The process of vetting customers before onboarding them is not a novel idea.
Know Your Customer (KYC) and Anti-Money Laundering (AML) processes have been around for a long time but since merchants have started moving their businesses online, the world of KYC is changing.
Now, businesses need to factor in the digital element of these processes and embrace the era of eKYC and online identity verification. Let’s dive right into it.
eKYC is Becoming a Regulatory Prerequisite
One could argue that a few years back, electronic know-your-customer processes were nice to have. Today, that is no longer the case.
The dynamic regulatory environment is asking more of compliance teams and the only way to stay in line with these demands is through eKYC. Automating the online verification process is not just a sales tool – its meaning to the company goes well beyond onboarding clients faster.
FAFT’s guidance paper for digital ID systems is a prime example of that. The paper paves the way for regulatory technology and eKYC.
Then you have the AMLD 6. The Sixth Anti-Money Laundering Directive opens up the scope and money-laundering offenses list, creating more work for compliance teams around the globe.
If you take into consideration that these events took place in 2019, it becomes very apparent that sorting out your compliance process isn’t really an option, it’s a necessity.
eKYC is capable of automating previously manual procedures, processing more information in less time and ensuring that the company and employees alike, fall in line with the growing scrutiny and regulation.
eKYC is Already Making Some Noise
The fear of the unknown is a real thing and when it comes to reimagining your entire KYC process, it’s no surprise that you wouldn’t know where to start or how to go about it.
Thankfully, others have done it before you and there’s a lot you can learn from them.
Bank Negara Malaysia released their eKYC Guidelines draft in December 2019. On June 30th, 2020, the Bank took the next step and released the first part of their official Electronic Know-Your-Customer (e-KYC) Guidelines.
Here’s one of the many important points made in the document:
“e-KYC solutions may utilise artificial intelligence, machine learning, or other forms of predictive algorithms to ensure accurate identification and verification. This may result in the automation of the decision-making process for customer identification and verification, thus reducing the need for human intervention.”
The significance of such moves is massive as it shows that eKYC is no longer an idea, but a plausible, enforceable and very much real solution to digital identification and customer onboarding.
eKYC Cuts Costs & Increases Profit Margin For Companies
Companies exist to make money and there’s no other way around it. eKYC can be a major contributor to that cause and there are facts to prove that.
A recent World Bank report points out the reduction in average verification cost per customer from $23 to a staggering $0.50.
If that’s not enough to prove the jaw-dropping effect of eKYC on the businesses’ balance sheet, then how about this? Electronic customer verification will take a few seconds to take place compared to 5-7 days when done manually. Jaw-dropping.
Customer Acquisition or Customer Retention? How About Both?
It’s a rare phenomenon to come across a piece of technology that serves as both customer acquisition and a customer retention tool – eKYC does both.
Onboarding customers has traditionally been a customer acquisition nightmare for the following reasons:
- It required the physical presence of the client in opening a new account
- It was time-consuming
- It was complicated
Companies would invest a lot of money in their marketing efforts, driving interested clients to their websites/physical store, only to have them drop out at the onboarding stage.
Enter eKYC.
By digitizing the process, companies are essentially investing in a conversion tool. The onboarding process is the first real interaction between the company and the client and the first real opportunity to win them over.
By offering them a fast, easy and intuitive process, eKYC becomes as much of a sales channel as it is a compliance one.
And then there’s retention.
Online identity verification is your first retention test. Getting customers over the line and making part of your company’s ecosystem counts as a retention win as you’re essentially earning their trust.
KYC is by its very nature a very tedious and tiresome process. Managing to turn it into a quick, seamless procedure will only win you brownie points.
Conclusion
The online identity verification frontier is no longer a novelty, but common practice. Companies that understand the value-altering capabilities of this new technology have a head start over their counterparts.
In an era where getting an advantage over competition comes at a premium, eKYC gives you the opportunity to increase the value of both your brand and offering.
Our team here at Identomat is focused on building identity verification for businesses from the ground up. We don’t create products that we then try and sell to businesses. We build products according to business needs and then help businesses implement them.
Reach out and let’s start putting together the eKYC process that will propel your business.
