Author: Signzian

A Brief Summary Of Video KYC In The Indian Insurance Industry

Posted on | by Signzian

The Insurance Regulatory and Development Authority of India (IRDAI) has permitted insurance companies to issue policies on the basis of a video KYC (know-your-customer) process. Moneycontrol had first reported the regulator’s plan of allowing insurers to adopt video-based KYC for policy issuance. It has already allowed insurers to use digital modes for validating policyholders’ signatures on documents.

Earlier, the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI), too, had allowed entities such as banks and mutual funds to use video-based tools to complete the mandatory KYC process. The Pension Fund Regulatory and Development Authority (PFRDA) has also permitted distributors to use video KYC for onboarding National Pension System (NPS) subscribers.

IRDAI introduces VBIP

In a circular sent exclusively to all general, life, and standalone health insurers; IRDAI expressed its readiness to introduce a Video-based Identification Process (VBIP) allowing insurers to provide a Video-based KYC method to their customers for KYC verification.

The circular also outlined regulations that will have to be followed to complete video KYC for insurance onboarding. These regulations are similar to the Video-based Customer Identification Process (V-CIP) introduced by the RBI recently, and the Video In-Person Verification Process (VIPV) brought in by SEBI.

The circular encourages the use of AI and other emerging technologies to ease the video KYC process and, on the surface, appears to be beneficial for the insurance sector. But what does VBIP really mean for insurers?

What are the problems with traditional insurance onboarding?

The inadequacies plaguing insurance onboarding are, to a certain extent, shared by manual and paper-based onboarding processes throughout all industries.

Traditional KYC verification in the insurance sector involves — manually creating insurance documents, collecting pertinent identifying documents from the customer, verifying the information in these documents, sending the relevant insurance contracts to the customer, and obtaining the customer’s signatures on these contracts.

This process encompasses numerous inefficiencies and areas due for optimization; some of the problems with paper-based insurance onboarding are –

  • High operational & onboarding costs: Paper-based KYC methods make use of inefficient and expensive mechanisms for documentation and verification purposes; these include paper documents, manual verification, and disparate KYC workflows. Operational costs are also high due to the manual nature of operations.
  • Lengthy verification processes & high drop-off rates: KYC verification is tedious and frustrating when done manually. These problems are compounded when the possibility of losing or misplacing paper documents is taken into account. Lengthy verification is also a burden to the customer, leading to low levels of satisfaction, numerous KYC drop-offs, and ultimately a business loss.
  • Excessive workforce requirements: Paper-based KYC documentation inherently requires a workforce to function; employees are also required to perform ID verification and due diligence on the verification processes. These requirements further exacerbate the operational liabilities of traditional onboarding.
  • Messy paper trails: Mountains of paperwork are almost a prerequisite for onboarding when a customer visits an insurer. However, all this paper is more than just daunting; it’s needlessly expensive, tedious, and time-consuming. The paperwork also increases the chances of losing or misplacing customer information, thus further increasing the time taken for onboarding.
  • Manual errors and data security: Manual errors are a certainty in traditional KYC verification. Organizing customer documents, data entry, and KYC verification are all subject to manual error, which significantly costs the insurer. Additionally, paper documents are the least secure when it comes to protecting customer data and can easily be lost or misplaced, leading to distrust amongst customers and further costs.

Traditional insurance onboarding, therefore, isn’t really a walk in the park. What will the alternative proposed by IRDAI look like? The circular gives us some clues.

What are the steps in VBIP?

According to IRDAI, VBIP in practice will be quite similar to the video-based customer identification process (V-CIP) envisaged by RBI a few months ago and also to VIPV.

However, we must note here that the IRDAI circular does not include PAN validation in the steps for VBIP, as opposed to RBI’s V-CIP in which PAN validation is a part of the process.

