Introduction

Most transactions and financial instruments have moved to online platforms as a response to the explosion of digital technology. Hence, verification processes naturally follow suit. 

Since eKYC was widely adopted by millions of banks and institutions worldwide, their customers are no longer required to submit copies of physical documents, such as passports or IDs, for data confirmation. According to both critics and insiders, this new solution is straightforward, easy to operate, and saves lots of time for both parties.

So what is eKYC in bank? Below is a more comprehensive overview for beginners. 

What Is eKYC In Bank?

It replaces the traditional KYC process (Image source: Pxhere). 

eKYC, short for Electronic Know Your Customer, refers to the digital verification process commonly employed by modern banks and financial service providers.

It is designed to confirm the address/identity of the customers and replace the traditional verification method (known as KYC - Know Your Customer). As a result, bringing physical documents like ID cards or passports to the register is no longer compulsory.

As Vietnam’s leading technology pioneer, Stringee has introduced one of the most critically acclaimed eKYC solutions using video calls. The operation is time-saving and straightforward for both parties.

Once the customer fills in their personal information on the mobile application and confirms all is accurate (no third-party photo-taking apps are allowed to reduce risks of document fabrications), the data will be sent to Stringee’s eKYC system and extracted using OCR. 

A specific schedule for the eKYC video call will then be sent to both the identification specialists and the customers. Customers can choose to reschedule the video call to another time or day if they already have other plans.

If the customer is the one who actively reaches out to the agent, their video call will be placed in the queue to distribute to the assigned employee. 

Otherwise, for clients on the receiving end of the call, the phone ringing should be heard clearly on the mobile application they have already logged into. There is no need to keep the app open constantly.

How Does It Work?

Specific details might vary slightly across different banks and mobile applications. However, below is the basic lowdown of how eKYC typically works.

Stage 1. Customer Initiation

Customers must initiate the eKYC process via the bank’s mobile app or online portal. Some banks even establish a dedicated eKYC platform for this purpose.

Next, the customers will be asked to provide unique identification numbers (such as Aadhaar cards in India or national IDs for other countries). Other personal details like name and date of birth must also be included. 

Stage 2. Data Transmission

Once the information input is complete, the bank securely transmits these customer data to the corresponding government database or authorized source. This database will then authenticate customer information against its official records, performing thorough checks on identities, addresses, and (most importantly) potential fraud indicators.

The bank should receive a response from this database within minutes or even seconds, which either confirms or rejects the validity of the customer’s identity based on earlier verifications. 

Stage 3. Outcome

The bank will proceed with the customers’ account opening or service request when their identity is verified. No further physical copies are required. 

On the other hand, if the confirmation fails or any discrepancy is identified, the bank will request physical documents or extra information from the customers for further investigations.

Extra. Special Circumstances

For urgent cases involving cybercrimes or sensitive data, eKYC allows banks to go beyond checking for ID numbers and names; cases in point include liveliness checks, facial recognition, and more. Other technologies are also incorporated to provide extra security layers and protect current customers from the risk of spoofing.

What Are eKYC Benefits?

1. It Saves Time

Financial services become less dependent on manual form filling. (Image source: Pix4free). 

Compared to traditional, paper-based KYC processes, eKYC is clearly a better time-saving option. Manual form filling, which can be quite time-consuming, is now completely eliminated in the eKYC process. Some systems go further and automatically pre-populate fields with existing data from linked databases, speeding up the process twice as before. 

The same applies to other lengthy processes like collecting, scanning, and verifying paper documents. Since the data is instantly transmitted to official databases, you no longer have to wait for days for the results; it should take 10 minutes at best. 

And that is not all; eKYC verification often utilizes centralized platforms to streamline the verification process. That means multiple checks can be performed simultaneously, a remarkable improvement over the slow, sequential paper-based workflows.

For illustration, suppose a customer wants to open a new bank account.  With traditional KYC, they have to spend 30 minutes filling forms, 15 minutes waiting for document verification, and potentially another 24-48 hours for manual processing. Meanwhile, eKYC could reduce this entire process to merely 5 minutes.

2. It Reduces Failed Customer Acquisition

As per the 2017 Digital Banking Reports, 43% of customer dissatisfaction was due to inefficient verification processes, particularly when opening new accounts. They had to enter their data at least twice when switching between channels, and even then, the accuracy rate was disappointing. 

That explains why eKYC services have become the ultimate solution for the above frustration, as they offer a smooth, convenient customer experience no matter when, where, and how many queues and channels are involved. Furthermore, information updates are synchronized across all channels during eKYC, ensuring both the bank branches and the customers always access the right data regardless of potential obstacles.

3. It Reduces Fraudulent Activities

The application of eKYC leads to fewer risks of fraudulent activities. (Image source: Flickr). 

As mentioned, eKYC connects directly to official databases (e.g., national ID databases) to verify customer's identity. 

This design is self-explanatory; with official records involved, risks of potential fraudsters submitting forged or manipulated documents are almost non-existent in normal circumstances. Plus, some eKYC systems incorporate biometric verification like fingerprint or iris scan, which helps confirm the customer’s physical presence and easily prevents any impersonation attempt. 

Risk scores for each customer are also generated based on data analysis from multiple sources, including credit bureaus, address verification services, and even the IP of the computer or mobile phone. Thus, the bank can detect suspicious activity and unusual transactions long before these criminals decide to dig deeper - and intervene on time to prevent financial losses.

4. It Improves Customer Experience

With no time-consuming paperwork getting in the way, customer frustration is significantly reduced. Studies even reveal most customers are willing to return to a financial or banking service if no physical proof of identity is required. 

These benefits also extend to the agents themselves. Once eKYC is integrated with modern programmable contact centers like StringeeX, customer data from multiple platforms are instantly verified, pre-filled in relevant application forms, and stored properly on one single interface for easier usage and tracking. So,  instead of spending hours searching and confirming information, agents can manage their time for more urgent customer issues. 

Better yet, automated info storage on StringeeX also makes it quite a breeze to provide customers with other personalized advice or product recommendations beyond simple money transactions. 

The instance a client reaches out to the bank via phone calls or messages, all their previous, relevant data will show up on the main screen, providing extensive background knowledge for the agent to handle the conversation successfully. No more angry customers on the other side!

Read more: Why is eKYC via Video Calls optimal for financial and banking businesses?

Who Else Needs eKYC?

Banking sectors aside, any business belonging to the “regulated sector” category will benefit from eKYC. Insurance companies, fintech start-ups (Volopay, Paytm, Razorpay), foreign exchange brokers, etc., are some common examples.

According to India Times, Sebi allowed 39 different entities to incorporate e-KYC Aadhaar authentication into their operation in 2022.

Conclusion

What is eKYC in bank? Our guides have provided a clear overview of this digital confirmation process. While certain limits might still exist, this solution clearly outperforms the traditional KYC method and successfully integrates itself into the workflow of numerous world-leading banks.

For more clarifications, please write to our support team.