KYC in Banking – Verify Customers Identities & Bolster Security
KYC or a know-your-customer regulation is a must for banks to meet. KYC in banking is needed to detect the identity of the customer. It ensures that the individual banks are not a culprit.
KYC is compulsory for many industries, especially those dealing with financial regulation. Fintech, cryptocurrency, property firms, and various other industries must meet anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. An effective KYC procedure makes it easy for all industries to comply with laws.
What is KYC in Banking?
Banks and other businesses need to combat financial fraud and money laundering. Customer identification is critical because it is the first move to fight against scammers and comply with regulations. The global money laundering and terrorism financing landscape threat is tremendously increasing for banks. To combat these threats, international regulations sectors constantly amend their laws. The Financial Action Task Force (FATF) is improving their standards by implementing strong regulations, such as AML 4 and AML 5. It also ensures that all businesses comply with know-your-customer laws.
The KYC process verifies the customers are genuine and not using fake information to open an account. It is compulsory for banks to identify the customer’s identity before onboarding them. KYC requirements for banks demand customers to submit identity proof, which can be a driver’s license, government documents, and National IDs. It depends on banks if they demand the customer to submit documents physically or can utilize eKYC for online verification.
Difference Between eKYC and Traditional KYC in Banking
To comply with traditional KYC in banking, customers visit the office and submit identity proof documents. Bank representatives conduct various verification checks to ensure the validity of provided documents. First, they attest the visible security features such as holograms, signatures, fonts, borders and print of copies. After that, they manually enter the document data into the computer and cross-check it against government repositories. When they confirm that provided data does not match against criminal databases, they allow those customers to open an account.
Banks can accelerate the identity verification process with automatic document verification using eKYC. It is an electronic identity verification process. eKYC uses digital technology to gather and verify the identity proof of documents. It enhances the verification process by utilizing the latest innovations in AI and machine learning technologies. Customers can submit the document from the comfort of their homes and do not have to visit the office physically.
Benefits of Using eKYC in Banking
Traditional KYC in banking is time-consuming and highly costly, whereas eKYC reaps accurate results in an effective and budget-friendly process. It also enhances the security of banks by automating the verification process using machine-learning algorithms. It eliminates human errors by implementing AI frameworks and advanced risk assessment tools. Given below are a few benefits of using eKYC in banking:
Convenience for the Customer
eKYC is easily accessible to the customer, since they do not have to visit the office, which makes the onboarding experience seamless. According to a Thomson Reuters survey, 89% of customers are unsatisfied with the KYC standards in financial institutes, and 13% change their banks because of the challenging identity verification process. eKYC in banks assists them with biometric verification and remote onboarding of customers.
Boost Customer Loyalty
As eKYC converts document verification from manual to automatic, it shortens the process by providing a convenient procedure for customers and banks. When banks utilize advanced technology to onboard customers effectively and securely, it enhances brand loyalty and positively influences clients. KYC in banking shows the organizations care about customer security and reflects a positive impact worldwide. eKYC is extremely beneficial for financial institutes such as banks, funding and digital trade organizations.
Banks are always at the top of the list of frauds and scammers. To protect them from these issues, regulatory sectors have made rigorous laws. Complying with these regulations protects banks from various fraud risks. Know-your-customer rules enhance the onboarding system and ensure that the bank complies with AML and CTF regulations. Traditional KYC is full of limitations in compliance and is a time-taking process, whereas eKYC in banking has overcome all these limitations and reaps accurate results.
Bolster Banks Security
As technology improves businesses and produces convenience, the innovations re-equip the scammers and offer them new loopholes to beat banking security. The banking industry is more prone to money laundering and document fraud risks. Digital KYC in banking enhances security by detecting scammers before onboarding.
Key Highlights of Using KYC in Banking
Financial institutes which rely on digital know-your-customer rules safeguard themselves from financial fraud and bolster their security. eKYC assists banks by utilizing advanced technology, including OCR, facial detection, real-time monitoring, and fraud detection. Implementing online KYC in banking enhances the system’s security and reduces cyber fraud in remote onboarding.