Transforming Customer Due Diligence using eKYC

Customer Onboarding Process | Enhanced Due Diligence | eKYC Services

Transforming Customer Due Diligence using eKYC

What is due diligence?

An effective KYC program consists of; customer identification, customer due diligence and ongoing monitoring. The first and third one is quite self-explanatory. Customer due diligence (CDD KYC) involves a background check of the customer to analyze the risk they might bring about to the bank or financial institution. It is a part of the client onboarding solution to ensure that the said customer is actually revealing all of his/her assets. The KYC process, mostly used by banks and financial institutions assumes great importance. It helps to verify and authenticate the customer details while opening a bank account. Today, many banks are implementing digital KYC solutions by accessing eKYC services like aadhar eKYC, etc. Thus, helping them in the customer onboarding process. With the help of e KYC solution, the banks are able to easily conduct CDD in KYC via video verification.

 

In this, the user undergoes verification checks against all of his/her creditworthiness making sure that they are not a part of any money laundering fraud or in any prohibited lists or engaged with any terrorist-financing organization. When a bank acquires a customer, they take over all the financial responsibilities of the customer including all the threats and risks possessed. e KYC EPFO, Aadhar eKYC, PF eKYC, etc are a few verification steps in the digital KYC process.

 

Why enhanced due diligence (EDD)?

 

Even though due diligence performs all kinds of checks the most common being aadhar eKYC, it falls susceptible to identity theft. The introduction of enhanced due diligence (EDD) in the client onboarding solution helped to surmount this issue. This provides an even higher level of scrutiny than due diligence could have provided. It runs an identity check on the customer along with other checks such as risk, address etc. It also rules out the possibility of identity theft and decreases the risk factor before initiating the customer onboarding process.

 

EDD aims at customers with high net worth and who take part in huge financial transactions on a daily basis. It provides detailed documentation and also separates the customers into different categories for investigating them differently. EDD also takes into account the solutions provided by the eKYC service providers. It ensures utmost care while investigating political people and people of high social status. The eKYC solution helps to deal with the threats possessed by these people as compared to the common people.

 

Enhanced due diligence reports also provide a detailed study of the customer’s background, assets, contacts, transactions etc. It eliminates the possibility of any fraud motivation or connection. It not only gathers data but also verifies the source and credibility of the information and gives a “go” or “no-go” label to the customers. Based on this label, the bank or financial institution decides whether or not to onboard a customer. When combined with AML (Anti Money Laundering) schemes, the enhanced due diligence process is more effective. This ensures that a proper client onboarding solution is in place to enhance the security levels for the banks.

 

Why are banks using EDD in the customer onboarding process?

Various banks and financial institutions are investing in customer due diligence or CDD KYC banking checks. Apart from the additional security, there are multiple reasons as to why these institutions should invest in this process. The banks collect several details of their customers such as their employment status, age, credit limit, past purchases etc. This helps to understand their requirements and serve them better. It also helps banks to identify black money or unaccounted assets that can damage their reputation. They take utmost care of not being associated with people having fraud motivation.

 

Multi-level eKYC verification or digital KYC checks like aadhar eKYC to ensure that the customers have no illegal history. Thus, it helps to maintain a positive and legal atmosphere in the bank. And lastly but most importantly, using such secure methods like EDD shows that the bank is confident about the customers it onboards. Thus, using e KYC solution depicts a positive image in the market. The banks also need not have any worries after customer onboarding. It can have a healthy relationship with each and every customer.

 

How is CDD in eKYC services having such a positive impact?

 

Businesses are getting digitized. Along with digitization, the number of cybercrimes is also increasing significantly. There were multiple policies to bring AML into practice. The cost of AML compliance across various financial firms was high. Spending hefty amounts annually on video KYC verification services and CDD KYC checks has become essential. Hence, several firms are highly relying on eKYC service providers for top-notch KYC verification services. This obviously was not very cost-effective and thus there was a need to curb the problem at its root. To address this obstruction, banks began implementing the advanced CDD technique. If customers were verified against all frauds at the start of the customer onboarding process, banks would not have to incur additional anti-AML charges.