Now, here are the rules set forth by IRDAI for its new video-based KYC process

  • KYC verification must be conducted by an authorized official from the insurer via video after obtaining the customer’s consent. This video must then be recorded and stored in a safe place with date and time-stamps.
  • The official can either perform offline verification of Aadhaar or online OTP-based eKYC authentication provided that the customer voluntarily submits such identifying information. In offline Aadhaar verification using Aadhaar XML or QR code, the official must ensure that the XML file or QR code was generated at most three days before the VBIP process.
  • The official must capture a live photograph of the customer, ensure that it matches the picture in the customer’s Aadhaar and that the identification details in the customer’s Aadhaar match with those provided by the customer.
  • The customer’s location is to be determined via geo-tagging to ensure that the customer is in India.
  • The official must initiate an audio-visual interaction with the customer consisting of a varying series of randomized questions, to confirm liveliness and that the interaction is not pre-recorded.
  • Insurers must ensure that the process is seamless and takes place in real-time. Additionally, the official will have to make sure that the customer is not covering any part of his or her face and that the video quality is satisfactory so that the customer is easily recognizable.
  • The audio-visual interaction in question must be triggered from the insurer’s domain and not using third-party services, and the official conducting VBIP must be trained for this specific purpose. The activity log of the official undertaking VBIP and the details of the official must both be preserved.
  • Insurers will have to carry out security audits and validation to ensure that their VBIP application is secure and end-to-end encrypted before releasing their applications to the public.
  • All accounts opened via VBIP will only be functional following concurrent audits, underwriting, and verification.
  • Note here that IRDAI does not explicitly state that these steps are to be followed in a particular sequence; the circular states only that VBIP must consist of the aforementioned steps and that the guidelines must be followed.

Now that we know what VBIP will look like, we must next extrapolate these guidelines to figure out how this new video-based KYC process will affect the insurance industry.

How will VBIP affect insurers?

 

The IRDAI circular was preceded by decisions from both RBI and SEBI to introduce video KYC for onboarding purposes. This suggests that the introduction of VBIP had a lot to do with the ramifications of V-CIP and VIPV on the financial and securities-related industries.

The impact of video KYC on banking and securities has been exceedingly positive, resulting in massive reductions in onboarding costs and TAT, and several millions of accounts opened via video. Therefore it’s safe to assume that the intention of IRDAI in releasing this circular was to provide these same benefits to the insurance sector, and it’s highly likely that this is indeed what will happen.

As mentioned before, onboarding across industries is quite similar, and hence changes in the onboarding process are likely to shake out in the same way. Given the extensive advantages of video KYC in banking and securities, we can reasonably expect the following benefits for insurers:

Reduced onboarding costs: As with the banking sector, insurers can expect up to a 90% reduction in onboarding costs by digitizing onboarding using video-based KYC methods.

Lowered TATs: Automated verification and digitized documents ensure that onboarding is completed within minutes instead of days.

More completions: Video KYC is streamlined and efficient, allowing for instant KYC verification and smooth onboarding, which is guaranteed to massively lower KYC drop-offs.

Increased customer satisfaction and reach: Customers will no longer have to visit offices carrying folders full of documents to be onboarded but can instead complete their KYC using just a device with an internet connection. This will also allow more people to obtain insurance, which will be a positive development, especially during these times.

Customer safety: Customers, especially those in dire need of insurance, are either unable or too fearful to travel to insurers to obtain insurance. However, video KYC allows such vulnerable customers to complete KYC verification remotely and obtain the insurance they need without stepping outside their homes.

Secure customer data: In an age of frequent cyber-security breaches, data security is a prime concern for both businesses and consumers. Video-based KYC processes such as VBIP ensure the security of sensitive customer data and are instrumental in protecting information.

The benefits of video KYC are numerous, and the adoption of VBIP will certainly positively impact the business performance of insurers.

A video KYC is done to make sure the person buying an insurance policy is real and alive. It allows an insurance official to see you through a live video over the internet. Insurance companies — life and non-life — can now use a video-based identification process (VBIP) to obtain customers’ KYC documents, which is mandatory before issuing a policy. They will have to complete the process through their official technology platforms that facilitate recording videos of policyholders for the purpose. “Insurers may undertake live VBIP by developing an application that facilitates the KYC process either online or face-to-face in-person through video,” IRDAI said in its circular.

How will the process be carried out?

Either the insurers’ staff or authorized representatives can record a ‘clear, live’ video of policyholders at their homes and obtain identification information. “Discussions around implementation are still on. Approaches could vary as per the company. The first option is to enable advisors to visit the prospective policyholder’s house, connect her to the insurer’s employee through the official app and record the video KYC process as per IRDAI’s guidelines. The second option is to send a weblink to the policyholder who will use it to log in online At the other end, the insurer’s employee will record the identification process,” says Anilkumar Singh, Chief Actuarial Officer, and Appointed Actuary, Aditya Birla Sun Life Insurance.

