Seamless Customer Onboarding using Digital KYC

Digital KYC | EKYC | Customer Onboarding

Seamless Customer Onboarding using Digital KYC

With certain procedures changing as the world battles the pandemic, one very successful change is the introduction of Digital KYC. 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.”  For the banking and financial sector, not just there was an increase in the number of customer onboarding using Digital KYC but 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 method 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/E-KYC?

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 and 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 that 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 quite easily.

 

Digital KYC procedure

Digital KYC (Know Your Customer) is an advancement from the old method of KYC where people had to visit certain verified institutions to get their KYC done so as to take part in certain online money transactions and to verify the credibility of the customer. KYC 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 KYC verification process is also foolproof and end to end encrypted.

 

Digital KYC solutions and E-KYC 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 six to eight weeks to start using their accounts. Thus a digital KYC eliminates all these issues and makes work easier for both the management and the people. These make the banking sector enter a huge competition and 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 Aadhar 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 process of customer onboarding using Digital KYC.

 

How did it 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 and it is also a time-saving process as multiple registrations can happen concurrently. Several banks have already started using E- KYC for onboarding savings account 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 client onboarding process

In a paper published by Groupe Spéciale Mobile Association (GSMA), it is mentioned “we examined two approaches to conducting customer identification, 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 (e-KYC). Between the two, e-KYC 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.

Seeing that digital KYC has a vast scope in the future, 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 to ensure real-time onboarding in less than 90 seconds, a 90% quicker turnaround time and whooping 75% reduction in Operation expenditure. The On-Boarding Suite includes VideoKYC, 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, all organizations are changing and exploring new ways to make their services more user friendly. In the midst of all these digital KYC comes out as a service that is here to stay and grow. 

Video KYC: A Monumental Step towards Digitalization

Video KYC | Know Your Customer

Video KYC or V-CIP: 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 of the customers of a bank or financial institutions to ensure that they comply with the Anti-Money Laundering (AML) laws. 

 

With the emerging technologies like Artificial Intelligence (AI), UIDAI Biometrics, machine learning, face matching and recognition, the concept of Digital KYC took birth. E-KYC or Digital KYC was able to surpass the issues that the manual KYC process faced earlier but was still lacking in achieving complete digitalization. The prominent technology which is helping us to go fully digital is Video KYC.  

 

Background 

The KYC process is imperative for Regulated Entities (RE), 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 is exposed to the risk of frauds and the great threat of money laundering. This has impelled some developments 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 E-KYC. Though Digital KYC was used earlier, the KYC process was still cumbersome as the customers were required to provide the documents in the physical form. Earlier this year, intending to reduce the cost of customer acquisition, the errors in KYC documentation and adherence to the AML regulations, Reserve Bank of India (RBI) released an amendment on 9th January 2020, adding Video-based Customer Identification Process (VCIP) as another option for KYC verification in the financial community. As an impact of the Covid-19, in-person interaction has not remained a feasible option for verifying documents in the KYC process. Hence, Video KYC has become a viable option in the KYC process.

What is Video-KYC?

 

 Video KYC or VCIP is the process of digitally authenticating the customers and overcoming the difficulty of physically examining the documents. KYC verification involves checking all the documents submitted by the customers and the absence of the technology made it a tedious and daunting task for humans. The Video KYC has surmounted this hurdle, bringing efficiencies in the KYC process and reducing the expensive customer onboarding task. This proved to be mutually beneficial for the banks as well as customers. 

VCIP has gained a lot of attention majorly from the banking and financial institutions. They experienced an increase in productivity and speeding up the process due to minimal intervention of humans.

Video KYC leverages the video call technology in onboarding the customers via video KYC authentication which has proved to be the most significant development in the field of KYC. It is a simple, seamless and scalable process by which the institutions can acquire customer details and documents before onboarding them. This is a reliable system which uses AI-enabled technology that helps in the prevention of fraud and checking errors.  

Steps in Video-KYC Process

Video-KYC is the game-changer for the industry, cutting 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 to be performed by 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 it 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 technology used in Video-KYC is a robust, secured and encrypted to prevent data leak which, otherwise, might be a data privacy concern. Each and every step in Video-KYC is done in real-time using AI-enabled techniques of automated data extraction, machine learning and face matching. 

 The Benefits of Video KYC

  • This type of KYC verification process drastically reduces customer onboarding costs.

  • Streamlines the complex process through automation using Artificial Intelligence.

  • Helps to detect frauds and malicious activity and safeguards the investors.

  • Keep a check on criminal activities majorly money laundering

  • Cost-effective technology involving minimal paperwork

 

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

This website uses cookies to ensure you
get the best experience on our website. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close