- Businesses need to rebuild their KYC and onboarding processes from the ground up to take advantage of these new capabilities, or they will lose ground to digitally native competitors.
- Regtech vendors must make AI a core part of their solutions, whilst still leveraging human intelligence to keep their decisions fully explainable, Juniper Research reports.
- Almost 18% of banking digital onboarding in 2025 globally will use AI systems, compared to fewer than 4% in 2020.
Spending on regtech systems, which enable banks and other heavily regulated sectors to meet their compliance burdens, will exceed $130 billion in 2025 from $33 billion in 2020.
According to Juniper Research report, the 290 per cent growth is being fuelled by greater use of AI to automate highly manual tasks and the transition to digital onboarding, which have emerged as critical capabilities in the wake of the pandemic.
Nick Maynard, Lead Analyst at Juniper Research, said that digital onboarding has been accelerated by lockdown measures, but ultimately, it is an acceleration of existing trends towards greater digital engagement.
“Businesses should rebuild their KYC and onboarding processes from the ground up to take advantage of these new capabilities, or they will lose ground to digitally native competitors,” he said.
Over the past five years, the banking and financial services spaces have embarked on a long journey of digital transformation. This has seen the rise of digital-only services, such as neobanks, as well as any number of online financial services providers, financial apps and other regulated activities that require KYC (including gambling, cryptocurrency exchanges and some elements of eCommerce).
This transformation has had serious implications for the onboarding process. By moving to a digital-only proposition, the onboarding and KYC checks also have to be fully digital, which represents a change in how many of these processes were traditionally carried out. The impact of the pandemic has meant that many traditional banks now also have to offer digital onboarding as a key capability.
AI needs to be at the core
Maynard said that nearly 330 million new bank accounts will be opened via digital onboarding in 2025, from 184 million in 2020.
Ultimately, consumers will continue to use digital onboarding in ever-greater numbers and, as such, vendors must design long-term strategies that support this, he said.
“Regtech vendors must make AI a core part of their solutions, whilst still leveraging human intelligence to keep their decisions fully explainable. AI’s capabilities in automating manual tasks will allow businesses to begin to improve their levels of spending on regulatory compliance,” he said.
The report states that almost 18 per cent of banking digital onboarding in 2025 globally will use AI systems, compared to fewer than 4 per cent in 2020 and the introduction of AI in areas like identity document verification means that businesses can finally move from their still largely manual processes to a fully digital model of KYC.