As a customer, you can choose to share your Aadhaar information or any other officially valid document such as a passport and driving license. If you have signed up for the Digilocker facility, you can submit a digitally signed copy. Or, you can simply share it in the form of a clear photograph or a scanned copy of the original document, through the e-Sign mechanism. Your live location will also be captured, along with the date and time-stamp. “Geotagging is a must. The KYC process is valid only if the prospective customer is in India,” says Vaidyanathan Ramani, Head, Product, and Innovations, Policybazaar.com.

At your end, you should also ensure that your face is clearly visible in the video and not covered in any way.

Conclusion

In these COVID-19 times, you will not have to risk visiting an insurance company’s branch or agent’s office to complete the policy purchase process, including KYC verification. Insurers are yet to roll out the process. Once they do, it is likely that you will have to access the insurer’s platform via a link or app shared by the company. You will have to answer questions via a video instead of doing so physically, besides sharing KYC documents online to complete the process. “The questions could be dynamic. Since one of the purposes is to establish that the person is alive, questions could be devised in such a way that responses cannot be standard,” says Vaidyanathan.

While the onus of executing a secure transaction is on the insurer, on your part, ensure that you are dealing with authorized representatives of the company and the video is being recorded through company-authorized channels.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

Car Insurance

Car Insurance: Embracing API, RPA, and AI

Posted on | by Signzian

Car insurance formed 39.4% of all non-life insurance markets in India combined. A major reason for this is India’s swiftly expanding Automotive industry. Automobile sales in India have risen to a 7.01% CAGR between 2013 and 2018. This constitutes the sale of nearly 25 million vehicles in 2018 alone.

The growth in the industry is not going to wane any time soon. But the competition in the field is not getting any easier either. Each Insurer is trying to offer better rates and offers for the customers.

This will be a chance for Insurance institutions to grab a bite of the impending opportunity. They should use every trick they can find to increase customer satisfaction and decrease costs. And the best in the quiver is automation of the entire industry. Automation brings forth other advantages like better customer experience and lesser processing time. This article has a detailed look at how companies can do it and how a few are already doing it.

The Growing Indian Automobile Market And The Potential It Holds

Motor insurance unlike most other insurance options is mandatory. It is used to insure any type of motor vehicle, be it two, four, or eighteen-wheeled. This is for our safety and the safety of others on the street. They do not just cover the motor vehicle but also to an extent, the health care of the individuals involved.

In 2019 India became the fourth largest automobile market superseding Germany with nearly 4 million units sold. By the end of 2021, the country is expected to ascend to 3rd place displacing Japan. Domestic production increased by 2.36% CAGR between 2016 and 2020. All this reinforces the incredible growth of the Indian market.

Unfortunately, A large number of vehicle owners in India are not renewing their insurances because of Insufficient enforcement, Substandard follow-ups by insurers, and increasing third-party cost covers.

The Insurance Information Bureau reported that the ratio of uninsured vehicles increased from 54% in 2018 to 57% in 2019. This implies that more than 13.2 crore vehicles on the street are uninsured. For a country with nearly 50 lakh registered accidents, that’s a lot. The operative word here being ‘Registered’.

The bulk of the uninsured are two-wheelers and vehicles bought at lower cost points. We can infer that owners in this segment consider even the current prices unaffordable. If the prices can be lowered by the insurers, it might will help bring in more customers.

The Existing Claims Process In The Vehicular Insurance Industry

 

The automobile insurance sector has been afflicted with immense pricing competition, high costs of acquisition, sparse product innovation, fraud, and abuse in vehicle repair networks. Although this has changed over the past decade, many insurers consider cost control to be a solution over better risk selection methods. This might not be the general norm, but it is a possible option many opt for.

In India automobile insurance is classified into primarily three categories:

  • Private Car Motor Insurance- all privately owned cars and four-wheeled vehicles.
  • Two Wheeler Insurance- constitutes all two-wheeled vehicles like motorcycles and scooters.
  • Commercial Vehicle Insurance- includes trucks, taxis, and other commercial vehicles.

