eKYC: What is eKYC (Electronic Know Your Customer)?

Although identity verification is crucial for a wide variety of industries, banking institutions may place the utmost importance on it. Customer identification systems are mandatory for banks and other financial organizations in the majority of regions.

With the growth of the digital sphere that we have recently seen in the banking sector, identity verification is becoming harder than ever. To tackle this, innovative minds have come up with digital verification— or eKYC— as a strategy for scalable growth.

What is eKYC?

“eKYC” is an abbreviation for “electronic Know Your Customer”— a digital procedure utilized for the remote verification of individuals’ identities.

A KYC solution is a digital system that has the capability of enabling businesses to verify the identity of their customers electronically. Because it eliminates the need for tedious documentation and physical presence, the process can be accelerated and made more convenient for both the customers and the businesses that are involved.

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Difference Between Electronic KYC and KYC [eKYC vs KYC]

The primary distinction between KYC and eKYC verification is the way by which personal information is gathered, processed, and validated.

The Traditional KYC Process

The usual KYC process uses paper records to verify people’s identities by hand. For this reason, being present in person and showing real papers are necessary for KYC. Most of the time, by going to a store or office in person.

The manual verification method and the need for face-to-face interactions that come with KYC may slow down the enrollment of customers. An employee checks the information against databases and watchlists after cross-checking it with their ID (like a passport or ID card). Individuals must wait for an answer, which may not come for days or even weeks.

The Revolution that is eKYC

eKYC verification employs an entirely different methodology. As this is a digital enrollment process, customers can send in information electronically, such as by scanning and uploading physical papers from the comfort of their own homes.

Mobile apps or online finishing can make things run more smoothly and paperwork easier to fill out. Reduce the time that would have been spent on testing processes that take a lot of time.

When processes are automated and digitized, costs related to paper, physical equipment, and manual labor go down. Also, businesses can speed up the process by using online tools and AI to verify identity documents instantly.

KYC vs EKYC

e-KYC Process

1: Customer Verification

Businesses should use an electronic Know Your Customer system that works well with their apps, websites, and other customer-facing tools. This makes the experience better for everyone. The customer will be required to present identification— to show proof that they are who they say they are.

This generally involves recording an image of the individual’s driver’s license or passport, which is subsequently uploaded as proof of identity. The eKYC solution uses optical character recognition to get personal information like name and address from the user’s device and fill in the application form instantly.

2: Biometric authentication

There are times when customers may also need to go through biometric identification. This requires the verification of biometric information, including a photograph, fingerprint, or retinal scan.

Most solutions ask customers to send in a picture of themself, which is then checked against face recognition software to make sure it’s real. For most people, this is the easiest option because most of them have smartphones with good cameras.

3: Face Liveness

The customer needs to show proof that they are the person named on their papers. To do this, they can record a short live video of themselves, take a selfie that can be compared to the picture on their ID, or, for papers that also have a fingerprint, put their finger on their laptop or phone’s fingerprint reader.

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Types of eKYC

There are various types of eKYC solutions, each catering to specific needs and regulatory environments. Some common types include:

  • Knowledge-Based Authentication (KBA): Using pre-set questions like mother’s maiden name or childhood address.
  • Document-based eKYC: Uses digital document verification and data checks of government records and state-issued IDs like Passport, Social Security, Utility Bills, etc.
  • Biometric eKYC: Uses biometric features already present in electronic devices like facial recognition or fingerprint scans.
  • Hybrid eKYC: Combines various available methods for a more comprehensive verification approach.

Benefits of eKYC

The adoption of eKYC solutions offers numerous advantages for both FinTech businesses and their customers:

1: Enhanced Customer Experience

Consumers adore Digital KYC because it accelerates the process by eliminating the need to physically go to a location to verify their identity. By utilizing biometrics in eKYC, a greater number of individuals can obtain and utilize financial services.

