How to reduce KYB customer friction in lending and accelerate loan approval

Know Your Business (KYB) processes are crucial for lending firms, particularly in a heavily regulated market like the UK. Ensuring that businesses seeking loans are legitimate and financially sound is not only a regulatory requirement but also a fundamental step in mitigating risk. 

However, KYB processes often introduce significant friction for both customers and compliance teams. This article takes a look at some of the biggest pain points of KYB and we share some practical strategies that can help streamline the process for both parties while ensuring complete compliance.

The challenges of KYB for customers

One of the primary frustrations for customers is the extensive documentation required for KYB. Lending firms often request a plethora of documents, including certificates of incorporation, business documentation, shareholder details, bank statements, and proof of address. This can be particularly burdensome and the time required to gather and submit the necessary documentation can be substantial. 

What’s more, many KYB processes are still manual or paper-based, requiring customers to submit physical copies of documents to firms in the post or scanned PDFs via email. This not only increases the risk of errors and potential loss of important or sensitive documents but also adds to the overall time taken for verification.

For businesses in need of urgent financing, delays caused by the KYB process can be detrimental. Customers often experience frustration as they wait for the approval process to complete, which can have a negative impact on their perception of your lending firm.

KYB hurdles for compliance teams

On the other side of the process, compliance teams are often overwhelmed by the manual effort required to gather and verify KYB documentation. This includes cross-checking documents, validating the authenticity of business records, and conducting thorough background checks. The manual nature of these tasks makes them prone to human error and inefficiencies, ultimately slowing the time to onboard new clients. 

Compliance teams face immense pressure to ensure that every KYB check is thorough and complies with regulations such as the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Any instance of no-compliance can result in severe penalties, adding to the stress and workload of compliance teams.

🔗 A complete guide to anti-money laundering (AML) regulations in the UK

Compliance teams also grapple with data silos, where relevant information is scattered across multiple systems and databases, making it difficult to gain a holistic view of a business and further complicating the verification process. Collating data from various sources manually can be time-consuming and error-prone. 

Lending firms, especially those dealing with a large number of small and medium-sized enterprises (SMEs), must conduct a high volume of KYB checks. The sheer volume can overwhelm compliance teams, leading to bottlenecks and delays in the loan approval process which will not only frustrate customers but also adversely impact the ability of the lending firm to onboard customers quickly and compliantly.

How can lending firms reduce customer friction during KYB onboarding?

To address these challenges, lending firms can adopt automated solutions to reduce the burden of KYB processes for both customers and compliance teams. Automated KYB platforms can streamline document collection, verification, and validation processes. These platforms can quickly collate and analyse documents, cross-check information, and flag discrepancies, reducing manual effort and speeding up the approval process. 

🔗 How to conduct thorough KYB checks without compromising customer experience

Minimising the back-and-forth communication with clients is crucial, and a robust KYB system helps achieve this by collating all necessary information upfront in a single digital solution. This streamlines the verification process, allowing teams to reach the source of the truth swiftly and with more confidence.

Moreover, advanced KYB solutions save substantial manual effort, especially when dealing with complex corporate structures. Automated systems can unravel and verify complex ownership details, reducing the time and potential errors associated with manual data handling. This automation not only improves accuracy but also frees up compliance teams to focus on higher-value tasks, boosting overall productivity.

With KYB software, compliance teams can reduce their dependence on clients to provide critical information via post or email, thus minimising the time spent chasing them for updates. These tools enable complete tracking of the verification process for directors and ultimate beneficial owners (UBOs), allowing compliance teams to act on potential issues before they escalate.

Streamlining the KYB process is essential for lending firms to reduce customer friction and enhance operational efficiency. 

Reducing undue friction in the KYB process not only benefits customers by providing a quicker and more transparent loan approval experience but also empowers compliance teams to perform their duties more effectively and efficiently. In a competitive and regulated market, streamlined KYB processes can be a significant differentiator, enhancing both customer satisfaction and regulatory compliance.

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