21 hours ago
Build, buy, or blend? Rethinking KYC strategy in modern banking: By Alex Ford
For years, banks have debated whether to build their own Know Your Customer (KYC) systems or invest in third-party solutions. But that binary choice is evolving with a new opportunity emerging in the form of blended KYC.
A hybrid approach offers the best of both worlds: the control and flexibility of in-house systems combined with the speed and automation of external technologies. It is a model gaining momentum, particularly as financial institutions seek to accelerate delivery without compromising on compliance or oversight.
The challenges of building in-house
The appeal of building your own KYC platform lies in full control. Institutions can tailor every component to fit their risk appetite, client base, and operational workflows. But the challenges are substantial:
Slow implementation : Multi-year development timelines can leave systems outdated before they are even live.
: Multi-year development timelines can leave systems outdated before they are even live. Ongoing maintenance : Regulatory updates, evolving risks, and system enhancements require continual investment.
: Regulatory updates, evolving risks, and system enhancements require continual investment. Complex data orchestration : Managing structured and unstructured data demands advanced capabilities far beyond traditional IT setups.
: Managing structured and unstructured data demands advanced capabilities far beyond traditional IT setups. Scalability issues: Internal teams often struggle to keep up with shifting compliance requirements and volumes.
As many banks have discovered, the control that comes with building often comes at the expense of speed, scalability, and cost. 'Builder's regret' is a common outcome when institutions realize that the operational overhead can outweigh the perceived benefits.
The case for buying KYC solutions
In contrast, buying a pre-built KYC solution allows institutions to bypass many of the growing pains associated with internal development:
Faster deployment : Off-the-shelf platforms can integrate quickly and deliver value in weeks, not years.
: Off-the-shelf platforms can integrate quickly and deliver value in weeks, not years. Automated regulatory updates : Vendors shoulder the burden of keeping systems aligned with the latest compliance requirements.
: Vendors shoulder the burden of keeping systems aligned with the latest compliance requirements. Operational efficiency : Automation reduces manual processing, improving both accuracy and resource allocation.
: Automation reduces manual processing, improving both accuracy and resource allocation. Real-time risk insights : Advanced analytics empower better decision-making and enhanced oversight.
: Advanced analytics empower better decision-making and enhanced oversight. Scalability: Vendor-led enhancements are continuously deployed across client bases, distributing development costs and future-proofing infrastructure.
While efficient and cost-effective, some banks remain cautious of full reliance on external platforms. Especially when it comes to data governance, customization, and regulatory scrutiny.
The rise of the hybrid approach
That is where blended KYC comes in. Rather than choosing between buying or building, banks can now strategically combine external capabilities with internal control. This hybrid model allows institutions to:
Retain oversight over critical compliance functions
Rapidly adopt proven vendor components for data aggregation, automation, and verification
Seamlessly integrate with existing systems and workflows
Remain agile in the face of regulatory and operational change
By doing so, banks gain the benefits of both approaches; reduced risk, lower operational burden, and improved cost efficiency, without the trade-offs of a single-path strategy.
What a blended KYC approach looks like
A blended model is not just a middle ground; it is a strategic alignment of internal and external strengths:
Maintain control over compliance and risk management
over compliance and risk management Accelerate Return on investment by reducing time to implementation and minimizing disruption
by reducing time to implementation and minimizing disruption Enhance agility with modular updates and vendor-supported innovation
with modular updates and vendor-supported innovation Strengthen resilience through scalable architecture and real-time monitoring
through scalable architecture and real-time monitoring Optimize cost by reducing in-house development spend while preserving flexibility
Blended KYC is not a trend, but the future. Corporate Digital Identity (CDI) platforms provide a flexible framework that seamlessly integrates with existing internal systems or third-party Client Lifecycle Management (CLM) platforms, or both.
By unifying structured and unstructured data into a single Corporate Digital Identity (CDI), a holistic view of the client entity is created, essential for efficient onboarding and ongoing due diligence.
Through intelligent automation, CDI platforms offer a blended approach, eliminating bottlenecks, reducing manual effort, and maintaining compliance, while enabling data reusability for greater efficiency. Additionally, delivering a significantly improved client experience. All with the adaptability banks need in a fast-moving regulatory environment.
Making the right choice
There is no universally right answer to the build vs. buy question, but there is a growing consensus that blended is better.
Building grants control, but demands time, resources, and continual investment
grants control, but demands time, resources, and continual investment Buying offers speed, innovation, and efficiency, but may limit flexibility
offers speed, innovation, and efficiency, but may limit flexibility Blending enables agility, compliance, and strategic control, without overextending internal capacity
As regulatory expectations rise and clients demand seamless digital experiences, banks must embrace flexible models that deliver fast, secure, and scalable KYC processes. The time to rethink is now, not just how KYC is delivered, but how it can evolve to become a true enabler of growth and trust.