Discounting some major corporations, most insurers in India still onboard their customers and provide services in the traditional ways of the past. This not only does produce a bad customer experience but also increases the cost and time required. Physical applications are obtained and processes are conducted in person expending hours of both the agent and the customer.

The insurance claims process is a brutal experience for many customers as multiple documents have to be submitted multiple times to prove their claim. These documents range from the basic policy number to the copy of the vehicle inspection address details. This is tedious and cumbersome for the clients.

There are three major types of claims:

  • Third-Party Claim- covers any damage to third-party property and healthcare.
  • Own Damage Claim- covers any damage to your property and healthcare
  • Theft Claim- Covers compensation in cases of the vehicle being stolen.

The processes for each vary vastly and are confusing to the customer. A systematic method of maneuvering these hurdles is lacking and would help enhance customer experience.

 

Claims Automation- How Will identity verification API Change The Process?

Traditional methods for verification demand manual assessment and submission of these photos and documents by claims officers. In which case, automation is entirely absent. It may take some hours or even days to assess the extent of damage. Claims automation makes the process require lesser effort from both parties. Most documents can be submitted in soft copies and identity verification API is used to validate and obtain data from them.

This helps insurance inspectors or concerned personnel to fast-track their processes. They can immediately store and retrieve data regarding the case through an online database system. This database system is usually composed of identity verification API that can be selectively used.

In advanced markets, RPA and AI are used for even evaluation and the validity of the claim. In a prime market like India, such innovation requires some more time. But eventually, the process will become completely automated.

Even documents are captured and processed with the help of identity verification API. The credibility of this process is better as the process is performed through strict automation avoiding human errors. The entire process can be simplified with a smartphone application for the processing. In the Back office, the assessment data is analyzed through human intervention. This double-checks the process and ensures the lack of any error.

Advantages and Disadvantages of Automation in Car Insurance

Automation through RPA and AI brings forth multiple advantages for the insurers and the customers. But a detailed insight is needed to have a better understanding of how exactly it benefits the sector and where it could have some improvements.

The Advantages of Claims Automation in Automobile Insurance include:

  • Time for claims processing is reduced from 5–10 days to a matter of minutes as identity verification API is used to process documents, images, and other data for verification and validity of the claim.
  • More number of claims applications can be processed as the time and resources required for assessment of each is drastically reduced.
  • The overall cost for the insurers is reduced as time and resources are considerably reduced. This in turn decreases the overall expenses which can either be added to the company profits or used to reduce the cost of premiums. Thus, attracting more customers.
  • Automation enhances efficiency and develops cutting-edge equity in the procedure.
  • As the assessment and processing are not prone to much human error the credibility is increased in cases of disputes and disagreements. This gives more validation to the insurers’ stance.
  • The efficient automation processing prevents fraudulent claims. As it is much harder to fake an accident or other modes of fraud like fake documents, fraud rates can be reduced to a great extent.

Unfortunately, the current automation methods have not reached their absolute potential. Due to this, they have certain areas of improvement that need to be addressed. Some of them are:

  • It is still not fully automated. Thus, human intervention to an extent is unavoidable. Perhaps in the future, this too shall be solved.
  • Assessment is still manual as the claims officer must perform this manually to an extent. This is something that can be improved in the future
  • Proper management of Cloud data storage and IT security is needed in Automation. The system must be foolproof for hackers and external disruptors.

Conclusion

The booming automobile industry is a lucrative opportunity for insurance companies. But with the newer norms from the government, the competition is only set to increase. As mentioned before, tackling this requires newer methods for processes. Is it not obvious that automation is a better path to take from the stagnating anchors of traditional methods?

Automation through identity verification API, RPA, and AI will create a smoother and easier experience for the claims processes. Its credible assessment and processing of claims bring more validity to the insurers. Overall the industry is set for a change through this. Some of the insurance companies in India like the IFFCO Tokio General Insurance Company Limited have adopted AI to a whole new level. But this is not the case with existing insurers in the automobile industry.

