In the rapidly evolving landscape of digital transactions, understanding the nuances between traditional know your customer (KYC) practices and unified KYC frameworks is important. KYC processes are fundamental in verifying the identity of customers and assessing the associated risks in financial transactions.
While traditional KYC involves discrete verification procedures conducted separately by each financial institution, Unified KYC presents a consolidated approach, streamlining the verification process across multiple institutions.
Anil Jain, Chief Product and Delivery Officer, Solutions Global, explains the disparities and advantages of these two methodologies and illuminates the shifting dynamics of regulatory compliance and customer convenience in the modern financial sphere.
Traditional KYC
In the conventional KYC process, customers are required to personally visit a designated representative at a financial institution. They must present physical documents such as government-issued identification and proof of address, like utility bills or bank statements. The financial organisation or regulated entity then verifies the authenticity of these documents by physically comparing them with the originals.
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Limitations of Traditional KYC
Traditional KYC processes have numerous limitations, with one of the most significant being the necessity for face-to-face interaction between an authorised individual from the regulated entity and the customer. This requirement often results in time-consuming travel, wastage of resources, and fuel expenses for both parties involved. Moreover, manual verification of documents introduces the risk of fraudulent activities, leading to inaccurate verification and potential vulnerabilities.
These factors contribute to delays and hinder the efficient onboarding of customers or the timely updating of KYC details as per the customers risk profile.
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Unified KYC
A Unified KYC Platform integrates ID document verification, biometric authentication, liveness detection, and AML watchlist screening into one efficient system. This comprehensive solution enables businesses to swiftly and securely verify identities, streamlining their onboarding processes.
Unlike traditional manual methods reliant on paper, this digitalised approach meets regulatory demands while enhancing accuracy and speed. By amalgamating multiple data sources and automating procedures, it simplifies customer onboarding, ensuring compliance and slashing operational costs.
Unified KYC entails conducting Digital KYC using various APIs provided by India Stack. This involves retrieving customers’ demographic data from the UIDAI
Database, including their name, address, and photo. It also includes conducting video interactions with customers by an authorised individual remotely or online.
Benefits
Implementing a consolidated and automated KYC system for customer onboarding provides numerous advantages for financial institutions operating in today’s intricate digital landscape. By seamlessly managing high volumes of customers and navigating various regulatory frameworks, integrating such a system yields substantial benefits. These advantages encompass heightened adaptability, amplified transparency, time and resource savings, improved accuracy, fortified security and compliance protocols, and an enhanced user experience.
