As Swift is preparing to open its KYC Registry to corporates in the last quarter of the year, the company has entered discussions with regional know your customer utilities about connecting their solutions.
“We see the different local utilities as partners that could be plugged into or integrated with the KYC Registry in order to provide a full customer experience to the banks,” Marie-Charlotte Henseval, Swift’s head of KYC compliance services, tells GTR. “Ultimately what we want is for the banks to have a one-stop-shop to access information about all their clients, irrespectively of their size.”
Swift’s KYC Registry is an online portal that was set up in December 2014 to enable the Swift community to collectively address the global compliance challenge by allowing users to manage and share due diligence information. This helps to ease the burden of compliance with KYC requirements, a job that is extremely inefficient and mired by time-consuming, manual processes and the duplication of efforts.
To date, membership of Swift’s registry has been limited to financial institutions with correspondent banking activities, who use the registry to conduct KYC on their correspondents. Instead of each bank having to reach out to its counterparties to gather the information individually, they can, through the registry, find it all in one place. More than 5,500 banks are in the registry.
Swift is now expanding the utility’s reach, having announced earlier this year that it will be opening the solution to the 2,000 corporate groups that are already connected to Swift. This is due to happen in Q4 this year.
The ambition is to extend beyond Swift-connected corporates at a later stage, Henseval says.
“Corporates have always seen KYC as a big challenge because of the fact that they need to provide documentation several times in multiple formats to their banking partners. It’s very cumbersome, time-consuming and costs a lot of money. So the registry is going to bring them efficiencies in the KYC process, enabling them to use one central repository to upload and maintain their KYC information in a standardised way, eliminating all the bilateral exchanges with the banks,” she explains.
Banks, on the other hand, will be able to use the registry to get direct access to KYC information about corporate clients, which will simplify and speed up the onboarding of a company.
A changing market
The news about Swift’s expansion has come amid a shake-up in the market for KYC solutions. Bloomberg announced in April that it will shut down its KYC utility, Entity Exchange, while Refinitiv said in June it is planning to close its KYC as a service offering, with some sources naming low uptake as the reason behind these decisions.
Their withdrawal from the KYC space has raised questions around the viability of the utility model. The emergence of blockchain technology, meanwhile, has prompted some to argue that the centralised utility model will become extinct sooner rather than later and be replaced by a decentralised approach that is more efficient and secure.
But Henseval is optimistic that Swift’s current KYC utility model is working. She explains that the company’s phased approach to implementation of the registry has been a way for it to monitor its continued success.
“We launched the KYC Registry in 2014 with an initial scope of correspondent banking, and more than four years down the road, we have more than 5,500 banks registered,” she says. “So we have proved that the utility model works for banks, and we are now building on that success. A targeted scope is really a key element here.”
In line with this strategy, Swift will be rolling the utility out to corporates in phases, starting with companies that are already Swift clients before extending it further.
Henseval reinstates previous comments from Swift that it will continue with a centralised model, despite blockchain initiatives in the KYC space starting to gain momentum.
“At this stage we have not seen an added value for us to look at blockchain technology,” she says. “Our model is working and we haven’t come across requests from the community to look into that technology for now. The fact that the community was requesting the extension of the KYC Registry to the corporate segment means that they strongly believe in a centralised model,” she says, although adds that Swift is “watching this space closely”.
Rather than looking at new technology, the company is attempting to strengthen its position in the KYC space by integrating with regional utilities that have emerged over the last couple of years.
In the Nordic region, for example, a number of financial institutions have been working together on a regional KYC utility since last year. The project recently received the green light from the European Commission.
In Africa, meanwhile, a new digital customer due diligence platform, called Mansa, will be available for use by the end of the year. Spearheaded by the African Export-Import Bank, the repository will make it easier and more cost-effective for financial institutions to onboard African banks and businesses, large and small.
“We are not entering the same space,” says Swift’s Henseval. “The local utilities are catering to local needs. Swift’s KYC Registry is a global solution, so we look at large corporates, multinationals, multi-banked corporates, but very small companies will most likely not use the KYC Registry.”
She adds that the emerging regional solutions are complementary to the KYC Registry and that Swift is “exploring collaboration with some of them already”, although she couldn’t name the specific prospective partners.
“Our focus this year is the launch of our own offering,” she says. “The discussions around integration with regional utilities are starting in parallel, but real integration will not happen this year. Some of those local initiatives will go live later this year, so we all have our own focus, but that doesn’t prevent us from starting to talk about the next steps for the future.”