The BFSI sector has usually struggled with the concept of “seamless and digitized customer onboarding”, for the fear of fraud and regulatory failures that might attract heavy fines.
Post-pandemic, the digitization adoption in the BFSI sector is seeing an upward adoption trend, which might not have happened given the laggard behavior of the industry and the complexity, high-risk, and regulatory nature of the financial products. As per Mckinsey, the adoption of technology in the BFSI can bring down operational costs by 30-40%.
In a way technology in BFSI is helping to design customer-centric journeys that are compliant, cost-friendly, and risk-proof. The segments in BFSI banking, insurance, securities, and financial services have different use cases for different types of technologies. E.g. queries answered by bots for credit.
Technology That Simplifies Compliance
The dynamic regulatory environment for the BFSI especially banking has always troubled the risk management teams. Technology innovations are key to improve transaction monitoring, reduce false positives, and mitigate risks on-the-go. By streamlining existing processes via automation, onboarding activities can be made frictionless and create new growth avenues. API led verification technology with workflow automation can help to verify individuals in real-time as per the regulatory needs, letting teams focus more on value adds. These processes can be easily integrated and modified with the help of regtech like AuthBridge to bring down the risk of frauds, control costs, and improve process efficiencies.
Technology That Facilitates Online KYC With A Contactless And Paperless Journey
RBI compliant video KYC or VCIP was introduced earlier this year, taking into consideration the role of technology in reshaping KYC. Many countries are already exploring the power of AI in digital KYC and India is ready to follow the suite. Many financial institutions have tried to digitize the application processes to the maximum, to reduce manual efforts and support calls in case of incorrect details.
- OCR based Data extraction from PoI and PoA clubbed with API based verification of ID number, name, address and other details ensures that fraud is caught at the very beginning of the application process, and resources are not wasted on evaluating a non-genuine lead.
- AI-powered facial recognition helps to check if the person in the identity and the applicant are the same
- Video-based interaction replaces the executive connect to validate liveness detection, where anytime anywhere customer verification can be done by an RE executive, to ensure that the person is who they say they are.
All these can be combined to automatically audit and application and Video interaction via AI/ML programmed models and customers can be onboarding almost 10 times faster right from the comfort of their homes.
Technology That Catches Death Before Policy Frauds In Insurance
Where banks are using the video KYC technology to reduce the physical application and verification processes, insurance is using this technology in catching common frauds like taking policy in the name of dead/dying people. Although the insurance applications became digitized long back, the process of pre-issuance verification still needed a physical connection by an executive to collect documents, get physical signatures, and click customer photo.
But what if the executive is corrupt and becomes an instrument in the fraud? VBIP was recently introduced by IRDA to not only simplify the process of document collection and verification but in all, the AI-powered liveness check with gesture-based liveness detection and facial recognition, followed by Video PD for telehealth checkups, definitely serves the purpose of tackling the death before policy cases and nibbing the problem of fraud in the bud.
Technology That Simplifies Credit Underwriting
Thin file credit clients have always been a cause of worry for lending institutions because of the high risk of loan default. AI/ML-powered data models built on alternate data sources can help to solve this conundrum. It can create a 360-degree profile of the prospective loan applicant and help in making smarter and faster decisions for approval/rejection. The analytical engines can help to enhance the efficiency of the credit sector, by analyzing huge amounts of unstructured and structured data like rent payments, bill payments, psychometric analysis, employment history, etc.
To conclude, technologies like AI, Cloud, blockchain, RPA have become more than invaluable to the financial sector. From reducing risks of financial, reputational, non-compliance, and identity frauds today it is truly shaping customer experiences. But this change comes with the responsibility of data privacy. As digital workflows evolve, compliance with data privacy frameworks like GDPR, IT ACT 2000, etc. will play a key role in strengthening the argument for using technology to the benefit of BFSI.