Earlier, banks served merely as cash repositories and facilitators of money transfers. Later, they became potential gateways for fraud, terrorist financing and money laundering, since criminals found ways to exploit the system for personal gain. Regulators needed banks to know who exactly were using their services. That’s how Know Your Customer (KYC) — the process of establishing and verifying a customer’s identity — became a crucial aspect of the workflow during user onboarding. Today, it’s an integral part of broader efforts to prevent financial crime.
KYC is a highly manual and complex process involving filling of physical documents, followed by paper-based identity verification. It’s tedious and often a cause of frustration for customers who wish to open a bank account at the earliest. In fact, as per McKinsey, onboarding a new corporate client in banking can take an average of up to 100 days, which could lead to high levels of dissatisfaction. KYC and account opening are bottlenecks, and the two processes consume more than 40 percent of the time a user spends onboarding.
eKYC (Electronic KYC) is the digital version of this process, and more banks are leaning on it every year. Instead of a customer walking into a branch, verification happens through document scans, real-time data checks, facial recognition, digital signatures, and biometrics.
eKYC consists of several steps. First, the customer enters all the information needed (such as name, date of birth, address, among other information) related to their identity. With the help of technology, the entered data is extracted and validated. Identity and fraud checks are performed for the customer: Any noted discrepancies are flagged for review. If all the information is validated and verified, the customer is approved. If any issues are noticed, the customer could be asked to furnish further information.
Human-in-the-loop approach
One of the misconceptions about eKYC is that it’s a method to eliminate humans, who carry out the process of verification, from the workflow. It’s known that technologies such as artificial intelligence (AI) can be used to perform several of the checks — such as extracting information from the online forms filled by the customer and identifying potentially suspicious patterns. However, not all cases of customer onboarding are straightforward. There are complex cases and exceptions where a human-in-the-loop approach is needed to vet inconsistent information pertaining to potential cases of identity fraud.
What eKYC brings to the table
Improved operational efficiency: With eKYC, banks can streamline customer onboarding. Since there is no need to collect and store large volumes of documents, the time and resources needed to process each application are reduced. Even the onboarding cost comes down as no physical ID review is needed, and eKYC is a completely paperless process. With employees able to focus their time and energy on tasks that need human judgement rather than routine tasks, operational efficiency goes up.
Enhanced customer experience: For customers, eKYC provides a quicker way to complete the identification process at the bank as in-person visits are not required. By making it easier for customers to open accounts and access financial services, companies can bring down the number of abandoned applications, leading to higher conversions and smoother customer experience.
Stronger security and compliance: Digital verification is easier to track as there is a time-stamped audit trail that is generated. eKYC has the ability to catch fraud that a physical document review by a human could miss. Synthetic identities, where a fraudster builds a fake identity by mixing real and false information, and tampered documents, are spotted much more easily with the technology. Even high-risk device patterns are caught with the help of eKYC.
Onboarding is a vital aspect of customer experience at a financial institution. eKYC is transforming this process by reducing the dependency on paper-based workflows and enabling faster identity verification. With more financial services moving online, customers will expect onboarding to be as simple as opening an app. It will be incumbent upon the financial institutions to do this without compromising security.
How Infosys BPM can help
Infosys BPM has significantly strengthened financial crime compliance by delivering cost savings, greater operational efficiency and stronger regulatory adaptability. At the core of this is a suite of homegrown products — including an AML alert workbench, document workbench, intelligent KYC, a risk-profiling agent, and fraud-dispute digitization — that together power scalable, enterprise-grade financial crime compliance operations.
