Since The emergence of Know Your Customer as a precautionary measure with financial institutions, fintech, and businesses, advanced versions of KYC like perpetual KYC and eKYC, eKYC is a relatively new concept. It can be a great way to execute the KYC process better. This article aims to highlight eKYC as a progressive of the KYC process, discussing all that needs to be known about eKYc.
What Does eKYC Mean?
eKYC is an acronym for Electronic Know Your Customer and refers to the remote, paperless process that minimizes the costs and traditional bureaucracy that are employed in KYC processes. It enables businesses and organizations to verify the identity of their customers in a more efficient and secure manner without the need for physical documents or face-to-face interactions.
eKYC can be used to authenticate customers and meet regulatory requirements in a variety of businesses, including banking, insurance, telecom, and e-commerce. It entails retrieving people's personal information from the government database and confirming their identities using Aadhaar-based authentication methods, such as biometric scanners and OTP (one-time password) verification. The information is subsequently utilized to open accounts, offer services, or carry out other necessary transactions.
How is eKYC Process Carried Out?
In Kenya, the eKYC process is primarily used in the financial sector to verify the identity of customers and comply with regulatory requirements. Failure to meet up with these regulations may attract legal issues. The eKYC process in Kenya involves the use of various digital tools, such as biometric identification, mobile phones, and online platforms, to verify the identity of individuals.
The process is generally used by financial institutions, such as banks, insurance companies, and microfinance institutions, to comply with regulatory requirements while providing a seamless customer experience.
To perform eKYC in Kenya, customers typically provide their personal information, such as their name, address, and date of birth, along with their government-issued ID number. This information is then verified against the government's database through the use of biometric identification, such as fingerprints or facial recognition.
The eKYC process in Kenya has several benefits, which include increased security, reduced fraud, and improved customer experience. By using digital tools to verify customer identity, financial institutions can ensure that their customers are who they claim to be, reducing the risk of fraud and increasing security.
Additionally, eKYC can be performed quickly and easily, providing a seamless customer experience. This includes:
1. Customer onboarding
The potential customer is required to provide their personal information, such as their name, address, and date of birth, along with their government-issued ID number. This can be done through an online form or mobile app. Many businesses today employ perpetual Know Your Customer processes to stay up to date with emerging customer risks.
2. Biometric verification
In biometric verification, the customer's biometric data, such as fingerprints or facial recognition, is collected and verified against the government's database. This way, authentication of an individual's identity can be carried out through a digital process.
3. ID verification
In ID verification, the customer's ID information is verified against the government's database, and any discrepancies are flagged for further review.
4. Risk assessment
The customer's risk profile is assessed based on their personal information and transaction history. This is used to determine the level of due diligence required for the customer.
5. Verification completion
Once the customer's identity is verified and their risk profile is assessed, the eKYC process is complete. The customer can then access the financial institution's services, such as opening a bank account or applying for a loan.
The eKYC process in Kenya is facilitated by various digital tools, such as mobile apps, online platforms, and biometric verification devices. These tools are used to securely collect and verify customer information, ensuring compliance with regulatory requirements while providing a seamless customer experience.
It's worth noting that the eKYC process may vary slightly depending on the financial institution and the specific requirements of the regulatory authorities. However, the overall process typically follows the steps outlined above.
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Why eKYC is The Future Of KYC?
Electronic Know Your Customer (eKYC) is considered the future of KYC (Know Your Customer) because it offers several advantages over traditional KYC processes.
a. Speed and convenience:
eKYC allows for quick verification of customer identity through electronic channels, such as online or mobile platforms. This eliminates the need for customers to physically visit a bank or financial institution to complete the KYC process, saving time and effort.
eKYC significantly reduces the cost of the KYC process by eliminating the need for manual data entry and verification. This is especially important for small businesses and startups that may not have the resources to invest in expensive KYC solutions.
c. Increased accuracy:
eKYC reduces the risk of errors in the KYC process by using automated data validation and verification checks. This helps ensure that the information provided by the customer is accurate and up-to-date.
d. Enhanced security:
eKYC uses advanced security measures, such as biometric authentication and encryption, to protect sensitive customer data from fraud and identity theft.
eKYC helps financial institutions comply with regulatory requirements, such as Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.
f. Digital transformation:
With the increasing digitization of financial services, eKYC enables financial institutions to offer a fully digital customer onboarding experience. This can help attract tech-savvy customers who prefer to conduct their financial transactions online.
g. Improved customer experience:
eKYC offers a seamless customer experience, allowing customers to complete the KYC process from the comfort of their own homes or offices. This can help improve customer satisfaction and loyalty.
eKYC can be easily scaled to accommodate large volumes of customers, making it ideal for businesses that experience rapid growth.
eKYC can be customized to meet the specific needs of different financial institutions, depending on their customer base and regulatory requirements.
j. Reduced fraud:
eKYC uses advanced fraud detection techniques, such as facial recognition and document authentication, to reduce the risk of fraudulent activity. This way, resources are managed more effectively, and customers and businesses are at lesser risk.
k. Accessible Digital Tools Available:
There are many accessible digital tools available for paperless KYC that can be easily utilized. Youverify offers automatable eKYC solutions that help businesses perform adequate customer risk assessment and satisfy compliance.
eKYC offers numerous benefits over traditional KYC processes, making it a popular choice among financial institutions looking to streamline customer onboarding procedures while ensuring compliance with regulatory requirements. With the increasing digitization of financial services, eKYC is expected to become the norm in the near future.