As the world is moving towards the fourth industrial revolution, financial businesses are facing an excessive increase in customer acquisition costs and stringent regulatory compliance. Banks and financial institutes with their identity verification methods are experiencing hefty fines for violating the KYC and AML compliance. It is eventually leading to significant brand damage escalating to temporary or even permanent cessation.
Multiple incidents regarding compliance violations are being reported in the financial market. Nevertheless, the entire financial infrastructure is lacking an efficient solution that can solve this arising problem. Even with the customers getting comfortable with diverse transactions, the organizations lack proper to know your customer solution to deter fraud and meet regulations.
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Limitations in Traditional KYC Verification Process
Financial institutions are striving to onboard the customer as soon as possible to stay ahead of competitors. However, the traditional onboarding process is not efficient enough to do meet these requirements. Due to the time-taking and costly verification process, and bad customer experience, the customers tend to migrate towards other financial institutions.
As per a study, 12% of the people claimed that they changed their banks due to inefficient verification and KYC issues.
The data-driven world with the emerging trend of the fintech industry requires prompt KYC verification solutions te combat data phishing, identity theft, digital fraud, and any other frauds taking place under their umbrella. These frauds are becoming rampant than ever and that’s why the regulatory penalities over financial corporations are spiking up with every passing year.
Digital KYC – The Solution
To overcome all these limitations, the KYC service providers are going digital, since modern problems require modern solutions. Financial institutes need the KYC solution that is fast, convenient, efficient, and more secure. Digital KYC perfectly incorporates all these features productively.
Now the question is how it works?
Like manual KYC, the customers go through proper verification but the only difference is that the whole process can be completed frictionlessly within seconds. Moreover, the customers don’t have to meet the service providers and submit or fill out all the documents physically. What customers have to do is just create their profiles online with their pictures and submitting the identity documents, for instance, passports, driving license, ID card, utility bill, etc. as requested by the institution.
This whole verification process is quick, easy and user-friendly. The AI-based KYC verification systems, automatically fetch user’s data from the document through OCR technology. With the use of AI and machine learning algorithms, the collected data is matched and analyzed giving results accurate than manual verification. Through this profile and verification results, the customer can complete the KYC process of the financial institutions within seconds.
This whole online KYC saves a lot of time, cost and effort of not consumers but also businesses.
Meeting the KYC/AML Regulations
The role of financial firms in economic stability is what makes them highly regulated institutions. Dealing with the diverse payments and transactions, banks and other financial institutions are potential targets of fraudsters and scammers. Moreover, the firms serve as inherent channels for money laundering, terrorist funding, and other illegal transactions. This is the reason why government regulators are putting tight reins on financial institutes.
The KYC norms in the banking sector differ as per the country regulations but all serve the same purpose and that is to verify the customer identities and deter money laundering and financial frauds.
The KYC process is an integral part of AML compliance. By conducting the in-depth verification of the clients and assigning them risk factors facilitate organizations to monitor the customer activities and in case of anomaly detection, they can instantly report it to the regulatory authorities. The failure to do so can land the organizations in serious problems, leading to hefty fines and brand damage.
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