Digital KYC Customer Onboarding Process
With certain procedures changing as the world battles the pandemic, one successful change is the introduction of Digital KYC customer onboarding. This technology provides video verification services for various digital onboarding solution. Not only does it keep up with the safety procedure, but also makes life a lot easier. As per the new amendments, industry body, NASSCOM said, “The move comes as a major relief for the fintech industry as no cost-effective, scalable and customer friendly alternative digital KYC method was available to them, until now.” The financial sector experienced an increase in the number of customer onboarding using eKYC services or Digital KYC solution. It also received a lot of positive reviews from the masses as it makes their life much easier.
Of the roughly 175 countries with some form of national ID system in place, 161 are digitized and 83 collect biometric data. This presses even more pressure on the banking and financial sector to move on from the traditional to a more automated and technologically aided method. The World Bank defines digital ID as “a collection of electronically captured and stored identity attributes that uniquely describe a person within a given context and is used for electronic transactions. It provides remote assurance that the person is who they purport to be.”
What is Digital KYC/eKYC?
KYC (Know Your Customer) started out as a part of the USA Patriot Act. This act was made for the sole purpose of catching offenders and making laws against them more secured. The goal was to increase the safety of the nation and its citizens. It was least controversial and least opposed. It was done with the goal of making sure that banks could verify their customers and there was no fraud whatsoever in their identity. This was one of the major steps taken against money laundering and thus was accepted by financial and banking sectors easily. Digital KYC or video KYC verification is the process of digital customer onboarding. The advent of Digital KYC customer onboarding solutions have automated onboarding process.
Digital KYC procedure
Digital KYC (Know Your Customer) is an advancement from the old method of KYC. The old method involved people visiting certain verified institutions to get their KYC done. They did so as to take part in certain online money transactions and to verify the credibility of the customer. Online/digital KYC or eKYC verification is the process of using two-way video applications to get their photographs. It does so by taking a screenshot during the video call or the live call. It also uses live geotagging to confirm the location of the customer. This is a completely online procedure and needs only a valid phone number and any government-issued identity card. The eKYC verification process or digital KYC is also foolproof and end to end encrypted.
Digital KYC solutions and eKYC verification in banks
Traditionally finance and banking sectors have been collecting hard copies of birth certificate, address proof etc. This is not just time taking but also takes a lot of effort and manpower. There are also a lot of chances of human errors and misplacing of documents. There is a lot of money and time and space required to maintain these documents as well. Some major financial institutions spend up to $500 million annually on KYC and customer due diligence, according to Thomson Reuters. The Thomson Reuters survey also found that 12% of companies said they had changed banks as a result of KYC issues.
If the number of customers at a bank doubled, KYC requirements could cause them to wait 6 to 8 weeks for using their accounts. Thus, a digital KYC customer onboarding solution eliminates all these issues. It makes work easier for both the management and the people. The adoption of eKYC services or video KYC verification made the banking sector to enter a huge competition. Digitization remains the only way for them to survive. 71% of trade providers have stated inadequate KYC practices as key factors in driving trade finance rejection rates. The world is learning from India as its Aadhaar verification program successfully digitized ID for more than 90% of the population of India. Majority of banks in India have been able to speed up the customer onboarding process using Digital KYC or video KYC verification services.
How did online KYC or video verification services affect customer onboarding?
Needless to say, this comes as a boost to all the fintech and banking sectors around the country. It is also a huge economic boost as barely any hardware is required. It is also a time-saving process as multiple registrations can happen concurrently. Several banks have already started using eKYC services for onboarding customers and promoting the same for credit card registration. The rate of onboarding new customers increased rapidly because they felt a lot less friction in the data collection process.
Statistics of the customer onboarding solution
In a paper published by Groupe Spéciale Mobile Association (GSMA), it is mentioned “we examined two approaches to conducting customer identification, background verification, and due diligence (collectively referred to as “know your customer” or KYC) that make it easier for financial service providers to take on new customers: tiered KYC and electronic KYC (eKYC) or digital KYC solutions. Between the two, eKYC verification is the more promising long-term approach, but also the more challenging to implement.” This is a fully paperless process and thus promotes environment-friendly schemes too.
Digital KYC customer onboarding has a vast scope in the future. Hence, multiple start-ups are coming up with the idea to make it more effective. One such company is PiChain. It is a real-time onboarding company which uses Machine learning and AI algorithms to increase the efficiency of their customer onboarding process. PiChain has also developed a full-fledged On-boarding suite that uses the AI, Machine Learning and Blockchain to its advantage. It ensures real-time onboarding in less than 90 seconds, a 90% quicker turnaround time and whooping 75% reduction in Operation expenditure. The OnBoarding Suite includes Video KYC verification, eKYC, AML Screening and E-Signature approved by regulatory authorities.
The International Telecommunications Union (ITU) identifies 22 governments that allow third parties to access their digital ID systems for the purpose of conducting KYC. It also determines the documents that are needed by the client to complete the procedure. This process is integrated with Machine Learning and AI algorithms to make it more secure and easier to detect frauds.
Considering all of these together, as we march towards the new normal caused by the COVID-29 pandemic. Here, all organizations are changing and exploring new ways to make their customer onboarding solution more user friendly. In the midst of all these digital KYC or eKYC services comes out as a service that is here to stay and grow as a digital onboarding solution.