According to Economic Times, the pandemic has radically reshaped every aspect of people’s daily habits due to extraordinary conditions and safety regulations. New priorities, concerns, and preferences have dramatically changed consumer sentiment and behavior in financial services. A BCG report indicates that consumers nowadays have become more demanding of digital experiences with the rise of online banking use by 23% and mobile banking use by 30%.
As stated by Deloitte, the bank of the future needs to transform boldly by embracing emerging technology, grasping open banking models, and adopting the customer-centric approach in every digital strategy. Amid the wave of financial technology (FinTech), the competition in attracting and acquiring new customers has never been higher. A new solution called electronic Know Your Customer (eKYC) for opening accounts provides customers with a seamless onboard experience and reduces paper-based procedures. This is the very first step of developing digital banking in this ever-changing environment to continue staying ahead.
Let’s start with a definition of eKYC for Banking and how it accelerates the onboarding process in 2021.
What is eKYC?
eKYC is an evolution of the current Know-Your-Customer (KYC) procedure, which essentially relies on physical copies of original papers to identify and verify a customer’s identity. This is a remote, paperless verification method that minimizes the costs assesses risks, and detects frauds in online transactions, including account opening, loan, and payment registration.
As per the Prevention of Money-Laundering Act, 2002 and Prevention of Money-Laundering (Maintenance of Records) Rules 2005, banks have to collect personal information before performing any financial transactions. To prevent money laundering, terrorist funding, and financial mismanagement, eKYC involves the electronic submission of identity evidence, address proof, and other biometric information. With eKYC, bank account opening and customer onboarding are much easier, as customers do not need to go to branches or wait weeks for identity verification.
Importance of eKYC in the digital onboarding process
Previously, face-to-face meetings were required for opening bank accounts (customer onboarding). Not only does this consume a significant amount of time, and require a lot of manpower, but it also lowers the level of customer satisfaction. Therefore, an onboarding process with less human contact on multiple digital channels by eKYC is a revolution. With the advances of new technologies (AI, digital systems, mobile applications, etc.), banks and other financial services companies can now boost efficiency in business processes, avoid security risks and, eventually, stay ahead of the fierce competition.
The eKYC procedure helps banks identify customers to ensure that they are eligible for the services/products without face-to-face interactions. The identification and verification of the client’s identity occur immediately, helping banks to increase their conversion rate and offer a seamless experience to their customers. Weeks needed for its completion become hours, thus vastly improving the customer onboarding process.
Benefits of eKYC in the digital onboarding process for banks
1. Improve Customer Experience & Onboarding
Customers are now comfortable using online channels. They are mostly influenced by personalization and customization provided through digital offerings. According to the Signicat Report (2020), onboarding is one of the most crucial areas where providers are failing. The report also shows that 68% of consumers expect 100% digital onboarding due to the unprecedented nature of COVID-19. The digital onboarding process with eKYC refrains customers from entering their information multiple times. Regardless of what channels they choose via mobile app or website from starting to provide personally identifiable information (PII) to finishing applications at their own convenience. Customers are offered a radically simple, fast, and seamless onboarding experience.
2. Significant Operational Efficiencies
Apart from creating a customer-centric experience, applying eKYC in digital onboarding also helps banks to improve operational efficiency. It allows banks to standardize and automate technology, procedures, data, and organizational models. Moreover, banks can also decrease redundancy and wasteful procedures through rationalizing systems and synchronizing processes across departments.
Banks can expect to avoid repeating onboarding processes and evaluations when they use an e-KYC tool. As a result, time-to-revenue is significantly faster, overheads are cheaper, and customers are less likely to abandon the applications.
3. Reduce Paper Usage and Document Loss
eKYC is a paperless solution that eliminates the need for paper documents. By being environmentally friendly and employing a cloud-based internet system, banks may decrease their carbon footprint. Not only does going paperless help preserve the environment, but it also helps cut down on the expenses of standard KYC compliance.
Moreover, the eKYC system aids in the security of client data and the prevention of missing papers. It saves banks from being overwhelmed with records and paperwork which are stored traditionally.
4. Prevent Fraud Risk
Customer onboarding is the beginning of a customer’s relationship with banks. The onboarding process is an essential part of the Fraud Risk Management Program as it verifies that people are who they say they are. eKYC verification using biometric markers can cross-reference multiple data points by combining ID document verification with distinguishing biological traits. Besides, the ID verification process flags abnormalities in a customer’s identity like out-of-date or mismatched information. Therefore, it supports banks in increasing system security, and minimizing online fraud, while maintaining customers’ trust.