KYB checks are crucial in the business development of every organisation and they cannot be neglected. With the increase in technology adoption across various industries, firms are relying on digital KYB verification techniques to confirm the identity of a company. With appropriate checks in place, businesses can comply with global regulations, reducing fraud and increasing trust overall within the industry. This is why e-KYB solutions are increasing in number and the market size is expected to grow above $318.11 million by 2026. But businesses across multiple industries especially banking and B2B spend too much revenue on KYB checks.
This blog will give a detailed walkthrough on the top five aspects of business that take up most of their income stream revenue on KYB Due Diligence.
Why do Companies Need to Implement KYB Checks?
KYB Checks are necessary for firms across a wide range of industries as it is the factor which evaluates the genuineness of a business. Before any business partnership and client onboarding, organisations carry out the KYB process using sophisticated tools that analyse a business track record, assess their risk score and screen them against global regulations for any possible chance of reputational damage or sanction. All businesses operating in the financial sector (Banks, Financial Institutions, Insurance Companies) need to have sound partnerships and client onboarding solutions to prevent any potential loss.
Why Businesses Overspend Money on KYB Checks?
KYB Checks are not for free, they come at an expensive cost. However many firms overspend while verifying other potential clients and partners. Here are the top 5 reasons why:
1. In-House Business Compliance Department
From hiring a single employee to setting up a complete compliance department, everything costs money. Highly skilled individuals can take a potential share of your business revenue. For instance, scouting the best talent, calling them for interviews, choosing the best among the candidates and onboarding people from the market all take quite a substantial share in revenue, especially if the business is a startup. Glassdoor backs up this statement as well, stating a hefty $13300 salary for a skilled individual in competitive markets. Adding taxes and other legal charges on top of it can easily increase the figure to $150K. At this point, as a business owner, you must be wondering about a possible solution to it. The use of automation and technology that takes care of all compliance operations automatically.
2. Outsourcing to Law Firms
Many businesses outsource their compliance operations to law firms or simply lawyers who take up high amounts of money. As per the estimations, any law office can easily cost your business around $5000 per verification or project. At the same time, you also are not aware of any KYB due diligence process being carried out, from data analysis to the final person ensuring the quality of each operation. These charges also vary from company to company depending on the business size and structure. The bigger the business size the higher the amounts they charge per verification. So it is always a better option to outsource your compliance and KYB operations to firms that charge less and use a transparent method of verifying your business partners.
3. Paying Without Assessing Quality
The third reason why businesses spend too much on KYB checks is quantity over quantity. Many compliance agencies offering KYB checks implement multiple modules to assess business risk. Most times they charge separately for every solution they use, making the total cost significantly higher. Reducing the number of modules can result in comparatively lower quality KYB checks without proper use of technology, leaving chances for incomplete assessment. Crimes like money laundering, fraud and terrorist financing can cause damage to businesses that do not follow proper KYB checks.
4. Using Multiple AI Tools
In the age of technology, AI assists in KYB checks as well as putting up all the sophisticated methods of verification in a short amount of time. But every AI tool comes with a whopping price and when there is a need for multiple types of checks, the price can go higher and higher. For instance, UBO verification, sanction screening, risk analysis, and PEP monitoring are different operations and require multiple AI tools in order to achieve the perfect KYB check. Speaking of AI tools, get ready to subscribe to a monthly or annual fee in advance, which can start from $100 to $1000 per month depending on the business size and number of checks. Some AI tools charge $15 for a single and simple KYB check. Paying for multiple AI tools is another reason businesses overspend on KYB compliance. Instead, they can outsource it fully to a competent compliance firm or an AI-powered business verification solution.
5. Developing Custom Verification Processes
High chances are that you develop a customised onboarding process after trying tens to thousands of KYB verification solutions. It may seem a good solution in the first place but it can take your business through a complicated and cost-intensive process as you have to verify every new business manually. Whenever developing a customised strategy for business verification, many organisations start with collecting customer data and market status. This initial process is time-consuming and requires a lot of resources to collect data and set up a verification strategy. Taking identity documents, business compliance data, Ultimate Beneficial Ownership IDs and all related information can become increasingly difficult. Instead, using a third-party verification solution for KYB checks with a one-time payment can help reduce costs significantly.
Spending on any of the above-mentioned operations is not bad at all. Setting up an in-house compliance department and custom verification process is a great initiative in the long run but can make a significant spike in your business expense graph. Instead, automation is the solution for every business process in today’s fast-paced landscape. Using the power of AI, KYB checks are no longer difficult and time-consuming. Using KYB’s business verification solutions, firms can enhance business onboarding operations while keeping their expense charts in control.
Contact our experts today to get a complete walkthrough on KYB checks for different industries.
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