Many services and operations are now going digital. Across businesses, automation is progressively replacing manual operations. This is especially important in the financial services industry. KYC automation via eKYC makes operations faster and safer and improves the client experience. As more authorities trust digital KYC solutions and allow for wider use, the potential of the technology grows.
What is KYC?
Before we get into digital KYC solutions, it’s a good idea to discuss KYC. “Know your Customer,” or KYC is the method of authenticating a user’s identification. It is about understanding and trusting a client’s identity and financial activities. KYC safeguards the financial sector, its clients, and the broader market against fraud, money laundering, and other finance-related crimes.
KYC occurs during the onboarding of a new client, but it also plays a crucial role in the client relationship.
What are Digital KYC Solutions?
Most businesses have experienced rapid digitization in past years. Banks and the finance industry have been at the frontline of this, with increased online client interactions and other operations.
Digital KYC solutions generally refer to the digitization and automation of KYC procedures. It is the computerized, online, and frictionless digital and remote transformation of traditional KYC methods.
Evolution of KYC into e-KYC:
Many components of financial institutions have adopted digitalization in the past few years. More people want to open accounts digitally, and more products and services are available online. Clients are less likely than before to visit traditional bank offices. The Covid-19 outbreak has expedited an already well-underway transition. According to a McKinsey report, corporations are now seven years ahead of the curve in digital transition after the pandemic
This digitalization of business operations applies to a wide range of fields. Not long before digitization was considered impossible for these programs. Technology, machine learning, and connectivity advancements have made so many things achievable.
KYC is a forerunner in these domains. Traditionally, for onboarding, a new client would have to submit hardcopy identification papers and other proof at a bank office. The initial stages of the digital KYC solution saw this procedure shift online.
Ever since digitization has advanced even further. The term eKYC currently refers to the complete digitalization of the KYC procedure. This covers not only paper-free customer onboarding and identity verification, but also continuous KYC and AML surveillance, as well as more complex procedures like an electronic signature.
Compliance has been critical in the growth of digital KYC solutions. KYC is a strictly regulated field, and financial firms are restricted by rules and guidelines. Authorities are progressively accepting technologies such as video and biometric authentication, as well as the usage of digital signatures. Furthermore, the adoption indicates the growing trust in digital KYC and its capacity to provide more secure verification and compliance operations.
Benefits of Digital KYC Services:
A Fast Process:
Every automized and computerized solution is faster. This is a significant advantage of eKYC. Users can be onboarded with the help of digital KYC solutions and verified in moments rather than days.
Client Satisfaction has Increased:
Real-time client verification improves the user experience. Financial firms want clients to be able to acquire goods and services as soon as possible, and clients expect a simple and frictionless experience that is also resilient and safe. According to a Thomas Reuters study, 89% of business clients had a negative experience with KYC procedures, with 13% switching banks.
Higher Conversion Rates:
Finally, faster and better user satisfaction levels lead to a rise in client conversion rate. An important metric for any financial company.
Digital KYC is more secure:
eKYC is both quick and secure. It surpasses the security measures of typical manual procedures and adheres to all applicable requirements, such as AMLD and eIDAS. The regulators’ increased acceptance and interest in digital KYC solutions show its success.
An All-round Verification System:
eKYC procedures and operations may be readily altered when requirements change or technology advances. Many digital KYC solutions are adaptable, enabling the simple addition of new features.
Elements of Digital KYC Verification Process:
Video KYC:
This was one of the earliest eKYC approaches introduced and is being used today. Clients may now be authenticated automatically by matching live video streams to identity papers. Video KYC verification process can be done when similarity is uncertain or when authorities request it.
Document Verification:
Another aspect of digital KYC is the collection and verification of pictures of identity documents.AI methods are employed to validate the authenticity of various kinds of files.
Digital Due Diligence:
KYC due diligence necessitates a risk evaluation to identify the probability of a consumer engaging in financial fraud or laundering activities. Previously, such investigations would have required extensive manual inquiries and document reviews; however, digital KYC solutions now handle most of these operations.
Continuous Monitoring:
Another factor to consider for digital KYC solutions is the continual presence of consumer monitoring. Successful KYC necessitates not only the first evaluation of a client but also constant during the whole business relationship.
Bottom Line:
Financial companies and regulatory bodies widely accept digital KYC solutions because of their adaptive nature. In addition to that, they offer a robust security system that preserves customer data.
How financial crime is increasing and the steps companies are taking to tackle it? Here’s the Financial Crime Report 2022.
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