While embracing the perks of Automation, we must acknowledge one other factor. Automation is evolving. This evolution helps in making the processes and in essence our lives more comfortable. Hence, all the players in the industry are predestined to adapt to technology or fall in the coming age of transformation. The right choice is easy to see, but to accept is a bit more tricky.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

Innovation Of No Code AI In US Banking & Its Impact On Customer Experience

Posted on | by Signzian

AI-powered machines are tailoring recommendations of digital content to individual tastes and preferences, designing clothing lines for fashion retailers, and even beginning to surpass experienced doctors in detecting signs of cancer. For global banking, McKinsey estimates that AI technologies could potentially deliver up to $1 trillion of additional value each year.2

Many banks, however, have struggled to move from experimentation around select use cases to scaling AI technologies across the organization. Reasons include the lack of a clear strategy for AI, an inflexible and investment-starved technology core, fragmented data assets, and outmoded operating models that hamper collaboration between business and technology teams. What is more, several trends in digital engagement have accelerated during the COVID-19 pandemic, and big-tech companies are looking to enter financial services as the next adjacency. To compete successfully and thrive, incumbent banks must become “AI-first” institutions, adopting AI technologies as the foundation for new value propositions and distinctive customer experiences.

Over several decades, banks have continually adapted the latest technology innovations to redefine how customers interact with them. Banks introduced ATMs in the 1960s and electronic, card-based payments in the ’70s. The 2000s saw broad adoption of 24/7 online banking, followed by the spread of mobile-based “banking on the go” in the 2010s.

Few would disagree that we’re now in the AI-powered digital age, facilitated by falling costs for data storage and processing, increasing access and connectivity for all, and rapid advances in AI technologies. These technologies can lead to higher automation and, when deployed after controlling for risks, can often improve upon human decision-making in terms of both speed and accuracy. The potential for value creation is one of the largest across industries, as AI can potentially unlock $1 trillion of incremental value for banks, annually

No-code in a nutshell

For as long as there have been computers to program, there have been attempts to make programming easier, faster, less technical, and available to a much broader audience. Essentially, any end-user programming signals that even though most computer users lack coding skills, they would welcome the application potential of various tools — as long as the effort to obtain these skills is low.

No-code stands for a family of tools that allow people to build applications and systems without having to program them in a conventional way. Instead, the core functionality is accessible through visual interfaces and guided user actions, as well as pre-built integrations with other tools to exchange information as needed.

While these self-imposed restrictions can lead to issues for very large or complex applications, the whole family of no-code tools is handing a big chunk of power to their users. As Alex Nichols from Alphabet’s growth fund CapitalG said:

“No code is empowering business users to take over functionality previously owned by technical users by abstracting complexity and centering around a visual workflow. This profound generational shift has the power to touch every software market and every user across the enterprise.”

To give you a few examples, here are some common things that can be built entirely with said no-code tools (check out Nocodelist for more examples):

  • Websites and landing pages with Webflow (ours is built with it!)
  • Web or mobile applications with Bubble, Adalo, Mendix or Thunkable
  • Chatbots or virtual assistants through Octane AI, Kore.ai, Landbot or Mindsay
  • Databases through Airtable
  • Connecting your tool stack with Zapier, tray.io, Integromat, Parabola, or Paragon
  • E-commerce through Shopify or Weebly
  • Manage memberships with Memberstack

It is fair to believe that the no-code space is here to stay. AI tools built on these principles are showing that the field not only grows in width but also depth when it comes to the job to be done and technology in place.

Before we move to no-code AI, we will quickly touch on one fundamental question first: When does it even make sense to use AI?

When to use — Why No Code AI Can Help Succeed?

Note that AI can be used for a variety of applications but we intentionally limit our discussion to business applications.

Broadly speaking, AI is particularly helpful when there is some sort of intelligent judgment to be made by humans and when there are many of these on an ongoing basis. We often use the phrase “AI starts where rule-based automation ends” — which makes sense from our viewpoint but should not be generalized (there are tools that go beyond pure automation, e.g. Obviously AI for analyzing tabular data at scale).

Quantity

Due to ever-changing regulations at both the federal and state levels, insurers and banks are finding themselves having to produce, reproduce, and edit a massive amount of required client forms. Whether it’s a policy proposal, an insurance application, a policy amendment, or a prospectus, it’s something that must be reviewed by an employee and scanned for future retrieval. When you use a digital solution like EasySend, your company can significantly reduce the number of forms and make it easy to fill them out and store them. If there is an update to be made, an existing form can be changed and saved in the cloud-based database. The catch is that your client database must meet current federal and state security standards to protect consumer information from data breaches.

