How Digital KYC Solutions are Bringing Credibility & Trust for Small & Emerging FinTech Businesses

With over 20 years of experience in Financial Services industry and Credit Bureau, Pratyush is a visionary leader and CWA Gold Medallist from ICWAI.

Due to a competitive business environment, changing customer expectations, and a stringent regulatory framework, financial institutions globally have been constantly evolving. The COVID-19 pandemic has only accelerated the speed of change. As the industry has gone through a complex crisis, a lot has changed in terms of acquisition, buying risk, consumer behavior, and product requirements. The gap between demand and supply is also ever expanding. While the think tank of banking institutions is focused on managing the existing situation in the short run, the strategic focus is around the future. So with an objective to expedite financial inclusion, fintechs are improving their business model to provide seamless credit and deliver consumer products. Fintechs are also focused on financial inclusion as a long term strategy for a profitable growth. Digital transformation has emerged as the key to a long term and sustained business growth in the sector.

How Is the Financial Sector Adopting Digital Transformation?
The adoption of technology and digital transformation has been a huge game changer. It is supporting the current situation while pushing organisations to be future ready in the post pandemic world. The use of digital tools enable contactless sales, remote onboarding of consumers, and digital customer management services to meet the key requirements of every business. Today, fintechs are leveraging digital capabilities and alternate data for underwriting and building a strong competitive advantage. Digital transformation is a long journey towards the ‘future of tomorrow’. However, the focus remains largely around KYC compliance, automation of processes, and the use of alternate data to enable full automation. To meet the ever-growing demands of the increasing population, the government took steps and reformed strategies to simplify payments, banking, insurance, and other financial services. The financial industry demonstrated resilience and adaptability and the changes look positive. Regulators have also introduced new measures to ensure that the financial services market continues to operate in a seamless way. These measures are centered around the adoption of digital KYC and contactless onboarding.

What is Digital KYC? DKYC is a digital process used by finTech companies to carry out KYC of its customers. It includes capturing the live photo of the customer and an officially valid document or the proof of possession of Aadhaar along with the latitude and longitude of the location where such a live photo is being taken by an authorized officer of the reporting entity. No offline verification takes place. A few companies have been permitted to use Digital KYC. The regulators have defined the process for completing KYC and have also laid down the controls which need to be followed for a successful

digital KYC. Further, the application of DKYC should be authenticated and used for specific purposes only. The access and control of this application remain with the reporting entities and only their authorized officials/agents are allowed to carry out this process.

Digital transformation is a long journey towards the ‘future of tomorrow’

The Application must have the following Features in place:
1.The customer should visit the registered entities official place or vice versa.
2.PAN details should be properly captured
3.The application should have the feature of capturing a live customer photo which should be embedded in the Customer Application Form ‘CAF’
4.The application should be able to capture the live GPS coordinate of the customer at the time of completing this process.
5.Upon successful completion of the process a onetime password should be initiated on the mobile number which is filled by the customer on CAF

For controls, the following should be enabled in the DKYC application:
1.PAN should be verified from NSDL.
2.OVD should be collected in electronic format as per the RE policy.
3.Information showing on the uploaded document should match the information entered in CAF by the authorized officer.
4.Live photo of the customer should match the one in the document.
5.All mandatory fields should be captured in the CAF

A comprehensive DKYC solution essentially fulfills the Know Your Customer(KYC) compliance requirements of a business. Digital KYC helps in mitigating the risks of identity thefts and financial frauds before taking on customers. It is built on cutting-edge AI to enable contactless onboarding and best in class customer experience.

Below are the key benefits of Digital KYC as desired by FinTech companies:
1.Speed and scalability to go to the market faster.
2.End-to-end workflow development to solve core business challenge.
3.Easy plug and play architecture to drive efficiency and flexibility.
4.Security and compliance to stay on the right side of the law.
5.Seamless integration for a better customer experience.

Conclusion
Easy to integrate and flexible Digital KYC solutions give small and emerging fintech businesses a level playing field when it comes to customer authentication, onboarding and management. These solutions help small scale businesses save costs by eliminating the need for inhouse investment in process engineering, technology infrastructure and maintenance costs. These solutions also help small scale fintech businesses in focusing on customer friendly onboarding journeys by eliminating friction and increasing stickiness through a larger focus on strategic and qualitative experiences and reduced emphasis on manual intensive tasks that affect efficiency.