Know Your Customer, or KYC is the process of verifying and authenticating the identity of potential customers, clients, and vendors before initiating a financial, economic, or business relationship. As per RBI guidelines laid in 2004, it is mandatory for organisations, especially financial institutions, to comply with KYC.
The implementation of KYC helps banks, mutual funds providers, insurance providers, e-wallet providers and other transaction-based businesses to evade fraud and keep their systems fool-proof. Thus, the system hugely impacts the identity verification processes, allowing organisations to create secure business frameworks.
An increasing number of organisations are inclining towards automated KYC solutions due to the ease, accuracy, and outcomes. It is not always possible for all businesses across the spectrum to have an automated KYC system in-house. In such cases, hiring an agency offering new-age KYC compliance tools help augment the processes and facilitate better outcomes.
KYC automated solutions verify customers’ identities by leveraging advanced artificial intelligence and machine learning technology. This ensures the meeting of all regulatory standards and does not require dependency on other enterprise resources.
Let us understand the importance of digital KYC and its process.
Video or Digital KYC:
In a rapidly stringent and ever-evolving scenario, the process of ensuring systematic fulfilment of regulatory compliances in onboarding is a complicated task for all companies and financial institutions. However, it is essential to provide a smooth onboarding process to candidates. With video KYC, companies can carry out extensive identity checks of the clients and customers remotely through video conferences.
Furthermore, it involves minimal manual intervention. For instance, the verifier in such a system checks the necessary documents and conducts a thorough liveliness check to identify the customer’s location. It is a quick and efficient solution used by organisations worldwide. In the lack of such systems within the company, it is always advisable to use the services of equipped verification agencies utilising technology.
Advantages of KYC Automation:
There are many challenges in the manual KYC process of identity verification. These include manual data entry, increased costs, wastage of human resources, time-consuming, inconsistency and security. However, these challenges can be overcome with the advantages of automated KYC, as listed below.
Increase in Efficiency:
A complete automated process enables employees to be authenticated instantaneously. Moreover, since there is a lack of involvement of human resources, there’s an added benefit of 24/7 functionality. This results in significantly decreasing onboarding time and thus leads to a higher degree of efficiency in the organisation.
Reduction of Risks:
Manual data entry increases the chances of mistakes and oversights. With a fully automated end-to-end process, the chances of error are minimised. With KYC, one of the primary concerns of every enterprise is privacy. The reduction in the dependence on manual intervention helps protect the privacy of clients by significantly decreasing data breaches. Moreover, the tools are compliant with privacy and data protection laws, including the GDPR.
Enhancing Customer Experience:
The higher is the level of customer satisfaction, the higher is the chances of achievement of objectives and success of the organisation. Automation of KYC provides organisations with a frictionless experience as there is quick completion of employees’ onboarding process.
With the elimination of the need for performing repetitive tasks, organisations can deploy resources in tackling the key areas which have high-risk cases. Thus, the freed-up capacity can be utilised by empowering the employees to use their skills and abilities for customer-centric engagement and retention.
Scalability is one challenge that paper-based KYC processes cannot overcome. Manual intervention, paper trails, and requisites for a customer’s physical presence are only a few obstacles. Digital KYC solutions can enable businesses to quickly scale the checks to adapt to the company’s needs and requirements and make moderations in the processes to meet the frequent changes in compliance and regulations for KYC.
Digital KYC solutions can transform the entire KYC process, reduce operational costs, and maintain all regulatory compliances simultaneously. These solutions support identity, utility checks, credit history checks, vehicle registration verification, bank statement verification, and professional verification.