How Facial Recognition eKYC Strengthens Online Customer Onboarding Processes for Banks

For some years now, the banking, financial service, and insurance (BFSI) industry have been developing know-your-customer (KYC) procedures to ensure the utmost security for its customers and their valued assets. The most recent development of this technology is through eKYC (electronic Know Your Customer), which applies to the newest computer-based technologies like FaceMe Fintech. This technology seeks to prevent payment fraud, deter financial crime, and enhance customer identification and authentication processes using AI-enhanced facial recognition technology.

What is KYC Verification?

KYC (also known as “Know Your Customer” or “Know Your Client”) is a mandatory process in the BFSI industry that verifies customer identification, ensuring that the user is who they say they are. KYC is also an important part of the verification process as it helps prevent the user from participating in fraud, money laundering, or in some cases, forms of terrorism.

As mentioned previously, the KYC verification process is now mandatory for financial institutions in the developed world and is used both when a customer opens a new account and throughout the lifetime of one’s account. Rather than a one-time occurrence, the KYC procedure is repeated periodically to help ensure that the account is still being used by the authorized user(s), thereby protecting the personal identity and assets of account holders.

What is the KYC Verification Process?

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The KYC verification process is sometimes described as the client onboarding process. From the client side, users start the KYC verification process when they submit an identity verification request. The user must provide several interlinking documents which bear one’s name, and other commonly requested personal information to prove identity such as one’s current address, birthdate, birthplace, etc.

Additional documents may be requested such as recent utility bills and other commercial documents, validating the already-provided information, like passports and drivers licenses. All of this helps ensure that the onboarding customer is who they say they are and helps provide a well-rounded customer profile.

Why is the KYC Process Important?

The KYC process is important because it provides benefits for both the business and its customers. A business that does not opt-in to providing KYC processes for its customers can be seen as irresponsible or negligent. This is damaging to a business's reputation and can hurt the business in the long run. Moreover, in most developed nations, a BFSI business that does not comply with KYC regulations and anti-money laundering regulations is at-risk of heavy penalties from governing bodies and other regulators. Penalties could include substantial monetary fines and/or sanctions upon the activity of the business.

Although it may seem like a burden, the KYC process is also beneficial for customers. KYC reduces the chances of identity theft and all the troubles that come with a stolen identity. The process help safeguard user information from unauthorized users and acts as a protective measure for a customer’s valued assets.

What is eKYC?

eKYC stands for “Electronic Know Your Customer” and is an enhanced digital KYC verification process that both speeds up traditional onboarding (via document imaging and electronic transfers) and ensures accurate security measures (via electronic, computational, and biometric techniques for user identification).

Although there are great benefits to the traditional KYC process, there is sometimes a waiting period between user sign-up and the actual use of the BFSI product or service. This lag can be a source of frustration for customers, and those who find the process too lengthy might opt to abandon the use of the system altogether. In addition to this, the traditional KYC process is susceptible to human error, as most physical documentation must be filtered through the human eye, and may be subject to false matches, especially with difficult-to-read documents such as old photos. Because of this, more businesses are choosing eKYC over KYC to further strengthen their online identity verification processes.

Some of the benefits of using eKYC include:

1. Additional levels of safety, efficiency, and security for KYC implementations in financial institutions.
2. Greater levels of protection from identity theft across BFSI operations.
3. Cutting costs by using fewer human checkers, reducing customer visits, and moving towards paperless management systems.
4. A simpler and remote online onboarding process that protects account integrity.
5. Increases in enrolment speed and customer satisfaction.

Facial Recognition eKYC: Streamlining the Online Customer Onboarding Process

There are a handful of biometric eKYC authentication options, including fingerprint recognition, iris recognition, facial recognition, etc. However, facial recognition is one of the most practical options available, as it is easy to use, quick, hygienic, and available in remote environments.

• Ease-of-use and speed : With facial recognition technology now integrated into the eKYC process, customers no longer need to visit banks in person to verify their identity. Instead, users can verify their identity from the comfort of their homes using just a web browser or an app on their phones. Facial recognition eKYC has also helped speed up the process of information cross-checks and has reduced verification errors commonly made by human eyes.
• Hygienic and remote : With facial recognition, there is no need for a physical surface to be touched by multiple users to verify identity as is common with fingerprint recognition or entering a physical location (like a bank) to provide identity. Especially during the COVID pandemic when remote working became popularized and hygiene became a public concern, smart device BFSI services and remote eKYC onboarding were seen as essentials. Even with pandemic concerns fading, the eKYC digital revolution and the adoption rate of facial recognition technology shows no signs of slowing.

There are a number of benefits of eKYC over the traditional KYC verification process, and facial recognition technology solutions, such as CyberLink’s FaceMe, have become a popular choice for eKYC’s biometric identification processes. The number of companies choosing facial recognition as their eKYC solution continues to grow.

How Facial Recognition eKYC Works: Banking, Brokerage, and Insurance Industries

Although an eKYC system can be implemented by businesses in a multitude of ways – to enhance security, increase company efficiency, and speed up onboarding – there are a few specific ways where eKYC has been commonly used in the banking, brokerage, and insurance industries, specifically regarding facial recognition.

Like the traditional KYC process, the eKYC process begins when a customer submits a request that requires identity verification, such as opening an account or applying for a loan. By using the eKYC system, potential customers can verify their identity quickly using nothing more than a smartphone and approved forms of government-issued ID (e.g. drivers license, ID card, passport).

Often the process continues with the customer downloading the bank’s app, then they begin registration by providing basic details, scanning necessary forms of ID, and sometimes, taking a live photo of themselves using their device. Data is processed by identity verification software and credit check agencies, and within minutes, the verified customer is ready to use their newly activated account. Some banks will even provide a digital version of their debit card available for use almost instantly after account activation, a handy feature that allows the customer to use their banking services immediately while they wait for their physical card to arrive in the mail.

eKYC Compared to KYC

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Although KYC had an important place in history for securing the information of financial institutions and their customers from fraud, eKYC has clearly replaced the traditional KYC system due to its convenience and security. Some of the major advantages include:

1. A simpler remote online customer onboarding with identity validation that saves time and reduces the need for on-site visits
2. An instantaneous, paperless, and cost-effective account opening process that benefits both the business and the customer
3. Increased protection from identity theft across BFSI operations
4. Greater customer satisfaction as customers can create and secure their personal information in a more convenient way and from the comfort of their home

eKYC allows for a safer, faster, and more robust biometric system, and eKYC that is powered by facial recognition technology has shown no signs of slowing down. eKYC enabling processes like facial recognition technology implementation of secure identity recognition for both consumers and BFSI industry players, and trends only indicate that eKYC verification is going to only become more prevalent in streamlining insurance, loan, and credit card applications in the future.

Of course, the possibilities of facial recognition expand far beyond the boundaries of eKYC and BFSI industries. For more information on how products like FaceMe can advance your business please check out our case studies about facial recognition in smart retail and smart security environments.

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