Today’s digital economy requires companies to offer their customers the best in class experience, which requires putting the customer at the center of strategic planning — the foundation for sustained competitive advantage. And more so in the world of banking and finance as the digital banking paradigm is going mainstream.
Over the past few years, many changes in companies’ onboarding rules and laws have been observed. KYC was originally expected only to detect and prevent fraud, but that’s not enough anymore, as it must adjust its requirements based on the shifting demands of its customers. Hence, eKYC leverages technology to provide a quicker, more scalable, and reliable mode of conducting KYC for enterprises.
In this article, we will explore the concept of electronic KYC, unravel its complexities, and look at its implications for the banking and finance industry.
What is eKYC?
eKYC (Electronic Know Your Customer) is a digital method of verifying the identity of customers used by banks over the Internet.
Utilizing cutting-edge technology such as Artificial Intelligence (AI), Machine Learning (ML), and biometrics removes the necessity of face-to-face interactions as well as the submission of physical documentation.
Moreover, with eKYC online, individuals can create bank accounts, apply for loans, or engage in other types of financial transactions, which eliminates the need for cumbersome paperwork and time-consuming verification processes.
Traditional KYC Vs. eKYC
Know your customer, or KYC is a standard technique for verifying an individual’s or a business’s identification prior to and during a financial connection in a regulated field. Several sectors, especially the banking and financial services sector, rely heavily on these audits.
Opening a bank account, getting a loan, trading stocks, getting insurance, gambling online, or applying for a credit card are all examples of transactions where Know Your Customer requirements may be necessary. With the use of KYC procedures, banks verify the identity of their customers. It also provides background information regarding the financial condition of the individual or business, both historically and currently, in assessing how much risk. KYC processes are also important in AML’s due diligence efforts.
KYC and electronic KYC have different methods for verifying and obtaining customer data. eKYC is an electronic version of the Know Your Customer process, which replaces paper-based methods, including document requests and verifications. Electronic Know Your Customer (eKYC) removes the requirement for physical meetings and the sharing of physical documentation to assess the level of compliance risk. Indeed, it is the next iteration of an ecosystem that’s necessary to stop fraud and terror, theft of intellectual property, and all manner of illicit behavior that destroys businesses, the economy, and the lives of people.
Benefits of eKYC Processes in Banking
eKYC’s revolutionary potential is beyond just simplifying the verification procedure. It offers several advantages for both service providers and their clients. Let’s go into these benefits and find out why eKYC is so important in the modern digital world:
Reduced Costs
By switching from paper-based KYC processes to digital verification, businesses may significantly reduce operating expenses formerly incurred for the management and storage of documents.
Greater Efficiency
Since eKYC drastically reduces the time required for new client onboarding. The process is quick and easy because no one has to be present or provide any paperwork.
Improved Accuracy
The accuracy of data entry and document verification is also enhanced by the use of eKYC. Moreover, automating data collecting and verification processes increases the reliability of businesses and companies.
Better Compliance
eKYC makes it easier to follow Know Your Customer rules since digital records are less cumbersome regarding upkeep, retrieval, and auditing. Additionally, they assist businesses in remaining compliant effortlessly with KYC and AML regulations.
How eKYC is Revolutionizing the Banking & Finance Sector?
Numerous banks and financial institutions have adopted eKYC and are taking advantage of increased productivity and happier customers. Indian banks, for instance, have adopted aadhaar e-kyc, making it possible for millions of people to easily utilize financial services.
Electronic Know Your Customer (eKYC) is now used by digital banks and fintech companies to shake up the established banking industry. These advanced businesses have developed completely digital onboarding methods, allowing their users to open accounts, apply for loans, and explore investment options quickly with no significant effort.
Furthermore, Electronic Know Your Customer (eKYC) is a major component of the digital identity process that is directing sudden shifts in the financial services sector. Banks may now provide a streamlined and safe onboarding process by using cutting-edge technology like biometrics, ML, and AI.
Concluding Remarks
eKYC, being more than merely a technological leap, is significantly changing how banks and financial businesses operate and serve their consumers. Furthermore, Electronic Know Your Customer is leading the world towards a paperless future where rapid onboarding will be easier, providing a simplified, efficient, and secure mechanism for client verification.
Additionally, new opportunities are now available through integrating eKYC with biometrics and other technologies. With these inventions, the verification procedure is now secure and easy to use.