Since individuals don’t have to do each step of real-life KYC processes, mobile-based electronic Know Your Customer lets people use their phones or computers to complete the whole process. The fastest and easiest eKYC ways only take a minute to complete.

2: Reduced Costs

Due to automation and less paper use, traditional KYC processes have high administrative costs for things like storing, verifying, and handling documents. Businesses save money with electronic KYC because it does some of these chores automatically.

3: Improved Security

In the traditional KYC method, information about the customer’s identity is kept in a central database. Hackers will want to get into that database because they can get a lot of personal information in one hit.

eKYC and decentralized identity, on the other hand, can help organizations lower the risk of identity theft. In short, the person who owns the data in a safe digital wallet is in charge of it instead of a central authority.

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Evaluating Your Needs: Tailoring eKYC for Your Business.

Before diving headfirst into eKYC implementation, a thorough evaluation of your specific needs is crucial. This evaluation involves two key considerations:

1: Technology

There are many Digital Know Your Customer systems, and each one has its benefits. High levels of protection are provided by biometric verification, which uses fingerprints or facial recognition. Optical character recognition (OCR) is used in document recognition to instantly get data from uploaded documents like driver’s licenses and passports.

Liveness checks make sure that the papers are being presented by a real person, which adds to the security. Checking data against government records and sanction lists is possible with trusted sources. You should think about the type of financial services you offer and the amount of security your customers need. The key is to find a balance between protection and user experience.

How safe your customers need to feel and what kinds of banking services you offer. The key is to find a balance between protection and user experience. For example, facial recognition could work well if your FinTech business caters to younger people who are happy using smartphones.

Keep in mind that your audience includes people who might not be as comfortable with such technologies. For them, document identification might be a better fit.

2: Compliance

As each country has its unique financial landscape, KYC and AML regulations vary regionally across the globe. It is critical to understand the regulations that govern your industry and the target market that you intend to serve. The electronic KYC option you select must conform to the regulations and be adaptable to accommodate variations in your area.

This process can be made easier by working with a provider who knows how to handle different legal environments. Don’t forget how hard compliance can be; keeping ahead of the curve is important to avoid fines and damage to your reputation.

Selecting the Ideal eKYC Provider: A Strategic Partnership

1: Data Retention

Increasingly conservative data protection rules are making it more difficult for firms to gather and maintain personal information. Make sure that the solution you choose only saves the bare necessities and doesn’t keep selfies, personally identifiable information, or other identity data.

2: Hybrid Model

‘One-size-fits-all’ approaches become less effective as industries continue to develop and change. Hybrid KYC models, which combine aspects of traditional KYC and Digital KYC systems, are gaining more and more prominence in this sector. Businesses that need an exceptionally customizable and adaptable KYC process frequently favor hybrid solutions.

With the hybrid system, you get the best of both worlds. The convenience of technology combined with the reassurance of human oversight to build a solid practice fit for an evolving industry.

3: Operational Cost

Think about how much it will cost to adopt an electronic KYC solution. Look at different price models, like subscription- or per-transaction pricing, to find the one that will save your business the most money. Think about both the short-term and long-term costs.

Don’t forget that the prices of eKYC were lower before this budget. Because of eKYC, there will be less work for workers who are responsible for KYC—getting businesses to cut costs and use their resources more efficiently.

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Conclusion

eKYC implementation has the potential to transform your FinTech company. Customer registration is optimized, security measures are fortified, and regulatory compliance is promoted.

It offers a multitude of advantages that can be realized through meticulous requirements assessment, provider selection, and data security prioritization. Keep in mind that establishing trust and nurturing enduring customer relationships begins with a secure and seamless onboarding process.

Are you ready to change how you onboard new customers with the help of eKYC? As a top eKYC provider, KYC Hub has a wide range of features that are specifically made to meet the needs of FinTech companies. Our safe and easy-to-use tool works well with other systems, so your customers will have a smooth onboarding process.

Get in touch with KYC Hub right away to find out more about our eKYC verification services and how we can help your FinTech company do well in the digital world.

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