The inexorable advancement of technology and its impact on various sectors across the world is evident. Various forms of technology are supporting digitalization across industries, rendering more convenience to the users along the way. A prime example of digitalization is the change in process of applying for a personal loan, which until few years back was cumbersome and tiring.
Earlier, the consumers had to stand in long queues just to file endless application documents in order to get a loan. However, the entire process is now digitized and only takes a few minutes to complete and a few hours to get a loan. One of the key contributors to making the process fast and convenient is – eKYC, which has helped service providers, both large and small, to make consumers’ lives easier and processes faster.
What Is eKYC?
eKYC or electronic Know your customer is a paperless process to verify the identity credentials of the customers electronically. Generally, a service provider, either government or private, verifies your identity and other particulars linked to you using documentation such as your Aadhaar Card, PAN card, etc. It is mandatory for customers or clients of banks and financial institutions, as stipulated by the RBI through circulars from time to time. Moving from the traditional to the modern way of verifying the customer details has benefitted the fintech companies and their customers at large.
How Does It Work And Is It Safe To Use?
eKYC is the digital and upgraded form of traditional Know your customer process. In simple terms, we can say that eKYC is a process which involves the online KYC authentication of a consumer via demographic & biometric information which is stored in the UIDAI database and can be retrieved only by a regulated entity once the consumer verifies his/her identity. Identity is verified either by way of face authentication technique, One Time Password (OTP) or by downloading and sharing KYC XML.
It is the easiest and the safest way to carry out a verification process virtually because UIDAI verified biometric scanners are used to read the information of the consumer and store it in a secure manner. In the case of Aadhar based e-KYC verification, a reference ID is shared for verification and Aadhar number is not disclosed. This adds an additional layer of security to the process.
Following Are The Factors Why eKYC Is A Boon For The Fintech Sector:
Faster Processing: eKYC is a completely digitized process that eliminates the need for a paper document. As compared to the traditional paper-based, offline verification process, eKYC is a simpler way that can be used to verify customer identity in minutes. The service is completely automated and thus transfers the data in real-time and avoids manual intervention, therefore, making it a faster process.
Better Customer Experience: Contactless and paperless are two key features which turn the eKYC experience into a more preferable one. With eKYC, the fintech companies are now able to offer completely digital onboarding customer experience, which in turn has made the entire process simple and hassle-free. Since the verification is done online, it has replaced the paperwork involved, providing more comfort to the tech-savvy users.
Reduced Paperwork and Costs: eKYC benefits not just the Fintechs and the borrowers but also the environment. eKYC, being completely paperless, helps companies to not just reduce their carbon footprint but also to save costs involved in all the paperwork. In addition to this, the customer data stays secure as it eliminates the chances of loss of customer data, as data stored on cloud can be recovered and searched for easily as compared to a piece of paper.
Improved Security and reduced frauds: The authentication process uses biometric technology that focuses on the elimination of ID theft and is the safest option that is currently available. The new high-tech biometric system is tricky to replicate and its nature makes it difficult to bypass. Thus, it helps the fintech companies to reduce data leakage and fraudulent activities.
Improved Accuracy / Reduced Chances of error: Since no manual intervention is needed to enter the key details of the customer, human error is minimized. Since the process is machine-led, there is no room for operational mistakes which may otherwise hamper the process or affect the outcome.
KYC is a positive step towards providing different alternatives to digitally onboard customers in a paperless, presence-less manner. The success of eKYC is making the path for credit access even simpler for the consumers.