What is eKYC?
eKYC stands for electronic Know Your Customer, a digital process used to verify the identity of customers. It involves using electronic documents and biometric authentication technologies to confirm the identity of individuals. The global COVID-19 pandemic has accelerated the adoption of eKYC verification and reduced the need for in-person interactions.
eKYC is used in various industries, including banking, telecommunications, and healthcare. The banks use eKYC to open new accounts and deliver financial services to their customers. The telecommunications industry uses eKYC to identify its customers who purchase SIM cards or activate new services. The healthcare sector utilizes eKYC to verify the patient’s identity and ensures that their medical records are accurate.
Benefits of eKYC
One of the main benefits of eKYC is its speed and efficiency. Unlike traditional KYC processes, which often require customers to submit physical copies of documents or visit a physical location, eKYC verification can be completed online only. This makes it faster and more convenient for both the customer and the service provider.
Another benefit of eKYC is its accuracy. eKYC uses biometric authentication technologies, such as fingerprint or facial recognition, which ensures that the person being verified is who they claim to be. This reduces the risk of fraud and helps to prevent identity theft.
eKYC: Five steps to paperless verification
The eKYC process typically involves the following steps:
Step 1. Initial verification
The first and foremost step is to provide personal information such as name, date of birth, and Social Security or identification number. This information is then verified with the relevant authorities and databases to ensure accuracy.
Step 2. Document submission
The next step is to submit scanned copies of the required documents such as ID proof and address proof. Then these documents are scrutinized and validated by the system to confirm their authenticity.
Step 3. Biometric verification
The third step involves capturing biometric information such as fingerprints, iris scans, or facial recognition. The system matches the biometric data with the provided documents to ensure they belong to the same person.
Step 4. Consent and confirmation
Once all the above steps are completed, the user gives consent for the eKYC process and confirms the accuracy of the information provided.
Note: This step is crucial to ensure the user is aware of the process and is willing to go through with it.
Step 5. Finalization and approval
After completing all the above steps, the system generates an eKYC record and sends it to the relevant authority for final approval. Once approved, the eKYC verification is completed, and the user can access the services for which the eKYC process was conducted.
Types of eKYC
There are three different types of eKYC, including:
1. Biometric verification
This eKYC verification method involves using biometric data such as fingerprints, facial recognition, or iris scans to verify a user’s identity. This method is used in financial services, banking, and telecommunication industries.
2. Digital identity verification
This method verifies a user’s identity based on their digital footprint or online behavior. The digital identity verification method is commonly used in the online retail and e-commerce industries.
3. Video-based verification
This involves real-time video interaction between the user and the verifier. Here the verifier can confirm the user’s identity by analyzing their facial features and matching them with their official records. This method is used in the healthcare industry for virtual consultations and patient verification.
4. Document verification
This eKYC verification method verifies a user’s identity by cross-checking their personal information with government-issued identity documents such as driver’s licenses, passports, or state ID cards. This method is used in the financial and insurance industries.
Regulatory framework for eKYC
To ensure the security and privacy of customer data, many countries have established regulatory frameworks for eKYC. These frameworks typically include guidelines to collect, store, and use customer data, along with the requirements for service providers to maintain a secure eKYC system.
In India, for example, the Reserve Bank of India requires strict data protection and customer security for eKYC service providers.
Challenges with eKYC
Despite its many benefits, eKYC is not without its challenges. Ensuring the security of customer data is one of the main challenges of eKYC. It involves the collection and storage of sensitive personal information, such as biometric data and identification documents, which contains a risk of data breaches and unauthorized access.
Another challenge is the potential for errors in the authentication process. While biometric authentication methods are more accurate than traditional methods, there is still a risk of false positives or false negatives.
Future of eKYC
The future of eKYC is promising, with the potential for advanced biometric authentication methods and increased use across various industries. With the ongoing digital transformation, eKYC is likely to become an even more important tool for businesses to verify the identity of their customers quickly and securely. However, it is essential to continue improving data security and privacy standards to ensure that eKYC remains a safe and reliable means of identity verification.