the cues and symptoms that are immediately present can limit the range of possible outcomes; the most reliable and effective recommendations require a thorough knowledge of a patient’s – or in this case banking customer’s – history.

The problem with banking records

As innovative companies like Square and Stripe continue to show up in the financial services marketplace, truly knowing your customers will become crucial for legacy companies to stay competitive and relevant. These digital-born newcomers have been developing detailed digital snapshots of their customers since day one, as an integral part of their business operation. The challenge, however, that traditional banks face compared to these digital upstarts is related to the formats of customer data typically generated.

From customer profiles to mortgage applications, much of the paperwork generated from banking activities is exactly that – paper. The problem is that retaining customer records in paper format leads to limited accessibility – for example, if customer information resides in a filing cabinet in a branch, a customer service agent would not be able to access it while tackling a customer inquiry. Disorganized, unstructured customer information also presents potential compliance issues. Simply put, the sheer variety and variability of banking-related content – forms, agreements, policies, contracts – combined with the evolution of those content types over time and across geographies, makes data management a unique challenge.

Is digital preservation the answer?

While Knowing Your Customer via their data footprint may present challenges in banking, it’s not impossible. For traditional banks and wealth management companies, the solution lies in developing organized systems and processes by which data is created, used, managed, stored, re-used and either appropriately disposed of or archived.

As we discussed in our post Ensure Your Data Remains Accessible with Long Term Digital Preservation, there are three key purposes for digital preservation:

  • Preserving critical documents for the future, ideally converting all existing content (including paper) to the searchable, self-contained PDF/A format.
  • Streamlining content management with process automation and digitization in order to allow the use of real-time analytics and evidence-backed research.
  • Maintaining vital documents even if disaster strikes, such as a fire or a flood, and ensuring they remain accessible from any location and on any device.

The real value of digital preservation, however, lies in the treatment of the preserved data, rather than the static, archival part of the equation. By taking steps to ensure that all digitized content exists in a searchable format, with rich metadata applied, making it well categorized and easily discoverable, financial institutions can position themselves for pain-free regulatory compliance and smart, leveraged future applications.

Wrap up

From regulatory requirements to improved customer service, Knowing Your Customer is a must in the financial services sector. Although a historic preponderance of paper makes getting a handle on long-term customer data a challenge within banking, digital preservation is the key to achieving KYC objectives. If you’re ready to start building a long-term digital preservation strategy for your organization, contact us to set up a call, or click here to read more.

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