In 2022, banks significantly invested in online KYC verification, with the market value exceeding $1.3 million. This investment reflects the growing importance of seamless customer onboarding processes. In Indonesia alone, approximately 34.61 million new bank accounts were created, which highlights the necessity for efficient and secure verification systems. Online KYC verification plays a crucial role in this context by ensuring that banks can onboard new customers smoothly while maintaining compliance and security standards. This functionality streamlines the onboarding process and builds trust and confidence among customers.
Let’s explore the functionality of online KYC verification in the onboarding procedure and its overall major components in meeting compliance measures and the significance of authentication solutions in combating frauds.
What is KYC Verification Online? Understand the Nature of Onboarded Customers
Know your customer (KYC) is the process of evaluating users’ credentials to find out the risk score associated with the consumer profile. It is a method of identity verification, but in financial institutions or when hiring someone in a business or corporation, it is usually called an online KYC onboarding protocol. If it is conducted to scrutinize the nature of the business, the same protocol would be referred to as “Know Your Business” (KYB).
KYB and KYC are the major components of the anti-money laundering (AML) structure conducted in the banking departments and financial institutions to combat potential risks of terror funding, tax evasion, money laundering, and other related monetary frauds. Online KYC is conducted digitally during the onboarding process, such as when opening a bank account or in the hiring process. The following credentials are required during this process such as:
- Madden Name
- Proof of Address
- DoB (Date of Birth)
- Social Security Number (also called Identification Number)
The system analyzes the given customers’ credentials using authorized database records. The digital copies of the documents are analyzed using machine learning algorithms and the integration of artificial intelligence mechanisms. These advanced systems analyze the documents in real-time and report the unidentified entities to authorized officials.
KYC Check Online in Continuum: Extending Beyond Initial Onboarding
Authentication of the user’s credentials is an important part of the online KYC procedure, but there are more insights to this procedure that assist in complying with the regulatory measures. There are three major components of online KYC, which are given below:
CIP
A customer identification program is a streamlined way of collecting the required information from the users and validating them according to the present protocols, which can be done physically or digitally. The last step is to keep the records for further utilization in the future.
CDD
Customer due diligence is the second major component of online KYC protocol. It is executed to evaluate the user’s transaction history, previous financial records, and digital funds transfer. All these details assist in finding the risk score of the customers in real-time. Even if the users complete the onboarded procedure and become permanent members of the system, their financial activities will be analyzed throughout the life cycle under the customer due diligence program.
Continuous Monitoring
Ongoing monitoring means the user’s identities and funds transfer history are spotted if they are found to be involved in illegal activities. The main objective of regulating the ongoing monitoring programs is to combat the risks of reputational damage in the banking departments and other related financial institutions.
Online KYC Solution: A Way to Combat Potential Identity and Monetary Risks
KYC online protocol helps in combating potential identity impersonation and monetary fraud by monitoring illegal transactions. The real time authentication of online KYC verification helps in offering access to the services to only legitimate users, and the unidentified persons have to face the denial mode. KYC compliance enhances the user experience through their digital services, and occupied individuals can get their information verified during the onboarding procedure. Automating verification protocol reduces the manual intervention, which ultimately cuts down the errors and delays. Knowing your customers within business premises ensures that the integrity of the system is maintained, which strengthens the relationship between users and the enterprise. These enhanced online KYC procedures are conducted at lower operational costs, which makes it economical in this inflation period. The integration of online KYC verification is the ultimate gateway for enhancing the operations of the entire working mechanism and has proved to be the one-end solution among most authentication procedures.
Wrapping it Up
The online KYC procedure is the most economical and utilized solution for identifying legitimate customers and reporting fake entities to the authorities. The prominent outcome of this protocol is that it helps meet all regulatory measures of compliance. The integration of the KYC procedure of the businesses streamlines most of the operations because the involvement of the fraudulent entities gets minimized, which ultimately leads to a better environment within the enterprises. It is 2024, and the deployment of online KYC verification can help identify potential imposters in real-time and enhance the overall mechanisms of the system.
