Tech

e-KYC Process – Streamlined Customer Verification in the Banking Industry

In today’s digital world, banking enterprises rely on online payments in order to execute operations. With this development, the risk of fraudulent activities has also expanded, forcing businesses to integrate iDV(identity verification) methods, including Know Your Customer (KYC) and electronic Know Your Customer (eKYC). These two methods may sound the same, but they have considerable variations, and it’s essential for enterprises to know and apprehend them. It will help the banking industry choose the proper ckyc process for their needs.

Article Key Notes

  • A quick insight into KYC procedures and how customer verification works.
  • What are the fundamental traits of Know Your Customer in banks
  • eKYC and KYC comparison
  • News covered on the launch of eKYC in banks

Quick Insights to KYC Procedures

The term KYC stands for Know Your Customer. It is used to identify consumers to ensure their legitimacy and compliance with AML and CTF regulations to combat illegal money dealings, terrorism financing, and more run-of-the-mill fraud schemes. Financial and banking sectors can more precisely inspect suspicious operations by validating a customer’s identity. The primary intention is when consumers show up for the account opening and execute any transaction; the banks should monitor it to ensure that transaction patterns are not suspicious.

3-Step KYC Verification in the Banking Industry 

The KYC process in banks is often referred to as the three-step verification or listed as a pillar of customer verification. This includes:

  • Customer Due Diligence (CDD)
  • Customer Identification Program (CIP)
  • Constant Screening

Fundamental Traits of KYC Bank

Know Your Customer(KYC) is legal for the banking sector and companies under it. The main goal is to establish robust customer identity verification that will help organizations prevent financial crimes. However, it assists them in sustaining a reasonable position in the digital industry. KYC serves as a cornerstone of a strong and reliable banking system. The following are some fundamental gains of KYC.

  • It ensures user accounts stay active and compliant with the latest regulations
  • It will safeguard the banks against corruption, tax evasion, illegal money exchange, etc.
  • It prevents crime that results from online schemes and impersonation attacks.
  • Combats accounts takeovers
  • Lower the financial crimes higher chances for overall business growth
  • It assists lenders to execute an adequate risk assessment on consumers by validating their financial history and owned assets
  • It develops confidence between consumers and companies, drawing more business to a state.
  • KYC safeguards user accounts from unauthorized access

Quick Comparison of eKYC and KYC Banking

Let’s dive into a quick comparison between the digital know-your-customer and traditional customer verification methods.

  • Traditional KYC

Standard KYC is a method enterprises implement to authenticate the identity of new consumers. It includes registering the consumer’s information, such as name, official address, date of birth, and other government-issued official documents. The details registered are then validated manually against official documents such as passports, national IDs, or driver’s licenses involving standard methods.

  • Electronic KYC

eKYC refers to a digital version of customer verification that uses automated means to validate the consumer’s identity. It is fast, protected, and convenient, which makes it an ideal solution for enterprises that require to verify a huge number of customers instantly. eKYC permits companies to enroll and verify identity information in real-time without the need for physical documents or in-person interactions.

The Launch of Shared e-KYC in Banking Structure

According to the latest news, an announcement has been made by the State Bank of Pakistan(SBP) and Punjab Bank Association(PBA) as they aim to move towards the initiation of a shared eKYC structure. However, they have advised the banking system to join the shared eKYC platforms. The share electron customer verification will be using blockchain strategies in storing and sharing consumer credentials across the banking sector. This new initiative will allow the banks to streamline their onboarding process for the new entities and will make it a more cost-effective approach. Primarily, the platform is initiated by the PBA and guided by the SBP, aiming to improve the efficiency and credibility of the KYC process.

While concluding the latest update, some of the key points to note include:

  • Initiatives like these serve as building blocks for border digitizations.
  • It will facilitate the banking industry to collaborate with digital banks and other fintech industries.
  • Shared eKYC will promote data sharing with security.
  • Reduced the trial and error phase and made it budget-friendly.

Final Statement

KYC regulation includes all the primary and secondary steps required to ensure the security and integrity of the business. Implementing the risk-based approach and continuous monitoring in the KYC process will eliminate the threat of money laundering and other financial crimes. Approximately all companies and industries are required to adhere to the CDD regulations. Moreover, the news of shared electronic customer verification has already made a significant impact as the banking industry is moving towards the digital identification standard to reduce manual errors.

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