8 Reasons Why eKYC is Important for the Financial Sector
8 Reasons Why eKYC is Important for the Financial Sector
Learn how this innovative technology is reshaping the financial landscape as we discuss the importance of ekyc
eKYC
January 23, 2024
Mobinul Islam Riyadh
Sadman Sakib Khan
Sadman is a marketing professional and a fervent devotee of the ever-evolving world of marketing & technology. Possessing a knack for crafting compelling narratives, Sadman passionately engages in the creation of top-tier content in close partnership with esteemed subject matter experts.
Imagine you are Maria. The CEO of a growing fintech startup. Struggling to stay compliant with regulatory authorities for KYC needs. Grappling with manual KYC process, hindering user onboarding and business growth.
You decided to implement eKYC to streamline the onboarding process. Reducing operational costs allows her to focus on business development and expanding the customer base.
Now imagine waiting lines, mountains of paperwork, and productive hours wasted just to open a bank account.
Hopefully, by now, you get a clear picture of how eKYC is benefiting banks, financial institutions, and fintech companies.
In this blog, we will discuss 8 reasons why eKYC is important for all financial institutions. Let’s delve into –
1. Frictionless Onboarding
Now let’s get back on waiting in lines, and going through paperwork just to open a bank account. What if there was digital onboarding and eKYC in place to completely change the process?
Organizations can efficiently onboard and verify customers, minus their love for tedious paperwork. And, customers can open accounts and interact with organizations with the tip of a button.
eKYC can speed up the process from days to minutes.
2. Enhanced Security and Fraud Prevention
eKYC leverages biometric technology to authenticate users with facial recognition and fingerprints. Making it hard for fraudsters to manipulate identity.
A 2020 study by the National Institute of Standards and Technology figured that facial recognition algorithms can achieve a False acceptance rate (FAR) of below 0.001% on a large dataset. This suggests fraudsters successfully impersonating someone else facial recognition is very low.
eKYC goes beyond fighting fraud and identifying users. It safeguards data privacy and empowers users with advanced encryption. All while being compliant with the latest data privacy regulations like GDPR and CCPA. Further cementing transparency with robust audit trails and clear communication.
3. Cost Efficiency and Resource Optimization
An analysis by Forrester research revealed that eKYC reduced paper-based KYC costs by up to 80%. McKinsey & Company estimated in 2021 that eKYC decreased the need for physical branches by 20-30%. In 2022 a World Bank report estimated that it costs an average of 130 USD/customer to reach the unbanked population, furthermore, eKYC’s remote capabilities extend beyond existing customers opening up a vast new market.
That being said, by implementing an eKYC solution organizations can now redeploy their staff to more critical areas where manual attention is required.
4. Improved Risk Management and Regulatory Compliance
With its capabilities in instant identity verification, tracking real-time behavior, builds dynamic risk profiles, and builds dynamic risk profiles. Improving risk management with dynamic profiling risk patterns.
Beyond its real-time monitoring, it also simplifies compliance. Staying constantly updated with the latest regulations, ensuring institutions operate within legal boundaries. Automated reporting generates detailed audit trails and ensures transparency.
A 2022 study by Deloitte found that institutions using eKYC with dynamic risk profiling experienced a 25% false positive for fraud alerts. Learning a more efficient and accurate risk management system.
5. Competitive Advantage in the Digital Age
Let’s get back to waiting in lines once again. In this digital age, nobody wants to wait in lines and go through a pile of paperwork just to open an account. To acquire and retain this generation of tech-savvy customers eKYC is crucial.
eKYC isn’t just a compliance box to tick, it’s a strategic investment in your digital future.
6. Future-proofing for Technological Advancements
Its unparalleled scalability and adaptability with cutting-edge technologies such as AI and blockchain, keep your organization at the forefront of innovation and the edge of competition.
It embodies the readiness for future innovations in the financial sector, with its adaptability ensuring a smooth transition into the evolving landscape of financial innovation.
7. Global Reach and Expansion
Time waits for none, especially for ambitious ideas and urgent needs. And the sluggish pace of KYC is a roadblock in global reach and expansion. But with the power of digital onboarding and eKYC now businesses can expand worldwide.
Ditching the endless forms and piles of documents! eKYC empowers businesses with flexibility. Now banks, financial institutions, and fintech companies can expand and reach the underserved. Location is no longer a barrier. Organizations can now transcend geographical boundaries, empowering rural areas, as well as cross boards to access financial services.
A 2021 study by McKinsey & Company found that eKYC solutions can help financial institutions reduce that eKYC solution can help financial institutions reduce geographical restrictions on onboarding new customers by up to 50%.
8. A Step Towards Sustainable Financial Inclusivity
It unlocks doors and streamlines onboarding while bridging the gap between the underserved and the unbanked. Imagine remote villagers accessing microloans and rural entrepreneurs launching businesses. Now the technology is here to make that a reality. eKYC can now allow banks, financial institutions, and fintech companies to ignite economic engines and pave the way for a brighter and more sustainable future.
Final Words
In conclusion, eKYC is not just a buzzword. It’s a revolutionary force transforming the financial landscape. Frictionless onboarding, verification, and enhanced security to cost-efficiency & global reach. It’s time to ditch paperwork and embrace the digital wave. A frictionless finance is here, and it’s powered by eKYC. Don’t let your institution get left behind.
Polygon Technology is here to help you make the journey. See how other financial institutions have successfully leveraged eKYC to achieve their goals. Discuss your specific needs and get personalized guidance from our product specialist.