Are legacy banks at risk? Businesses seek digital-first alternatives over KYC hassle

By Gloria Methri

A wave of dissatisfaction with traditional banks is pushing businesses to seek out digital-first alternatives, with 85% of organisations considering a switch due to outdated processes, poor onboarding experiences, and Know Your Customer (KYC) bottlenecks.

This significant trend is outlined in a trio of studies conducted by Encompass Corporation, which highlight growing frustration among corporates as traditional financial institutions struggle to deliver the seamless, secure services modern enterprises demand.

KYC Delays Proving Costly

One of the most alarming revelations is that 96% of businesses have experienced financial losses as a direct result of inefficient KYC procedures. These delays don’t just impede operational flow; they damage relationships and reputations, especially in sectors that rely on fast, compliant onboarding and cross-border transactions.

Among the key pain points cited, onboarding friction stands out as the leading cause driving companies toward digital-first banking. With 69% of firms stating that better onboarding would influence their choice of bank, it’s clear that seamless access to financial services is no longer a luxury—it’s a competitive necessity.

Digital-first banks, often born in the cloud, are capitalising on this by offering smarter, faster, and more intuitive experiences. Their ability to embed advanced KYC solutions and automate compliance checks means that clients are onboarded in days—not weeks.

Traditional Banks Losing Ground

The numbers underscore an urgent need for transformation in legacy banking. While incumbents continue to grapple with rigid systems and compliance-heavy frameworks, agile digital banks are eroding their market share.

According to Encompass, traditional banks risk losing up to 85% of their business customers unless they modernise their infrastructure and workflows. The financial services landscape is shifting, and corporate clients’ message is loud and clear: evolve or be left behind.

Why Digital-First is the Future

Digital-first banks are not just offering better user experiences—they are embedding themselves into the operational fabric of modern businesses. From real-time onboarding to proactive compliance, they deliver value where it matters most: speed, transparency, and reduced risk.

Furthermore, with AML (Anti-Money Laundering) regulations tightening worldwide, companies need partners that can keep pace with evolving requirements without introducing unnecessary friction.

In an era where digital agility equates to business survival, financial institutions that fail to prioritise customer-centric innovation risk obsolescence. As 85% of organisations actively explore digital-first banking, the pressure is now squarely on traditional banks to shed their legacy constraints and embrace modernity.