eKYC: Unlocking the Future of Banking Security with Digital Identity

Evidently, eKYC (Electronic Know Your Customer) is a name heard today. Previously, user registration, identification & verification was done manually or through different analog means. For the best customer-centricity, digital identity is required almost in every sector. Today, the digital landscape of the economic sector is imperative for every field of life. Similarly, KYC, a basic requirement for the financial and Banking sector, needs to be digitized. In this article, we shall talk about how the eKYC is considered the future of Banking security.

Overview of eKYC

Knowingly, the ability to digitize the customer onboarding process includes the KYC. Mostly, it is considered a vitally important activity in the Business & finance sector. However, electronic KYC is an advancement to the traditional KYC process. It leverages Artificial Intelligence alongside many other emerging technologies. Namely, the OCR, Biometric, Facial Recognition, Live checks etc, are embedded with Machine Learning to digitize the manual KYC. So, it makes the KYC process paperless, seamless and effortless.

The link between eKYC and Digital Identity

Basically, a Digital Identity is what defines a person, an entity of anyone’s existence online. Unique identifiers and user patterns help detect and identify individuals from their devices. Website owners use the collected information from the devices to track the patterns of use and target them in a personalized way through targeted content. Originally, digital identity was the means to enable eKYC. Initially, a digital identity is formed naturally through personal information and online actions. It can be a pseudonym linked to an IP address or a unique ID. Additionally, digital identities are considered contextual as users only provide selective information for authentication.

Who requires the eKYC?

Primarily, Banks, Financial institutions & other service providers require the eKYC. Other businesses may include:

• Fintech start-ups
• Brokerage firms
• Foreign Exchange
• Insurance Companies.

What is required during the Electronic KYC?

Essentially, the data points are required for a digital identity in the electronic KYC process for banks. These include:

• Username/ Password
• Transaction history
• DOB
• SSN (USA and other)
• Electronic transactions
• Loan history

Digital Transformation through eKYC

In our earlier publications, we have discussed the regulations of KYC and AML. In the case of banks, we now witness that almost everything is digitalized on the back-end. Since, rapid digitalization, it led the bank’s operations to require a seamless transition in conducting KYC. Electronic KYC has facilitated KYC for banking and contributed to fast-paced banking. More importantly, AI and Machine learning have automated many key processes in KYC. Thus, the eKYC has opened up ways towards new and improved identification & verification processes for banks. Customers, Businesses and beneficiaries can now do their KYC for bank accounts seamlessly. Also, it helps reduce the time consumed in the CDD process.

Drawbacks of eKYC in Banking

Firstly, educating the users and customers about electronic KYC is a prevalent problem. The complex methods of opening up bank accounts now irritate many individuals. Mostly, illiterate people need help to comply with complicated procedures and the use of technology. So, instead of making banking seamless for many, it has also made banking a tiring process. Secondly, educating the employees of banks about the procedures of updated KYC can be a problem too. Employees who are old-fashioned and like to work in traditional ways might find themselves stuck. It might result in bad customer service and hurt the bank’s reputation. Thirdly, Cost is the main issue everywhere. Economic uncertainty and the ever-rising inflation is a big hurdles to implementing eKYC in many countries.

What is the future of eKYC in Banking?

Since the digital banking age has begun, technology has been ruling over every banking process. Let’s take an example of a customer who needs to open up a bank account today. The first thing that banks will require is the necessary information to open up a bank account. Also, he may have to submit other supplementary documents too. Failing to comply won't allow him to open his bank account. Similarly, the updated KYC and Anti-Money Laundering regulations are stricter than ever before. Regulated firms and individuals need to understand the importance of eKYC to match the pace of a fast-moving world.

Conclusion

Undoubtedly, Digital identity and electronic KYC have revolutionized the banking industry. But it needs to be understood that efficient use of technology is important. Also, educating the public about the technology is mandatory to make it truly seamless and effortless. Today, almost every working-class person requires a bank account. Here the eKYC is the future that all shall embrace to walk with the pace of time. Moreover, the security of everyone from Money Laundering and Terrorism Financing is in full compliance with the KYC and AML regulations.

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