Looking to know about E-KYC (Electric Know Your Customer)? Here's a complete guide on E-KYC full form, identity verification process & best practices. Click to read now!
Customer transactions require some kind of identification. eKYC (Know your customer) is crucial to ensuring that every customer who signs up on a platform is assigned a unique identity. It was created as a means of procuring each person’s unique Aadhaar and PAN card numbers.
But it went on to become much more than that. KYC had long been in existence before eKYC and was a marketing or financial term. We will be discussing KYC, and therefore eKYC, in the financial context. eKYC added a layer of security when handling KYC online and highly reduced the possibility of fraud. eKYC or electronic KYC verifies the identity of the customer on an online portal generally through online verification of Aadhaar and PAN details, pulling up the data stored on UIDAI’s servers. UIDAI was mandated by the government to not only issue a 12-digit unique number to each citizen (Aadhaar or e-Aadhaar), which would trump the PAN card as the accepted means of identification, they also provided a paperless means of identification also referred to as e-Aadhaar. OCR of this document along with facial recognition would become the backbone of eKYC verification for every financial solutions provider.
eKYC is very important for the financial sector. It helps rid the society and the world of evils such as money laundering, terrorism, identity theft and so on. Now let us look at how eKYC is different from KYC. eKYC is electronic KYC. It is also referred to as digital KYC at times, though eKYC is the popular term in India. Getting eKYC ready is faster, requires less human preparation or intervention, and the information contained is more easy to store and transmit on request than regular KYC. eKYC is also paperless, can be secured with a password, and can be digitally signed and shared when required as opposed to KYC, which is generally on paper, requires manual updates every few years, and is not tamper-proof.
eKYC helps in overcoming several potential risks for the FinTech domain, assuring the service provider of the genuineness of the applications received and ensuring a higher transaction speed for the customer.
Here are some of the benefits of eKYC:
Reduces identity theft: Worried about thefts that can arise as a result of stolen identity or forgery and modification of identity cards and other documents? eKYC is the best way to legally establish identity in India. This is because a person’s identity is linked to a unique identification number, a photograph and even a QR code and thumbprint that is accepted in any court of law.
Eradicates money laundering: By placing the money in accounts or by investing in other products or services that will not invite any suspicion, money launderers are helping finance terrorism, human trafficking, and other illegal activities. There are three layers (or stages) of money laundering before the dirty money is converted into usable money or assets. eKYC helps implement anti-money laundering measures that conform to standards set by regulatory bodies.
Improves speed of transaction: With eKYC, it takes a few minutes and not hours (or typically days with regular KYC) to onboard/initialize a customer. This means the turnaround times are reduced for the verification of accounts or policies and the disbursal of loans and other payments. The end result: Customer satisfaction is raised several notches above normal and every customer becomes an advocate for the goodness and trustworthiness of your business.
Reduces human intervention and verification: The need for humans to monitor every transaction or enquiry is very less, thanks to eKYC. There is no loss of accuracy despite the lack of human presence. This is thanks to the accuracy of the AI-driven OCR engine and the failproof face recognition system also running at the same time.
Different types of eKYC
There are different types of eKYCs depending on the initial investment and the trust the financial services provider has in any particular method for a given scenario. Generally, they are of these three types:
Human-assisted eKYC: Initially, the customer registers on a web portal and submits his/her information. Each customer is then asked to perform certain actions and verify the details submitted. In case of any discrepancy, the agent will ask the customer to repeat the process, for instance, the lack of a match on the signature in the PAN card and that on another document.
Semi-automated KYC: In a semi-automated KYC, the AI is not trained well enough to execute difficult tasks such as comparing faces for a 1:1 match or checking against multiple faces from a database. Sometimes, even if it is so, the internet connection may not allow for it.Therefore, even when automated KYC is possible, the customer may have to upload documents by themselves in a certain order as requested.
Fully automated KYC: A fully automated KYC relies on AI driven face recognition and OCR to fully assist a customer in submitting information online. There is no human involvement and the verification of documents happens online. The customer has to click a selfie and not upload an image and similarly get aadhaar verified by UIDAI through OTP or a scanned image and is not required to actually upload an entire document and wait for verification.
Electronic KYC improves identity verification, as all submitted information is accessed, stored, and transmitted digitally, making it very difficult for anyone to tamper with. This ensures that the identity of the person remains unique and secure and that only an unbiased system is able to get access to it after proper authentication. As most eKYC are also automated and carried out by AI, the identity verification process does not require human validation, which makes it faster too. The accuracy of modern-day AI further ensures that there are no false positives or false negatives in identification.
eKYC makes use of the Aadhaar database maintained by UIDAI to carry out the identity verification process. Moreover, every financial institution is mandated to conduct an eKYC before they confirm loan application from any user. You can most often opt for a fully automated eKYC mode of verification if the organization has the capability. An OTP will be sent by UIDAI to confirm your identity, after which you may be redirected to your bank site where you would need to verify account and salary details. The whole process takes only a matter of minutes and is seamless as ever.
HyperVerge offers both OCR and face recognition technologies to help digital lenders onboard customers in various geographies. The AI that backs the identity verification system from HyperVerge is well trained on a number of diverse samples across geographies making it very accurate. Customers are onboarded in a matter of a few minutes. If you have seen digital lenders advertise that onboarding happens in less than five minutes, it is in no small part due to players like HyperVerge.
Using Aadhaar to verify citizen identity was a monumental step towards building a nation that is digitally transformed. The Aadhaar (that became every citizen’s unique identity) and the linked mobile number made it possible for digital lenders to reach out to more prospects and find the right customers. Enter eKYC, the future of KYC, which is crucial to improving not just an organization’s turnover but the customer’s experience as well. Backed by face recognition and OCR capabilities such as those from HyperVerge, both lenders and borrowers are benefiting from speed and accuracy. It’s almost as if all the leaves have turned to gold!
What documents are required for an eKYC?
All you need for an eKYC verification, in addition to employment verification from the digital lender’s side, are an Aadhaar or e-Aadhaar and a linked mobile number.
Who is eligible to do KYC through Aadhaar?
Any Indian citizen is eligible to do the eKYC by using OTP and face recognition-based Aadhaar verification.
When is KYC under process?
eKYC can be under process for several reasons? Some of them are:
Is there a fee for KYC?
Most lenders do not charge a fee for KYC. However, some of them might. In most cases the KYC fee in India is well below Rs. 500.
Is KYC a one-time process?
KYC is a one-time process. However, eKYC being lender-specific, the way it is carried out will vary. This means that you may have to do KYC for every lender service you avail.