eKYC
eKYC is an electronic or digital method for financial institutions and banks to verify the identities of their customers.
In recent times, eKYC has become synonymous with Video KYC, which is the process of authenticating KYC information digitally through video. Additionally, for the purposes of this article, eKYC is not to be confused with Aadhaar-based eKYC and refers to the video-based KYC process.
The Reserve Bank of India (RBI) recently issued a notification dated January 9th, 2020, legitimizing the Video-Based Customer Identification Process (VCIP) as a valid method for collecting the KYC information of customers and subsequently onboarding them.
This notification is forecasted to have a wide range of beneficial effects on the various financial institutions in India. Here we will classify and examine these benefits and tell you why you should be using the eKYC Process to onboard your customers.
What does V-CIP involve?
According to the RBI’s notification, VCIP consists of several steps involving, among other things, an audio-visual interaction, geo-tagging, and facial matching.
The steps have been formulated to make the collection of KYC information an entirely digital process.
This complete digitization is partially responsible for many of the advantages of eKYC, as we shall soon see.
Benefits of eKYC
For the sake of convenience and neatness, the benefits of eKYC have been divided into two broad categories – Benefits for Customers and Benefits for Businesses.
Benefits for Customers
Customers will experience numerous benefits due to eKYC, some of which have been outlined below :
- Customer convenience. Customers will not have to leave the comfort of their homes to get their KYC information authenticated. As the eKYC Process is completely digitized, the authentication can be done remotely.
- Fast and automated data capture. RBI encourages the use of facial matching software and AI techniques to capture data from video in VCIP. This will allow more data to be captured quickly from minimal input and will be vastly beneficial to customers in terms of convenience and innovation.
- A rising tide lifts all boats. The usage of the aforementioned AI and ML techniques for eKYC will encourage interest and novelty in these areas. This will be advantageous to the nation in the long-run
As we have seen, the benefits reaped by customers due to eKYC mostly involve convenience and long-term gains. Now let’s explore what businesses and financial institutions stand to gain from adopting the eKYC Process.
Benefits for Businesses
The eKYC Process, which follows the recommendations of the expert committee on Micro, Small, and Medium Enterprises (MSME), is designed to benefit businesses.
It does so in the following ways :
- The process is incredibly cost-effective. This is quite obvious given that the process is digitized and remote, but It’s worth going into some detail to examine the ways in which businesses can cut costs by adopting eKYC :
1.Aadhaar licenses, which financial institutions require to authenticate customers using their Aadhaar cards are no longer needed as eKYC is digitized.
2. Companies can cut costs on the hardware required for verification, as eKYC only requires a device with a camera and internet access.
3. Officials will not be required to travel to various locations in order to perform customer verification, so companies can save on travel costs.
4. The turnaround time (TAT) for customer onboarding is greatly reduced as the eKYC process is expedited. This will also cut costs for companies by more than 90%.
- Innovation is encouraged. The steps of eKYC stipulated by the RBI leave a lot of room for innovation and improvement. Additionally, the fully digitized nature of the process encourages the use of emerging technology to strengthen the process and integrate it with other methods. It’s worth looking at how this can be done:
1. Machine Learning. ML could be said to be the defining technology of our age. Its techniques can be used in VCIP to lower false positives. The screening of false positives could potentially lengthen the eKYC process, leading to customer dissatisfaction, and ML can be used to deal with this effectively.
Additionally, ML techniques can be used to automate the eKYC Process through the automatic face and document detection. SignDesk’s Digital KYC application, Scan.it, uses AI and ML techniques to perform real-time face and document detection.
Scan.it also uses ML methods to lower false positives in the process through its fraudulent profile filter.
2. Artificial Intelligence. Methods involving AI and robotics have a massive potential to automate the data-gathering process and completely streamline the steps involved in eKYC.
Scan.it makes use of AI techniques to make the onboarding process smooth, automated, and secure.
- Micro-businesses will benefit the most. Micro-businesses are institutions that typically offer services and products targeting individuals and small businesses and hence operate on smaller budgets and without any advanced hardware. They also primarily serve customers based in a rural setting.
eKYC will work to the benefit of such businesses in the following ways:
- Cheaper onboarding. Since micro-businesses work mostly offline and using paper-based methods for customer onboarding and authentication, eKYC can potentially cut the costs of these processes. The current costs of onboarding, which is over Rs. 200 per customer, can be slashed by more than 90% if companies adopt eKYC. Hence micro-businesses will profit greatly.
- Reduced TAT. The turnaround time (TAT) of customer onboarding is greatly reduced as the process of onboarding is made quick and smooth due to eKYC. This is particularly beneficial to micro-businesses since the remote undertaking of the onboarding process can improve customer experience and this is hugely beneficial to businesses with a small customer base.
- Growth of Formal Economy. The adoption of eKYC will see a marked increase in the number of users in the formal economy as the data and records obtained through VCIP can be used to integrate more people, particularly from rural settings, into the Formal Economy, by creating credit histories, for example. Towards this end, Scan.it supports vernacular languages and a text-to-speech system. Both of these can help bring more people into the formal economy and assist in the growth of micro-businesses.
Customer onboarding withSignDesk
SignDesk is primarily focused on creating a smooth and seamless workflow for businesses. Customer onboarding is an integral part of the workflow of any business, and since eKYC deals with precisely this, our Digital eKYC solution is geared towards making the onboarding process as smooth, integrated, and automated as possible.
Our product, Scan.it, uses AI and ML methods so that both businesses and customers can reap all the benefits of eKYC mentioned above.
Try out our product today and experience the future of customer onboarding.