Onboarding and KYC Applications

Onboarding is the first touchpoint that a customer has with the financial institu-tion, and if the same is appalling, there is a big chance that the customer may switch to another service provider. FinTechs, owing to their agility and ability to build innovative customer journeys, have been able to disrupt the onboarding func-tion. Some of the differentiation features introduced in onboarding solutions by FinTech companies that have redefined on-boarding for customers are:

  1. The introduction of an onboarding solution that has very limited text input and believes that an account for a customer can be opened in less than 4 minutes. It collects information/data through carrier information, from driver’s licenses using optical character recognition (OCR) technology. ID Analytics uses a complex analytics algorithm to prefill the data required for onboarding.
  • Onboarding solutions that help customers to be onboarded into multiple banking products through a compelling user experience.
  • An application wherein the user is able to start his/her onboarding process right from watching an advertisement and then getting help through an AI bot to help gather and correct information from other sources.

One of the areas besides onboarding that is attracting a host of FinTech solution providers is KYC. According to leading analysts, banks spend about half a trillion dollars every year for KYC compliance and customer due diligence. There are a lot of FinTech players that are emerging in the entire KYC process. The regulatory and legislative changes, besides the lack of qualified people, are some of the reasons for the increase in total time for KYC and onboarding. Therefore, a host of FinTechs, also categorized now as regtechs, have come up that act as data aggregators and ensure how compliance-related information can be gathered in an effective man-ner. These start-ups are also employing OCR to extract related information from an individual’s license, passport or similar documents. Some FinTechs are even doing KYC and onboarding using tax documents. In India, most of the establishments can tap into the government database (Aadhaar) for doing a preliminary KYC com-pliance. KYC in the current world of identity thefts and data breaches needs a qualitative evaluation of the individual and the intent of the transaction, besides the usual data validation. Below is a list of some of the innovative applications and platforms introduced by FinTechs for onboarding and KYC:

Applications that allow opening a bank account using a selfie is one of the most innovative ways of onboarding and doing a KYC together.

Applications that enhance KYC through digital identities. The digital iden-tity of an individual is created by capturing his/her digital footprints in mul-tiple digital domains including social media. The application then runs an AI algorithm to assess the credibility of the person for transactions like lending, investing, etc. There are a host of start-ups in this field.

Some of the start-ups are using blockchain as a technology for simplifying and securing the KYC information. They use information voluntarily shared by the community to form the basis of an individual identity information and uses blockchain to maintain unique documentation and identities. Blockchain also helps prevent duplicating identities.

Since KYC and onboarding requirements vary from country to country, it also needs to be compliant with regulatory requirements time and again. Therefore, there are FinTechs that collect real-time data about regulations and apply them directly to its clients.

There are KYC validation tools that offer other services like anti-money laun-dering (AML) and fraud detection. Some of the platforms also ensure com-pliance like global anti-terrorism laws, etc. using workflow, visualization and machine learning.

Applications and platforms that scan media information for negative news to provide a real-time KYC and AML view of individuals or corporates.

Some of the platforms provide digital fingerprinting technology for real-time customer identification.

The KYC information that is now required by most of the organizations typically wants the following to be covered:

  • Is the physical and digital identity of the entity relevant and true?
  • Is the organization exchanging the information authorized to exchange the relevant identity-related information?
  • Is it trustworthy to do business with the entity in question?
  • What are the risks involved in conducting the transactions with the associ-ated entities?
  • How to ensure that the transactions being conducted are unique and not fraudulent?
  • Is there an audit and traceability with all the entities participating in the transactions?

As the regulatory mechanisms become complex, more requirements will emerge for identity verification. Also, as frauds become more complex and difficult to deal with, the requirements from KYC and identity verification will also start becom-ing more and more complex. One of the clear advantages of having a valid KYC in emerging countries is the reduction of corrupt activities as the identities can be traced back to an illegitimate digital transaction.

Post Author: newfintech

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