In today’s increasingly digital world, where online transactions and remote services have become the norm, ensuring the trust and security of customer identities is important. That’s where eKYC steps in as a game-changer, especially for the fintech sector. Join us as we discover the transformative potential of eKYC and its role in shaping the future of the fintech industry.

Understand the basics of eKYC

Understanding the basics of eKYC, or electronic Know Your Customer, is essential in today’s digital landscape. eKYC refers to the process of electronically verifying the identity of individuals, replacing traditional manual methods.  

eKYC solutions often incorporate advanced techniques like biometrics, facial recognition, and data matching algorithms to ensure accurate and reliable identity verification. Understanding the basics of eKYC enables businesses to leverage its benefits, such as faster customer onboarding, enhanced compliance with regulatory requirements, and improved user experience in a secure and efficient manner. 

Read more eKYC Unveiled: An A-Z Introduction to Modern Identity Verification

What will happen to the Fintech industry when KYC becomes eKYC?

A recent Facts and Factors report forecasts that the global eKYC market is expected to reach $2792 billion by 2030, with a compound annual growth rate (CAGR) of roughly 21.55% between 2023 and 2030. 

Unsurprisingly, moving to online identity verification is the minimum for keeping up with digital innovation trends in a highly regulated industry like Fintech. 

The following factors summarize the most significant impact of eKYC solutions on the Fintech sector: 

#1 Quicker processing and customer onboarding 

Financial institutions can solve the issues associated with offline identity verification processes by implementing eKYC.  

Modern eKYC systems automate the process, delivering customer data in real time without user intervention. This allows them to speed up verification and provide a seamless onboarding experience. 

And the result? 

Reduced candidate rejections, a faster sales cycle, and, most crucially, a significant decrease in the proportion of consumers who cancel their purchase. 

#2 A Smooth Experience for Non-Tech & Tech-Savvy Customers 

Smartphones and laptops have, more than ever, become the digital versions of physical banking touchpoints, and KYC is no different. 

Customers nowadays want the identity verification process to be real-time, instant approval. Not to mention the requirement for enhanced data security. 

eKYC develops a solution that provides consumers with a fully digital banking experience. Customers benefit from flexibility and convenience, such as biometric authentication, document uploading, a secure interface, and accurate processing, without breaking their busy lives. 

#3 Access Controlled to Reduce Data Leakage and Scam 

39% of executives in the financial industry found that network security in fintech is a critical area highly exposed to scammers. Surprisingly, breaching a system with a login and password may appear to be a piece of cake. 

Financial institutions that use eKYC technology provide comprehensive security against unauthorized individuals required to reduce fraud and comply with anti-money laundering legislation.  

Advanced eKYC systems employ AI techniques that use a webcam to authenticate the identity of the individual requesting access. After scanning the user’s face, the AI compares all information on the displayed ID against government-issued records. If they do not match, the user cannot get access. 

As a result, fintech companies may secure access points, simplify account creation, and provide a seamless customer experience while protecting the customer’s private information using such highly precise eKYC software solutions. 

#4 Improved operational efficiency and accuracy 

Fintech companies can break free from the slowness of legacy systems that rely heavily on manual input. The eKYC process, powered by AI technologies such as facial recognition, eliminates the possibility of human error.  

Strong digital authentication enables fintech businesses to validate customer credentials in real-time, with no possibility for operational errors. 

#5 Processing without using paper 

eKYC solutions are emerging as key enablers of paperless customer onboarding. Compared to the old identity verification process, it helps financial institutions save money on paperwork, minimize their carbon impact, and maintain customer data more efficiently.  

Furthermore, using eKYC solutions can be their first major move toward developing an open-minded brand identity and achieving a competitive advantage in the market.

Use cases of eKYC

In the fintech industry, eKYC is particularly valuable for streamlining customer onboarding processes and ensuring compliance with regulatory requirements. Below are some specific use cases of eKYC in the fintech sector:

#1 Digital Account Opening:

Fintech companies, including neobanks and online lenders, use eKYC to simplify and speed up opening new accounts. Prospective customers can provide their identification documents electronically, and the fintech firm can verify their identity in real-time, allowing for a seamless and efficient onboarding experience.

#2 Digital Lending

Fintech lending platforms employ eKYC to verify the identity and creditworthiness of borrowers. By integrating with external data sources, such as credit bureaus and financial institutions, eKYC enables real-time verification of customer information and assists in making informed lending decisions quickly and securely. 

#3 Peer-to-Peer Payments

eKYC plays a crucial role in peer-to-peer payment platforms and digital wallets. Users can link their bank accounts, credit cards, or other payment methods to the platform, and eKYC is used to verify their identity before enabling transactions. This helps prevent fraud, ensures compliance with anti-money laundering regulations, and enhances the security of digital payments. 

#4 Investment and Wealth Management

Fintech platforms providing investment and wealth management services utilize eKYC to verify the identities of investors and ensure compliance with regulations, such as anti-money laundering (AML) and know-your-customer (KYC) requirements. eKYC enables swift onboarding, facilitates automated risk assessment, and enhances the overall user experience for investors.

#5 Cryptocurrency Exchanges

eKYC is crucial in the cryptocurrency industry, particularly for cryptocurrency exchanges. Exchanges are often required to perform robust identity verification due to regulatory obligations. eKYC helps verify users’ identity before allowing them to trade cryptocurrencies, ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

#6 Regulatory Compliance

Fintech companies must comply with various regulatory frameworks, such as the General Data Protection Regulation (GDPR) and Anti-Money Laundering (AML) regulations. eKYC solutions help fintech firms meet these compliance requirements by providing secure identity verification, accurate customer due diligence, and maintaining proper audit trails.

#7 Fraud Prevention:

eKYC solutions leverage advanced technologies, such as biometrics and facial recognition, to enhance security and reduce the risk of identity theft and fraudulent activities. EKYC solutions can detect discrepancies and flag potentially fraudulent accounts or transactions by comparing live customer data with their identification documents. 

Considering building your own eKYC solution?

More improvements in eKYC may call for a new roundtable by the next time. The pace of change is quick; obtain the assistance and information you need to stay ahead. 

CMC Global has a team of IT professionals who work with eKYC on a regular basis. We’ve constructed training courses for our staff across numerous technical areas and developed multiple consulting packages to help our clients and partners keep up.

Let us keep you ahead of the game!