Electronic know your customer (eKYC) is seeing increasing use around the world, as banks, enterprises, and whole markets turn to these digital onboarding processes for understanding customers and boosting financial access.
This new, data-driven verification approach is championed as a path to boost financial access, improve customer experience, and generally deliver a better ecosystem for businesses and customers alike. Implementing an effective solution means understanding the landscape, and ensuring that the right eKYC data is utilized in the right way.
What is eKYC?
Electronic know-your-customer (eKYC) refers to a range of solutions to electronically verify customer information and identity. It offers a digital solution to traditional know-your-customer functions, providing a paperless approach without the need for face-to-face interaction.
By transitioning KYC processes into the digital realm, eKYC significantly reduces the time and resources required to verify customer identities, tackling the often burdensome process for applicants while improving verification processes for organizations.
The growth of eKYC around the world
eKYC is being used in a wide range of settings, from digital public services through to online banking. The sheer scope of applications has seen huge growth in use cases, and market size for eKYC. The eKYC market is expected to grow from USD447.53mil in 2021 to more than USD1,964.73mil by 2029 according to analysis by Polaris Research.
The implementation of eKYC varies around the world. These include national digital ID schemes seen in countries such as Sweden and Singapore, general guidance models which indicate broad requirements for eKYC, due diligence models as seen in the UK, and even video call verification systems used in nations such as Germany.
Growth of eKYC has been supercharged during the COVID-19 pandemic, as existing trends for improved, responsive customer experiences and simple digital processes were amplified by the challenges of delivering essential services while respecting the wide range of isolation challenges and face-to-face restrictions. This led to even the most hesitant regulators looking for rapid and secure adoption of eKYC processes.
While the specific model of implementation may vary, what unites them is a commitment to using digital tools to improve verification processes. While some of the more time-intensive solutions such as mandatory video calls may see early usage, the likelihood is that eKYC solutions will converge on sophisticated data-driven processes that offer secure, sustainable, and safe verification for all parties while respecting relevant data privacy rules.
Analysis by McKinsey shows that superior eKYC processes delivered a significant reduction in risk effectiveness, reducing cases referred back to first-line risk review by 61%, while also reducing the response time for information and improving productivity. At the same time, those superior performers improved customer satisfaction scores by up to 30%, delivered between 5% and 10% revenue increases through avoidance of business losses and new opportunities, and reduced end-to-end onboarding time by as much as half.
In order to deliver on this need, McKinsey recommends five key elements of an effective eKYC program:
- Use risk-driven design and customer-risk management
- Digitize and optimize the customer experience
- Apply data and KYC-program-risk analytics
- Pursue intelligent process, case, and policy automation
- Create a center of excellence with clear performance management
Neural Technologies’ Credit Management and Business Assurance solutions are designed to help unlock the benefits of eKYC in application processes for customers. It ensures clear risk mitigation for enterprises looking to assess any type of loan or application in real-time, with fast, accurate accept/decline/defer decisions that are vital for credit management in a fast-paced operating environment. Our solution is highly configurable, and supports ID verification integration with third-party providers to enable customers with flexible eKYC solutions.
The use of eKYC is a fundamental part of our sophisticated data-driven solutions, and one which is also leveraged to protect enterprises and customers in our Mobile Money solution, which utilizes both eKYC and customer due diligence for monitoring of mobile money transactions. But it’s vital that the right data is used at the right time to unlock the value of this opportunity. Artificial intelligence and machine learning tools support optical character recognition (OCR) and facial recognition, as well as countering the emerging issue of deep fake images.
Analysis by McKinsey estimates that data-quality problems account for more than a quarter (26%) of operational costs, largely driven by non-standardized data formats and duplicate or incomplete data. Neural Technologies’ own solutions ensure integration of data from all sources and of all types, providing a clear, user-friendly solution that enables eKYC solutions to incorporate both structured and unstructured data.
While COVID-19 may have accelerated the transformation, the rise of eKYC has long been on the cards. With growing regulatory acceptance, and increasing calls from customers themselves, this data-driven customer verification technology is likely to enjoy growing opportunities in the future.