The banking, financial services, and insurance (BFSI) sector is evergreen in gauging fresh and creative solutions with digital KYC or eKYC. The industry is going through major transformations as technology continues to advance and customers become more tech-savvy. Despite obstacles such as global economic instability and geopolitical tensions, several current challenges are forcing the BFSI sector to adopt innovative technologies. One of the latest concerns is the increasing demand for financial services in underserved regions.
Additionally, the emergence of challenger banks and fintech startups is prompting traditional institutions to provide expedited and more user-friendly financial services.
In this article, we look at how digital KYC, or eKYC, is changing the face of the BFSI industry. By the end of this read, you will gain insights into the impact of digital KYC on the BFSI sector and its promising future in banking.
What Does Digital KYC or eKYC Mean?
Digital Know Your Customer (KYC) is essential in this era of digital transformation. By simplifying the customer onboarding procedure, Digital KYC or eKYC eliminates the requirement for in-person visits and extensive documentation. This not only enhances the customer journey but also decreases operational expenses for financial organizations.
Moreover, digital KYC utilizes cutting-edge technologies such as facial recognition and document authentication to boost security measures and combat fraudulent activities. As a result, individuals can conduct all their financial transactions digitally, anytime, without the necessity of physically visiting bank branches. Simultaneously, digitalization is revamping internal banking operations like customer onboarding or loan applications that were previously handled manually.
Digital KYC, or eKYC (Electronic Know Your Customer), is an online method of verifying an individual’s identity. Unlike the traditional paper-based KYC process, where users submit hard copies of their ID proof documents, digital KYC allows them to upload digital copies of documents like Aadhaar card, voter ID card, PAN card, or other proofs of identity and address directly to the bank’s portal.
This can also be done during a live video call to conduct a liveliness check. Digital KYC empowers individuals by enabling them to establish their identity and initiate banking relationships remotely through digital channels such as mobile phones.
Types of Digital KYC
Technological progress has completely revolutionized various sectors of operation, including banking and finance. This change can be seen most clearly in Know Your Customer (KYC) processes, which have moved from traditional paper-based ones to highly digitized systems.
The digital KYC process is a vital onboarding tool for clients geared towards regulatory compliance and mitigating identity theft and financial fraud. Now, let’s look at some common types of Digital KYC processes:
Online KYC Form
- Process: Customers enter all necessary data about themselves in an online KYC form.
- Signature: For example, it can be done physically by printing, signing, and posting the form, or digitally by appending a digital signature in the online form before its electric transmission.
Video-Based KYC
- Process: Clients undergo extensive audio-visual interaction during a video KYC session.
- Verification: A designated executive captures live images of the applicant, conducts a liveliness check, and verifies necessary documents such as a PAN card or Aadhaar card.
- Status: Upon completion, clients receive updates on their KYC status within a few days.
OTP-Based KYC
- Process: Clients input basic information and receive an OTP on their linked mobile number.
- Aadhaar: After typing one’s Aadhaar number, the KYC process begins by entering the OTP that they received.
These Digital KYC methods have significantly streamlined the KYC process, enhancing efficiency and ensuring regulatory compliance. This requires organizations and customers to familiarize themselves with these digital procedures according to regulations.
Improving Customer Experience through Automation of BFSI ID Verification
Significant progress has been made in the Banking, Financial Services, and Insurance (BFSI) industry through the adoption of low-code automation, digital identification verification solutions, and electronic Know Your Customer procedures. This transforms traditional customer onboarding into a seamless user experience platform.
Automation and Digital KYC in BFSI (Banking, Financial Services, and Insurance)
Automation plays a crucial role in structuring operations within the BFSI sector, especially in identity verification. Banks use ID verification automation to conveniently combine data from different systems into one secure location where it can be accessed easily, thus accelerating processes such as commercial lending and onboarding.
Digital KYC, or eKYC, is a significant aspect of this automation because it offers a 360-degree view of a customer’s KYC lifecycle. It also allows for real-time response prompted by such understanding: minimal friction to ensure a smoother customer journey.
End Thoughts
Digital Know Your Customer (KYC) benefits both customers and financial institutions by simplifying the onboarding process, removing the need for physical visits, and enhancing security measures. This streamlines processes for customers and reduces costs for institutions. Advancements in technology will bring even more sophisticated and secure digital KYC solutions.
Biometric authentication, artificial intelligence, and blockchain technology can enhance the customer experience and strengthen security protocols. Embracing these advancements, particularly the impact of Digital KYC on the BFSI sector, will be key for the future of the Banking, Financial Services, and Insurance (BFSI) industry to create a more inclusive and efficient system.
