Tackling the KYC/onboarding processes: challenge or opportunity?

Considering how much youve accomplished at your young age and the fact that you have been named a ‘Forbes 30 under 30’, can you please tell us a bit about your background, and what was the path of becoming the MD of solarisBank‘s Identity Unit? What exactly does this new Unit do?

After completing my studies in Information Systems at the University of Münster, I began my career as an IT consultant in Germanys largest Financial Services focused management consultancy. At the age of 21, I decided to use my experience to start a business of my own. This formative experience fine-tuned my entrepreneurial mindset, and paved my way into the European fintech world. On this foundation, I built a career working in different fintechs, and by the age of 26, I proceeded to become Managing Director at solarisBank.

In my current role, I am leading a unit that is striving to disrupt the market by building digital customer identification solutions for fintechs and other digital companies looking to offer a smooth and secure onboarding process to their customers. With this target in mind, my team built an entire platform of API accessible KYC solutions in the past two years that now sets a new market standard in Germany, contributing significantly into our overall company strategy as one of our five main product offerings.

Incumbent banks have constantly been alert to catch up with challenger banks to improve their onboarding process. What is the state of play of this process for incumbents, and why do some of them manage to reach challengers level, while others fall behind?

Whether it’s shopping (Amazon), entertainment (Spotify, Netflix) or transport (Uber), modern consumers expect their services to be mobile, on demand, and easy to use. This expectation extends to banking services as well. The onboarding process is a key component of this experience. After all, you never get a second chance for a first impression. Consumers don’t want to visit a branch, and send letters back and forth to open a bank account or apply for a loan. The challengers have recognised this, and set their focus on the user experience – with substantial success.

While some incumbents are failing to shift their attention from themselves to their customers, most have realised that they need to start investing in technology if they are to stay competitive. This is where banking as a service platforms, such as solarisBank, can have a big impact, as they are able to integrate digital processes directly into the incumbents’ products. This way incumbents can keep up with the challengers without needing to devote time and resources to building their own interfaces and processes.

What are the specific challenges that banks face when they want to offer a digital onboarding process to SMEs?

First and foremost, in our target markets, there are more complex regulations one must follow when identifying SMEs than when identifying consumers. Thus, in the context of SME identification, squaring an adherence to strict regulation with a first-rate digital onboarding experience?is much more difficult.

For instance, for the identification of a business, the German regulator requires banks to process official legal documents. Many banks still request legal representatives to hand in these documents in person at their branch. Without the capability access and process these documents digitally, banks must rely on the resource intensive manual alternative. On the back-office end, edge cases and compliance anomalies make it difficult for banks to automate the identification of SMEs. Thus, most banks are still not able to offer an end-to-end onboarding flow to their SME customers, resulting in conversion cycles that can stretch into several weeks.

In terms of innovative technologies and solutions, can you please name some tech ideas applied successfully within the onboarding/KYC space (and give some examples)?

One key advancement that is moving into the onboarding process is that of machine learning and AI technology. These can be used for instance to recognise patterns of malicious intent for fraud detection purposes. Further, they can be helpful for the identification process when integrated with biometric technology.

In addition, blockchain technology might also create exciting new opportunities. One way customer onboarding could benefit from blockchain technology would be by building a peer-to-peer network of KYC-data between financial institutions with permissioned access to a distributed ledger.

How fast these new technologies become market ready is, however, largely down to the cooperation between the regulator and the innovators.

There have been lots of recent developments, such as the Nordic banks that have intended to set up a joint venture - Nordic KYC Utility - to develop a KYC infrastructure. In this concern, should onboarding be competitive or collaborative when discussing the actions banks must consider to comply with regulations/AML laws?

In general, as a banking as a service platform, we recognise that pooling and sharing resources in a digital infrastructure can create useful economies of scale. We would support collaborative ideas when it comes to developing a KYC infrastructure, insofar it can improve the user experience without compromising on security or compliance. Having said that, we are weary of the complexity involved in setting up a collaborative infrastructure, as we have yet to see a successful attempt in the market.

About Delia König

Delia König is Managing Director of the Identity Unit at solarisBank, the tech company with a banking license. She manages and oversees the business unit that has built a platform comprising cutting-edge customer identification solutions for fintech, banks, and other digital companies looking to offer a smooth onboarding process for their customers. Prior, she was working as an IT Consultant in Germany’s largest financial services-focused consultancy, zeb, and gained experience as a Product Manager and entrepreneur. Delia studied Information Systems at the University of Münster, and holds a Master’s degree in Digital Banking from Stevens Institute of Technology.

About solarisBank

solarisBank, the technology platform with a banking license, offers a digital banking infrastructure for companies looking to offer their own financial services. With its APIs, solarisBank enables its partners to integrate financial services directly into their own offering. With its banking as a service model, solarisBank has convinced strong investors such as VISA, BBVA, ABN AMRO, Lakestar, SBI Group, and FinLeap to invest more than EUR 95 million in financing capital.