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Singapore’s Banks Face an Unprecedented KYC Onboarding Crisis

singapore client abandonment crisis kyc ai

Singapore’s banking sector is facing an unprecedented crisis as a growing number of clients abandon banks due to slow and cumbersome Know Your Customer (KYC) onboarding processes. A new study by Fenergo, a leading provider of client lifecycle management (CLM) and transaction monitoring solutions, has highlighted this mounting issue, revealing that nearly 90% of banks in the region have lost clients in the past year because of onboarding inefficiencies.

The research, which surveyed over 150 C-level executives from corporate, institutional, and commercial banks in 2024, indicates that Singapore’s banks are experiencing the worst client abandonment rates globally. This marks a 35% increase from 2023, signaling an urgent need for banks to rethink their KYC frameworks and onboarding strategies.

Poor Data Management and Siloed Workflows: 91% of respondents acknowledged that fragmented data systems were a significant barrier to streamlined onboarding.
Complex Onboarding Processes: 47% of executives cited excessive documentation and rigid compliance measures as primary causes of delays.
Deteriorating Customer Experience: 79% of banking leaders admitted that slow processes and inefficiencies were causing frustration among clients, leading to higher abandonment rates.

Singapore’s financial institutions also face increasing regulatory scrutiny, particularly after the high-profile money laundering scandal in 2023. The country’s newly introduced anti-money laundering (AML) strategy has placed additional compliance burdens on banks, exacerbating the onboarding bottleneck.

The Impact of Manual Processes and Compliance Demands

Banks in Singapore allocate more time and resources to KYC procedures than their counterparts in other major financial hubs such as the US, UK, and Japan. According to Fenergo, this is largely due to the continued reliance on manual verification processes, which increase operational inefficiencies and extend onboarding timelines.

Cengiz Kiamil, Managing Director at Fenergo, emphasized the direct correlation between enhanced AML scrutiny and customer attrition. “It’s no coincidence that the spike in banks losing clients due to burdensome KYC and onboarding closely follows one of the biggest money laundering scandals in Singapore’s history,” Kiamil stated. “Banks are now required to double down on client due diligence to better understand client risk, but the extra scrutiny, combined with outdated manual processes, is negatively impacting both customer satisfaction and financial performance.”

Despite increasing compliance obligations, only 1% of the surveyed banks have successfully automated the majority of their KYC and onboarding workflows. The lack of digital transformation in this space is a major contributor to Singapore’s rising abandonment rates.

The Role of AI and Automation in KYC Transformation

With digital transformation becoming a boardroom priority, banks in Singapore are now looking toward artificial intelligence (AI) and automation to overhaul their KYC processes. The study found that:

38% of banking executives plan to deploy AI-powered solutions to enhance operational efficiency.
30% aim to improve data accuracy using AI-driven tools.

Despite regulatory encouragement to adopt innovative technologies, traditional banks in Singapore have historically been slow to embrace AI and cloud-based solutions. However, industry experts argue that institutions failing to modernize risk falling behind, especially as customers increasingly expect seamless digital interactions.

“In today’s fast-evolving regulatory landscape and rising financial crime threats, it has never been more critical for banks to strengthen their client onboarding and KYC procedures,” Kiamil continued. “Firms that adopt automation and AI will not only improve compliance efficiency but also gain a competitive edge by offering clients a smoother, faster onboarding experience.”

Conclusion: A Digital Future for Singapore’s Banks

Singapore’s banks stand at a crossroads. The increasing demand for stringent AML compliance, coupled with high abandonment rates due to slow onboarding, presents a serious challenge for financial institutions. However, the path forward is clear—banks that embrace AI-driven automation can transform KYC and onboarding from a regulatory burden into a strategic advantage.

By leveraging cutting-edge technology, Singapore’s banking sector has the opportunity to not only meet compliance requirements efficiently but also enhance customer experience and reduce client churn. Institutions that fail to act risk being left behind in an industry where seamless digital interactions are no longer optional but expected.