 

The automation of  KYC giving birth to e KYC solution, AML screening and CDD made the process almost 40% efficient as compared to the manual process. Aadhar eKYC services are amongst the most used in India due to the growing use of Aadhaar for various schemes. Similarly, conducting E KYC PAN card is very much useful for identification and verification.

 

What next?

 

Customer due diligence is not the end of traditional KYC but transforming it into eKYC verification process. The banks need to keep a continuous check on their customers’ activities even after the onboarding. Banks need to monitor and flag any suspicious behaviour. This part of the CDD KYC is known as transaction monitoring. With transaction monitoring as a part of the client onboarding solution, banks can monitor their customers’ behaviour over time and record the changes. They look out for suspicious transactions, buying of assets or even liquidation of shares. All these are put together in an algorithm assessing the credibility of the customer. This can check if they still can be considered safe enough to continue a business relationship with.

 

Financial institutions keep track of their partners, customers & monitor audit trails of all user transactions using date and time stamps. Transaction monitoring is done by pinging databases of organizations like OFAC, UN and other government, etc to make sure their customers are not listed under any unlawful activities. If any unlawful activity occurs, the respected bank is alerted and they can take their course of action from there. Hence, most of the institutions are moving towards E KYC solution for running various checks like Aadhar KYC.

 

Due Diligence and future

 

After the introduction of the eKYC verification process, all of the above mentioned due diligence is available to banks at the tips of their fingers, only a few clicks away. This ensures additional security to the banks and the data remains safe. Customers can trust banks and vice versa, thus, it promotes a healthy customer experience. This, in turn, facilitates scalable customer onboarding via digital KYC solutions such as eKYC services. Even, the regulatory bodies have authorized to use of video KYC verification solutions for conducting strict identity checks.

Digital KYC Customer Onboarding Process

Seamless Customer Onboarding Process | eKYC Solutions | KYC Verification

Digital KYC Customer Onboarding Process

With the world battling the pandemic, one successful change is the introduction of Digital KYC customer onboarding. This technology provides video verification services for saas onboarding/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 a rise 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 have digitized system and 83 collect biometric data. This pressurizes even more on the banking and financial sector to move on from the traditional format. It emphasises the need for 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. The sole purpose of this act was to catch offenders and making laws against them more secure. The goal was to increase the safety of the nation and its citizens. It was least controversial and least opposed. Its goal was to make 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 many financial and banking sectors easily accepted it. Digital KYC or video KYC verification is the process of digital customer onboarding. The advent of Digital KYC customer onboarding solutions has automated the onboarding process.

Digital KYC procedure

Digital KYC is an advancement from the old KYC method in the client onboarding process. 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 a foolproof and end to end encrypted solution used in the client onboarding process.

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, 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 – 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 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. The majority of banks in India have been able to speed up the bank customer onboarding process using Digital KYC or video KYC verification services.

How did online KYC or video verification services affect the client onboarding process?

Needless to say, this comes as a boost to all the fintech and banking sectors around the country. The client onboarding process provides a huge economic boost with bare hardware requirement. 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

A paper published by Groupe Spéciale Mobile Association (GSMA), mentions “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 Onboarding suite that uses AI, Machine Learning and Blockchain to its advantage. It ensures real-time onboarding in less than 90 seconds, a 90% quicker turnaround time and a whopping 75% reduction in Operation expenditure. The Onboarding Suite includes Video KYC verification, eKYC, AML Screening and E-Signature approved by regulatory authorities.

Way Forward

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 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

Video KYC: A Monumental Step towards Digitalization

Video KYC Services | VCIP Solutions | eKYC Service Providers

Video KYC Process or VCIP Solution: A Monumental Step towards Digitalization

A commonly heard term in the banking industry is KYC (Know Your Customer). KYC is the process or step in which there is an assessment of the customers’ profile. It evaluates the risk associated with the customers of a bank or financial institution. This process ensures that they comply with the Anti-Money Laundering (AML) laws. With emerging technologies like AI, UIDAI Biometrics, machine learning, facial recognition, the concept of Digital KYC took birth. EKYC or Digital KYC verification was able to surpass the issues that the manual KYC process faced earlier. But this method is still lacking complete digitalization. The prominent technology which is helping us to go fully digital is Video KYC verification. This brought a sudden rise in firms offering video KYC solution or VCIP solution for banks.

