The pandemic has drastically transformed every element of people’s daily routines, as per the Economic Times, due to unforeseen circumstances and regulatory standards. Consumer spending and behavior in financial institutions have shifted significantly as a result of new objectives, issues, and priorities. As per a BCG review, customers have gone more demanding of digital platforms, with online banking usage increasing by 23 percent and mobile banking usage increasing by 30 percent.
The contest for garnering and expanding the customer base has never been fiercer than it is now, thanks to the wave of FinTech. For opening bank accounts, a new workaround called electronic Know Your Customer (eKYC) offers consumers an ultra-smooth onboarding experience while also reducing paper-based processes. This is the first step toward creating electronic banking in this evolving environment in order to stay competitive.
What is eKYC?
The existing KYC regulations, which primarily depend on hard copies of original documents to recognize and confirm a user’s identity, are being replaced by eKYC. This is a distant, paper-free validation process for online payments such as opening the account, loan applications, and billing certification that lowers the cost evaluates risks and intercepts fraud.
Banks are required to gather personal details before conducting any banking transactions according to the Prevention of Money Laundering Act, 2002. Online KYC entails the electronic transmission of identification documents, proof of address, and other important biometric data in an effort to stop financial fraud, terror financing, and misuse of funds. Consumers do not have to go to banks or wait longer for personal identification with eKYC, making account opening and client onboarding far better and faster
Importance of eKYC in the digital onboarding process
Earlier, opening an account necessitated face-to-face sessions (customer onboarding). Not only does this take a long time and consume a large amount of the workforce, but it also reduces client experience. As a result, eKYC’s onboarding process on numerous digital platforms with little personal interaction is a breakthrough. With the advancement of new technologies (AI, automation solutions, smartphone apps, and so on), financial institutions and bank services can now improve business operational efficiencies, avoid potential threats, and stay ahead of the curve.
Without physical meetings, the digital KYC verification assists banks in identifying clients and ensuring that they are qualified for the services/products. The recognition and validation of the customer’s identity happen instantly, allowing banks to boost their traffic and conversions and provide a more streamlined experience for their clients. The time it takes to complete it has been reduced from weeks to hours, massively enhancing the customer onboarding program.
Benefits of eKYC in the digital onboarding process for banks
Improve Customer Experience & Onboarding
Clients are now more than willing to use digital platforms. They are strongly affected by digital products that offer personalization and customization. Onboarding is among the most critical aspects where suppliers fail, as per the Signicat Report (2020). Due to the dramatic existence of COVID-19, 68 percent of customers consider 100 percent virtual onboarding, according to the report. Clients don’t have to enter their data numerous times with eKYC’s virtual onboarding program. Irrespective of which platform they use, whether it’s a smartphone app or a webpage, they can start providing personally identifiable information (PII) and complete registrations at their leisure. Users are provided with an onboarding experience that is drastically simple, quick, and smooth.
Significant Operational Efficiencies
Using eKYC in online onboarding not only creates a better consumer experience but also aids banks in improving operational functions. It enables financial institutions to standardize and optimize technology, processes, information, and organizational structures. Furthermore, by rationalizing systems and synchronizing methods throughout departments, banks can reduce duplication and inefficient procedures.Â
When financial institutions use e-KYC solution, they can hope to avoid similar onboarding procedures and assessments. As a consequence, time-to-revenue is reduced, overhead is reduced, and clients are less inclined to leave application forms.
Reduce Paper Usage and Document Loss
eKYC is a paper-free authentication system that does not require the need for physical documents. Banks can reduce carbon emissions by being eco-sustainable and using a cloud-based online platform. Going paper-free not only allows users to save the atmosphere but also enables them to reduce the costs of basic KYC compliance.Â
Furthermore, the eKYC process helps in the safety of customer information as well as the protection of lost documents. It prevents banks from becoming overburdened with record keeping and documentation that are typically stored.
Prevent Fraud RiskÂ
Client onboarding is the first step in a user’s connection with a financial institution. The onboarding procedure ensures that users are who they say they are, which is an important factor of the Fraud Risk Management Plan. By incorporating ID verification with differentiating biological features, eKYC solution confirmation utilizing bio-metric indicators can bridge multiple data sources. Furthermore, the ID validation process detects anomalies in the user’s identity, such as out-of-date or misaligned data. As a result, it assists banks in enhancing system safety and decreasing cybercrimes while preserving customer confidence.
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