Ajay Trehan, Founder & CEO, Authbridge Research Services, 0
Globally regulators are constantly evolving with new compliance norms and identifying the fraud at various stages of lending cycle. They are continuously exercising stringent measures for identifying fraud which have placed BFSI on the horns of a dilemma – to choose between convenience and compliance. Further, post the outbreak of COVID, the restriction on physical interactions have opened new challenges of authenticating the customer and still ensuring convenience. This has preponed the adoption of digital way of authenticating customer, which is faster, compliant and improves customer experience.
At the same time with adoption of technology and digitization, there are further risks of Identity frauds, illegitimate financial transactions, money laundering and others. Financial Institutions are continuously evolving newer and innovative ways of identifying and preventing such risks. The various options of KYC technologies are leading towards more robust and compliant process for lending eco system to make the shift in KYC technology post global pandemic crisis. Financial services continue to work diligently and re-emerge to the new normal.
The new age KYC technology is not just automation, rather smart automation and authentication, with minimal manual interventions. Digital KYC and Video KYC have set the ball rolling for Financial Institutions to test and implement paperless processes as seamless journey for customers and users.
The new face of KYC technology includes Artificial Intelligence (AI), Machine Learning (ML), data analytics, blockchain, and cloud platforms. These tech-upgrades can easily be integrated with APIs into existing workflows to boost performance and efficiency. Distributed ledger technologies bring the capability of audit and transparency and robustness into the system. AI along with predictive analytics and automated decision systems is enhancing the ability to draw deeper insights from data which was not possible before.
Technology has intervened at various steps to enhance the KYC process at multiple levels and make it cost effective and more impactful.
Establishing the identity of the customers digitally
Post the COVID-19 pandemic, digital solutions are taking over paper-based identification processes. The earlier method of physical face-to-face visits are being replaced with digital solutions including facial recognition and other forms of biometric identification. This has led to instant identity checks and highlights any red flag on KYC process. Facial recognition is probably the fastest, cleanest, efficient, and most secure solution for online identification. Other tech capabilities like liveness detection, OCR based data-extraction and verification against central databases are making KYC process far more simple, efficient and secure.
During customer onboarding, financial institutions should determine customer associated risks. These checks include ascertaining if the customer is a politically exposed person (PEP) and reviewing his/her previous financial transactions. Financial statement and Bank statement analyzers are becoming an important tool for such use cases where transaction profiling helps to determine the financial health and track record of customers. Transaction pattern provides an understanding of customer behavior and discipline and associated risk with the same. Tools using advanced analytics and ML for pattern recognition, data visualization for insightful decisions are also playing a crucial role to help the underwriters and risk managers simplify processes.
In case a high-risk customer is identified, the Enhanced Due Diligence process is applied to the customer. During the Enhanced Due Diligence process, the identity of each customer is ascertained by screening through AML, and checks are performed thoroughly from criminal records. In case a customer is assessed as high-risk, then a more in-depth analysis is performed by screening against media agencies, government records, and enforcement records.
Virtual communication, AI-powered liveness check and identity verification for Video Personal Discussion and Video KYC, are addressing the security concerns, auditing, and compliance requirements, to provide better fraud mitigation and faster customer connect
Virtual meetings with customers via Video PD & Video KYC
Physical meeting with the customers is not a dependency anymore. Virtual communication, AI-powered liveness check and identity verification for Video Personal Discussion and Video KYC, are addressing the security concerns, auditing, and compliance requirements, to provide better fraud mitigation and faster customer connect. Unlike any other video call, these tools can accelerate the sales cycle, application processing, reduce time to market, and in turn improves user experience, rendering executive connect obsolete.
RegTech for AML/KYC
RegTech (regulatory technology) and Suptech (Supervisory technologies) are disrupting the financial landscape by providing advanced solutions in the areas of regulatory reporting, risk management, identity verification, audit, compliance, and transaction screening.
Digitization is on the rise across business domains, but unless it can simplify the process and deliver seamless experience to the stakeholders involved, it will fall short of its possibilities. The new age technologies are changing the KYC landscape forever, for it’s not just a new alternate - it’s simplifying multiple aspects of the onboarding journey and adding to the productivity and process efficiency. Financial services will continue to invest in newer technologies to stay complaint and improve the turnaround time, optimize cost and control the operational risk.