Like everything else, banks, financial services and insurance agencies are evolving to make their services more accessible and convenient for customers. As far as possible, people want to conduct financial transactions digitally without having to physically visit a bank. According to a Global Retail Banking report, the use of online banking has increased by 23% while mobile banking is up by 30%. Banks are recognizing the need for a customer-centric approach to acquiring new customers. This starts with digitizing the customer onboarding process with an electronic Know Your Customer (eKYC).
Why Must Banks Pay Attention To Customer Onboarding?
Customer onboarding is the first interaction an individual has with the bank. The experience they have at this stage will set the tone for their expectations from the organization. If a customer finds the onboarding process clunky and slow, they may take their business elsewhere.
For banks, the process of onboarding new customers must balance keeping the customer happy and complying with legal regulations. Banks must verify every new customer’s identity and fulfil Know-Your-Customer (KYC) and Anti-money-laundering (AML) requirements.
Why Does The Traditional KYC Process Need To Change?
There are two statistics that can easily illustrate why traditional KYC processes need to change.
- Banks take an average of 24 days to onboard new customers because of complex KYC and AML processes
- 90% of customers will abandon an onboarding process if it takes longer than an hour.
Traditional KYC processes involve gathering data from multiple departments and the customer’s physical presence in the bank. This is inconvenient for customers, especially at a time when almost everything else can be done online. In addition to the inter-bank competition, there are also a number of new Fintech startups emerging that are making the industry even more competitive. Interest rates don’t vary by much and hence, it comes down to customer experience as the key differentiator.
What Is eKYC?
Simply put, eKYC is a digital version of the KYC process. It uses innovative technology such as facial recognition, Optical Character Recognition, machine learning, artificial intelligence, etc. to verify a customer’s identity. Rather than expecting customers to submit physical copies of identification documents, eKYC relies on the electronic submission of digital copies of these documents and biometric information. It is remote, paperless and much quicker.
Benefits Of eKYC For Customer Onboarding
eKYC is beneficial for customers and banks. Here is how:
- It makes the onboarding experience faster: Digital onboarding with eKYC is quicker and requires fewer keystrokes on behalf of the customer. Whether a customer chooses to interact with the bank via a website or a mobile app, they can enter their relevant details with ease and upload supporting documents. Banks can then verify these documents and extract further information from them without inconveniencing the customer.
- It lowers the time-to-revenue: eKYC also standardizes procedures and documentation. For example, let’s say a customer entered his address without the pin code. As part of the eKYC process, his/ her address will be compared to records in a third-party database and the missing information will be appended. This improves operational efficiency and synchronizes inter-department processes. This combined with a seamless onboarding process lowers the risk of a customer abandoning the application and makes the time to revenue much faster.
- It reduces the risk of document loss: One of the issues with traditional KYC is the thick files that must be maintained for each individual. Not only is this overwhelming at scale, but it also increases the risk of documents going missing. On the other hand, eKYC is a paperless process. It is easier to maintain and manage, more eco-friendly and cuts down on expenses.
- It prevents fraud:Fraudsters often use forged documents. A good forgery can be hard to identify during traditional KYC. eKYC is not only more convenient, it is also a stricter form of proving customer identity. In addition to verifying documents, it also involves the use of biometric markers. The system can flag abnormalities such as mismatched or outdated information that may otherwise have gone unnoticed.
Choosing The Best eKYC Solution For Your Bank
There are a number of eKYC solutions for banks available in the market today. You need an easy-to-use software solution with an intuitive interface that can be easily integrated with your website and mobile app.
For eKYC to be effective, customer information must be checked against reliable third-party databases. Hence, the software you choose should have access to trustworthy, global databases and watchlists. It should give you a 360-view of your customer and store data in compliance with GDPR, HIPAA, SOC 2 and other such privacy regulations.
An automated solution that requires minimal manual intervention is ideal. Lastly, it should be scalable and flexible to adapt to changing banking regulations.
