eKYC (or e-KYC) is an abbreviation for electronic KYC (Know Your Customer). It is the digital provision of conducting KYC verification using electronic means, without physical documentation.
Know Your Customer or KYC is a procedure to verify a customer’s identity to avoid identity theft and related fraud. Various businesses and organisations conduct it to identify and authenticate their customers. eKYC is the digital transposition of this existing traditional KYC procedure that is remote and paperless. For example, banks/NBFCs/fintechs, payment gateways, real estate, crypto, credit institutions, etc. employ the eKYC processes.
This digitised process of eKYC has streamlined many services for customers. For example, it is easier for them to open a bank a/c, get a loan/credit card, invest or buy insurance plans. They can do eKYC via video calls, upload online forms, and online submission of identity documents or biometric identification.
Why is eKYC Important?
eKYC leverages technology and electronic methods to carry out the identification-cum-verification process. This simplifies and optimises the entire KYC process. Physical verification becomes time-consuming whereas eKYC validates information faster. It is more efficient by all means.
The online verification process of eKYC also minimizes the costs associated with it. Physical verification not only takes more time but also incurs higher costs.
Be it eKYC or physical KYC, the entity that performs KYC takes into account certain customer details. It verifies the customer documents and other identifications like signatures, fingerprints, face verification, etc. As fraud and malpractices are common, KYC can prevent the falsification of signatures/identity or phishing.
Businesses dedicated to technical compliance solutions have expertise in developing secure eKYC processes. It leaves zero margins for counterfeiting offences and related crimes. Therefore, it is one of the safest customer verification provisions available.
How is eKYC Done?
There are some common ways of conducting eKYC as below:
Aadhaar-based e-KYC: As Aadhaar is an Indian identification document, thus, aadhaar-based eKYC is prominent in the country. Aadhaar is a biometric identification system, so e-KYC authenticates the customer’s identity via their Aadhaar number and biometric data. Online banks, digital wallets and credit providers often conduct this type of eKYC.
Digital Signatures: Most organisations that conduct eKYC ask the customers to digitally sign consent forms or documents. It acts as an identity proof and agreement. For example, a student applying for an exam may use a digital signature while filling out the form. Similarly, s/he may sign when appearing for the exam and signatures can be matched to confirm the identity.
Verification through Government Databases: Organizations often integrate with government databases or credit bureaus. For instance, customers applying for credit cards are asked to share certain details like name, PAN, etc. Credit card networks validate the identity of customers against the official records. They can find out the credit score, default, pending loans, etc. of the customers.
Facial Recognition: Often to confirm the identity of customers, they are asked to provide a live image or video of themselves, that matches the photos and identity proofs they submit.
eKYC helps to create a database of customers, match the existing records as and when required and ensure that customers are valid.
e-KYC helps in faster customer onboarding of customers like on payment gateways, lening or postpaid services, and so on. It also helps in reducing paperwork to enhance customer convenience.
KYC is subject to legal and regulatory framework and so it enables organizations to comply with regulatory requirements. eKYC implementation should protect customer information by maintaining a robust and secure customer verification process. It must adhere to data privacy and security norms.
