These days, a lot of tasks and services are going digital. Automation continues to replace manual processes as more and more activity across industries takes place online. This is particularly important to financial services. Through eKYC, KYC is automated, which not only makes processes faster and safer but also enhances the customer experience. Its potential increases as more eKYC techniques are accepted by authorities and are made more widely available.
Before we look at eKYC, it’s helpful to quickly review KYC. The “Know Your Customer” process, sometimes known as KYC, involves confirming clients’ identities. It involves being aware of and confident in a customer’s identification and financial activities. KYC safeguards against fraud, money laundering, and other financial crimes for the financial institution, its clients, and larger markets.
Onboarding a new customer involves performing KYC, but it also includes a crucial continuous component that continues throughout the customer relationship.
What is eKYC?
In recent years, digitalization has accelerated rapidly across most businesses. This has been led by the banking and financial industries, where more client engagement and other operations are going online.
eKYC, as a broad term, describes the digitalization and automated design of KYC processes. It is the automated, online, paperless digital transformation of the conventional KYC process.
Making the switch to a computerized KYC procedure
In recent years, a lot of aspects of banking and finance have gone digital. Online account opening is on the rise, and more services are now available digitally. Customers no longer have as much need to visit actual bank branches. An already well-established transition has been expedited by the COVID pandemic. According to a McKinsey report, businesses have advanced in their digital transformation seven years since the epidemic.
This service digitization affects a wide range of industries. Not so long ago, many of these appeared challenging to digitize. Technology advancements, AI developments, and networking have made it so much more feasible.
One of these is KYC, which is a leader. In the past, opening an account and enrolling a new customer required the customer to go to a branch location and show physical identification documents and other proof. This process went online during the initial phases of eKYC.
Since then, digitalization has advanced even further. The term “eKYC” currently denotes the complete digitization of the KYC procedure. This includes more sophisticated methods like digital signatures in addition to paperless customer onboarding, identity verification, and continuing KYC and AML monitoring.
The growth of eKYC has been largely dependent on regulation. Financial organizations are constrained in what procedures they can employ by law and regulations because KYC is a subject that is heavily regulated. Regulators are increasingly accepting of methods like video and biometric verification, as well as the usage of electronic signatures. Additionally, the adoption demonstrates the growing confidence in eKYC and its capacity to provide KYC that is more secure.
The advantages of eKYC
faster operations. Anything that goes digital and mechanized usually gets faster. This is a crucial advantage of KYC—instead of taking days or even weeks when done manually, onboarding and customer verification with eKYC may be completed in only minutes.
enhanced client experience The customer experience benefits greatly from real-time customer verification. Financial institutions want clients to have quick access to their products and services, while customers expect an easy, frictionless, yet reliable and safe experience. According to a Thomas Reuters study, 89 percent of corporate clients had negative experiences with KYC procedures, with 13 percent switching banks as a result.
higher conversion rates Customer conversion rate is a crucial metric for any financial institution, and it increases as a result of quicker and better experiences.
stronger KYC. eKYC is not only quick but also safe. It complies with all pertinent laws, including AMLD and eIDAS, and offers security equal to or greater than that of conventional manual processes. This is supported by regulators’ growing adoption of eKYC.
Processes that are versatile and flexible eKYC workflows and processes are highly adaptable when laws change or technology advances. Numerous eKYC solutions are modular, making it easy to add new features.
How does the eKYC procedure look?
The traditional manual KYC process has been digitally transformed into the eKYC process. It is quick; authentication takes only a few minutes as opposed to days or weeks. The consumer experience is very seamless, and the verification process is real-time. This maintains client interest and boosts conversion rates significantly.
Processes employ a variety of technology and verification techniques. Customers will perceive these as smooth because they are automated and properly integrated into the process. The use of biometrics, NFC card scanning, and video-based identification are some of the methods.
What applications of eKYC are there?
Standard KYC is replaced by eKYC, which is applicable to both the customer relationship and the KYC process. It is employed for customer onboarding, due diligence, and ongoing monitoring. This covers the principal eKYC use cases or techniques listed below:
YouTube KYC This was one of the original eKYC techniques created and is still essential. Live video and identity documents can be compared to verify customers, and automatic verification is now feasible. Manual video-based verification may be performed in cases where likeness is ambiguous or where regulators demand it.
Verification of the documents Another application of eKYC is the capture and validation of photographs of identity documents. Several distinct sorts of papers are authenticated using AI approaches.
electronic due diligence A risk assessment is necessary as part of KYC procedures to ascertain the chance that a customer (person or corporation) may be involved in financial crime or money laundering. In the past, conducting such checks would require time-consuming human searches and document verification, but thanks to eKYC, most of this can now be automated.
discovery of fraud and continued supervision. The constant client monitoring that eKYC is involved in is the last factor to take into account. The “three pillars of KYC” serve as a reminder that thorough KYC calls for more than just a single customer assessment; it also necessitates ongoing customer relationship monitoring. Much of this can be automated using eKYC. Accounts can be checked against watchlists, PEPs, and punishment lists, and consumers can be routinely tracked.
eKYC and IDnow
The premier eKYC solution provided by IDnow completely complies with KYC and AML regulations in the UK, Europe, and other regions. AutoIdent was created with extensive KYC and AML functionality.
As technology and policy have developed, AutoIdent has changed. Fully automated biometric identification verification has been added to video-based identity verification. Furthermore, AutoIdent provides automated or hybrid verification in accordance with the specifications set forth by laws in various jurisdictions.
Increased functionality is now available through the addition of other solutions, all on one platform. This involves the use of NFC technology and electronic signatures, as well as the KYC and AML screening mandated by AML legislation.