Evolving from KYC to CLM – revolutionizing customer relationship management

Transitioning from a compliance-focused KYC approach to a more dynamic customer-centric strategy that emphasizes the entire lifecycle of a customer relationship represents a paradigm shift in effective customer relationship management.

The global landscape of Know Your Customer (KYC) practices is undergoing a significant shift, moving away from traditional, manual methods toward embracing innovation and digital transformation. Within the dynamic realm of financial crime compliance (FCC), there’s a compelling need for financial institutions to integrate efficient KYC procedures into a broader strategy of end-to-end customer lifecycle management (CLM). These institutions face heightened regulatory scrutiny and evolving risk factors, driving a focus on enhancing client experiences.

Financial entities increasingly acknowledge the necessity of transitioning from conventional KYC practices to a more encompassing CLM framework. This evolution enables institutions to foster holistic customer relationships, leading to improved experiences, enhanced efficiency with potential cost reductions, strengthened compliance and risk mitigation, and the empowerment of data-driven decision-making through technology-driven solutions.

A significant challenge faced by majority of the financial institutions is the fragmentation of a single client’s KYC or AML data across four or more systems. Hence, CLM emerges as an imperative solution to deliver seamless and sustainable customer experiences.

Achieving the transition from decentralized KYC to a continuous CLM phase requires broadening the focus beyond mere customer identification to managing the entire customer lifecycle. This transition encompasses several key aspects:

• Data management – consolidating and integrating data from various channels to create a unified, comprehensive customer profile. This includes amalgamation of distinct data sources like internal systems, databases, external APIs, or third-party services
• Technology infusion – implementing automation to enhance efficiency and reduce manual interventions in the KYC process. This includes automation of continuous compliance checks and ongoing monitoring to ensure regulatory adherence
• Risk management – strengthening risk assessment methodologies throughout the customer relationship. This includes enhancing the risk assessment by incorporating and testing various risk models with real time monitoring. There could be an option to also include customized models basis customer behavior, product types and transaction patterns
• Data analytics – leveraging predictive analytics to gain insights into customer behavior and preferences, aiding in decision-making to identify potential risks
• Regulatory compliance – designing CLM systems adaptable to changing regulatory requirements the CLM system. This includes the need to be aware of any change in regulatory requirements so that the CLM system can be promptly updated in line with regulatory changes
• User experience – enhancing customer experience by streamlining processes and introducing secure CRM digital tools. Processes also need to be user friendly and should focus on reducing delays due to inaccurate document requirements or approvals
• Scalability – designing scalable CLM systems to accommodate a growing customer base. This will ensure the infrastructure and systems are flexible and equipped to handle increased volumes and demands.

While all these aspects are binding to transition to a successful CLM, collaboration among technology experts, domain specialists, and compliance officers is crucial to ensure a seamless shift from KYC to CLM.

The transition from KYC to CLM unfolds in a series of phases, each with specific objectives aimed at managing the customer relationship effectively:

• Customer identification to verify and authenticate the identity of customers
• Customer onboarding to establish a relationship with the customer
• Ongoing compliance to ensure regulatory standards are met
• Ongoing monitoring to periodically assess and monitor customer activities
• Enhanced due diligence to assess high risk customers
• Data integration to expand the scope to holistic customer management
• A 360-degree view to gain a comprehensive understanding of the customer
• Customer engagement to ensure long term client relationships
• Risk management to assess and mitigate risks.

In conclusion, the journey from KYC to CLM signifies a paradigm shift from a compliance-focused approach to a dynamic, customer-centric strategy, emphasizing the entire lifecycle of customer relationships. Continuous monitoring and optimization play a pivotal role in maintaining effective customer lifecycle management.

To learn more about how Capgemini can help you build engagement and trust with policyholders, contact: bhaskar.amit@capgemini.com