The BFSI industry, which includes banking, financial services, and insurance, is undergoing a radical change as a result of the modern world’s more advanced digital infrastructure.As a catalyst, the COVID-19 epidemic hastened the transition to digital technology across sectors, including banking. As a result, a significant shift is taking place in how banks interact with their customers, particularly regarding Know Your Customer (KYC) processes. Digital KYC or Digital Know Your Customer, is revolutionising the BFSI sector by streamlining customer onboarding and enhancing security measures.
Digital transformation in the banking industry encompasses a wide range of initiatives. On the one hand, it provides customers convenient access to banking services through various digital channels, such as the Internet, mobile devices, and wearables. This enables individuals to conduct financial transactions digitally at their own convenience, eliminating the need to visit physical bank branches. On the other hand, digitalization is reshaping internal banking processes, such as customer onboarding and loan applications. Previously performed manually at bank branches, these processes are digitised, resulting in increased efficiency, reduced paperwork, and improved customer experience.
In this blog, we will examine how Digital KYC may alter the BFSI industry. You will have an understanding of the influence that Digital KYC has had on the BFSI sector as well as its promise for the future of banking by the time you have finished reading this blog post.
What is Digital KYC or eKYC?
Digital KYC, or eKYC (Electronic Know Your Customer) is a way to verify the identity of an individual online. Unlike the paper-based KYC process, where the users submit the hard-copies of their ID proof documents, DKYC allows them to directly upload the digital copies of Aadhaar card, voter ID card, PAN card or other PoI and PoA to the bank’s portal. The same can be done on a live video call to do a liveliness check as well,
Digital KYC empowers these individuals by allowing them to establish their identity and initiate banking relationships remotely through digital channels such as mobile phones.
Types of Digital KYC
The contemporary era of technological advancement has transformed conventional operations across numerous sectors, including the banking and financial industries.This transformation is most evident in Know Your Customer (KYC) processes, which have evolved from paper-based methods to highly digitalized solutions. Digital KYC has emerged as a key tool in client onboarding, ensuring adherence to regulatory compliances and preventing identity theft and financial fraud.To elaborate on this, we dissect the common types of digital KYC processes below.
Online KYC Form
- Process: Clients must fill an online KYC form, providing all required personal and identification details.
- Signature: After everything is finished, there is a requirement for a signature, which may be executed in one of two ways:
- Physical: Print the form, sign, and mail it to the organization’s postal address.
- Digital: Apply a digital signature to the online form and submit it electronically.
Video KYC is one of the most popular methods to do KYC for the banks and other financial institutions.This technologically advanced KYC method involves extensive audio-visual interaction.
- Registration: The process begins with service sign-up, followed by a prompt for video KYC verification.
- Link: A text or email link is sent to the client to initiate the process.
- Verification: A designated executive captures a live image of the applicant to do a liveliness check and verifies necessary documents such as a PAN card or Aadhaar card on the video call.
- Geotagging: The location of the person is confirmed via geotagging.
- Status: Upon completion, clients receive an update on their KYC status within a few days.
The OTP-based KYC is widely used to open digital wallets or online bank accounts.
- Details: Clients input basic information and navigate to the Aadhaar e-KYC tab.
- Aadhaar: After entering their Aadhaar number, an OTP is sent to the linked mobile number.
- OTP: The KYC process concludes once clients enter the received OTP.
To sum up, these digital KYC methods have significantly streamlined the KYC process, enhancing efficiency and ensuring regulatory compliance. Organisations and clients must familiarise themselves with these digital procedures, ensuring adherence to the relevant regulations.
Enhancing Customer Experience Through BFSI ID Verification Automation
Significant progress has been made in the Banking, Financial Services, and Insurance (BFSI) industry as a result of the use of low-code automation, digital KYC solutions, and electronic Know Your Customer procedures. This shift towards technological integration transforms the traditional customer onboarding process into a more seamless, user-friendly experience.
The Role of Automation and Digital KYC in BFSI
Automation has played a crucial role in structuring various operations within the BFSI sector, particularly in identity verification. Banks have been leveraging ID verification automation to orchestrate data across diverse systems efficiently. It allows for the processing and consolidation of data into one secure and easily accessible location, ultimately accelerating processes like commercial lending and onboarding.
An essential part of this automation process is digital KYC, or eKYC, which can involve using Aadhaar eKYC online. A digital KYC solution provides bank employees with a comprehensive 360° view of a customer’s KYC lifecycle. This holistic understanding enables real-time responses with minimal friction, ensuring a smoother customer journey.
Creating a Competitive Edge
Organisations constantly seek a competitive edge over their peers in the rapidly evolving financial landscape. The fusion of automation and digital KYC verification techniques offers this advantage, allowing institutions to improve their customer experience significantly. At the same time, it ensures adherence to essential fraud mitigation strategies and regulatory standards, striking a balance between user experience and compliance.
The digital landscape has significantly evolved, propelling the BFSI sector into an era of digital transformation. With digital KYC and eKYC procedures, digital customer onboarding and security measures have been revolutionised, offering clients convenience and efficiency. Automation has also streamlined internal processes such as identity verification and compliance, providing employees with a comprehensive view of a customer’s KYC lifecycle. Amid rapid technological advancements and the incessant pursuit of a competitive edge, organisations must balance offering enhanced customer experience and adhering to regulatory standards. Ultimately, the integration of digital KYC, automation, and identity verification is reshaping the BFSI sector and redefining the future of banking.