Background

Though the KYC process is imperative for Regulated Entities, yet past years haven’t proved to be beneficial to bring out novel developments in this field. But as complications began to arise, the process of identifying and authenticating customers got exposed to the risk of frauds. It came under the great threat of money laundering. This has impelled some developments like the video verification process to tackle the ever-rising problems of REs.

 

With the recent amendment in The Prevention of Money Laundering Act (PMLA), the regulators allowed several modes of capturing customer details electronically. This led to various developments of technology across industries including the KYC process in banks. The regulators recognized the downside of the physical presence of the customer and sheer data handling in the KYC process even if it was for EKYC. Digital KYC solution is also known as video KYC verification process. It existed before and is not new. But still, customers find the video KYC bank account opening process cumbersome because they even require to provide the documents in the physical form.

Earlier this year, the Reserve Bank of India (RBI) released an amendment on 9th January 2020 for Video KYC. It added Video based Customer Identification Process (VCIP solution) as another option for KYC verification in the financial community. By this, it intends to reduce the cost of customer acquisition, the errors in KYC documentation and adherence to the AML regulations. Due to COVID-19, in-person interaction has not remained a feasible option. It is no more viable way for verifying documents in the KYC process. Hence, the Video KYC process has become a viable option in background verification.

What is Video KYC?

Video KYC (VCIP) or video verification is the process of digitally authenticating the customers. It overcomes the difficulty of physically examining the documents. KYC verification involves checking all the documents submitted by the customers. And in the absence of technology, it was a tedious and daunting task for humans. The Video KYC solution has surmounted such a huge hurdle. It has brought efficiencies by reducing the expensive customer onboarding cost in the KYC process. This proved to be mutually beneficial for the banks as well as customers.

VCIP solution or digital KYC verification has gained a lot of attention majorly from banking and financial institutions. They experienced an increase in productivity due to minimal human interventions. It also helped in speeding up the authentication process.

The Video KYC process leverages the video call technology in onboarding the customers. This video KYC verification and authentication process has proved to be the most significant development in the field of KYC. It is a simple, seamless and scalable way by which the institutions can acquire customer details and documents before onboarding. It is a reliable system with AI-enabled technology to prevent frauds and check errors.

Steps in Video KYC Process

Video KYC verification is the game-changer for the industry. It has cut down the extensive time-consuming process of document examination from a few days to a couple of minutes. This involved the following, hassle-free steps for the customers –

  • Registering and filling up the details on the online form on the website or mobile app of the Regulated entities (RE).
  • Consent to be obtained from the customers to fetch Aadhaar details, PAN number and other official documents to conduct E-verification. Meanwhile, allowing the bank to access the real-time location of the customer using geotagging software.

  • Scheduling a date and time for the customer onboarding process where banks send a link to the customers to the webpage for video call.

  • The bank official initiates the conversation by asking to display the documents on the video call. The software will grab the details from the documents and verify them with the uploaded documents. 

  • Using the facial recognition technology, the bank will verify the customer on the video call with the photograph on the documents.

  • The bank official will ask randomized questions as per the banks’ internal policy to ensure it a live interaction.

  • After assessing the answers, the bank official will decide whether the customer application should be approved or disapproved. Also, the video call interaction is stored by the official to ensure non-repudiation.

 

The Benefits of Video KYC

  • This type of Digital KYC solution drastically reduces customer onboarding costs.

  • Video Verification services streamline the complex process through automation using Artificial Intelligence.

  • Video KYC solution helps to detect frauds and malicious activity and safeguards the investors.

  • Adoption Digital KYC can help keep a check on criminal activities majorly money laundering

  • VCIP solution utilizes cost-effective technology involving minimal paperwork

 

Conclusion

 

The technology used in Video KYC verification or VCIP solution is robust, secured and encrypted. It ensures the prevention of data leak which, otherwise, might be a data privacy concern. Each and every step in digital KYC verification is done in real-time. This process uses AI-enabled techniques of automated data extraction, machine learning and face matching.

 

Video KYC is monumental but just a mere step in the financial sector. Furthermore, developing impeccable experience in the e-commerce, telecom and networking industry.

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