Quality

Let’s face it. Many insurers and banks in the U.S. have slowly developed into large and complex enterprises. They are slow to complete their digital transformation because they are often crippled by legacy systems and inefficient processes. The result is that customers don’t enjoy their experiences. With EasySend’s no-code, plug-and-play solution, any insurer can become more adept at processing multiple client forms, which improves the customer experience and elevates overalls satisfaction to a new level. Your insurance company must invest in a solution that brings legacy systems into the digital age (even if it means replacing them).

Cost

We live in a world where the potential ways you could invest in digital transformation would exceed your IT budget if you purchased them all. Every time you adopt a digital solution, ten more options emerge on the market promising to perform the same processes and more with greater efficiency. Although many large insurers and banks have deep pockets, their spending is under constant scrutiny from regulators, distributors, and customers. Generally, the priority of the insurer is always ensuring that you have healthy cap reserves, general account surplus, product embedded value, policyholder or contract owner dividend, etc. EasySend can help enterprises improve their top-line value (earnings) by reducing the substantial direct and indirect costs associated with manual form production and form management. We’ve also planned for how to manage the many risks associated with manual document processing including errors, non-compliance, and client attrition.

Time to Market

It used to be feasible to wait 8 to 12 months for the release cycle of a new digital product. Now, if you were to wait that long, your customers would abandon your brand. Today’s insurers should consider solutions that deliver new digital experiences to their clientele with greater speed. EasySend uses advanced AI (artificial intelligence) and no-code application development capabilities to reduce development time from months to days. Our solution also reduces maintenance costs and simplifies operations. You won’t need any programmers to update business processes with EasySend, but your CTO will find it easy to implement this platform across your organization. Choosing EasySend would be a crucial and impactful step in your digital transformation.

Benefits In Banking — What No-Code AI Helps You Achieve

Shadow IT solutions being built by businesses to resolve immediate needs are increasing the operational risk considerably. According to Gartner, at large enterprises, citizen developers are likely to be four times the number of IT professionals by 2023. ​​​​​​​

Customer experience transformation is held back by digital skill shortfalls in the workforce. Almost 80% of banking CEOs in a PwC survey saw this as a key challenge to digital transformation.

Dynamic market and regulation landscapes need adaptability at speed, but technology investment is slow in traditional banks. According to a recent Oliver Wyman study, traditional banks take three to six months to launch a new feature, while challenger digital banks do it in just about a couple of weeks.

Legacy systems that don’t integrate well with modern applications, hinder digital transformation efforts, consuming 60–80% of technology budgets for operations and maintenance.

AI and Credit Decisions

Artificial Intelligence provides a faster, more accurate assessment of a potential borrower, at less cost, and accounts for a wider variety of factors, which leads to a better-informed, data-backed decision. Credit scoring provided by AI is based on more complex and sophisticated rules compared to those used in traditional credit scoring systems. It helps lenders distinguish between high default risk applicants and those who are credit-worthy but lack an extensive credit history.

Objectivity is another benefit of the AI-powered mechanism. Unlike a human being, a machine is not likely to be biased.

Digital banks and loan-issuing apps use machine learning algorithms to use alternative data (e.g., smartphone data) to evaluate loan eligibility and provide personalized options.

Automobile lending companies in the U.S. have reported success with AI for their needs as well. For example, this report shows that bringing AI onboard cut losses by 23% annually.

AI and Risk Management

It’s difficult to overestimate the impact of AI in financial services when it comes to risk management. Enormous processing power allows vast amounts of data to be handled in a short time, and cognitive computing helps to manage both structured and unstructured data, a task that would take far too much time for a human to do. Algorithms analyze the history of risk cases and identify early signs of potential future issues.

Artificial intelligence in finance is a powerful ally when it comes to analyzing real-time activities in any given market or environment; the accurate predictions and detailed forecasts it provides are based on multiple variables and vital to business planning.

A US leasing company, Crest Financial, employed artificial intelligence on the Amazon Web Services platform and immediately saw a significant improvement in risk analysis, without the deployment delays associated with traditional data science methods.

At the same time, explicit programming often leads to problems when there are simply too many rules or exceptions to be considered. In that case, AI often works better. For example, it is certainly possible to set up rule-based automation for processing text by using a long chain of words and phrases but in many situations, this wouldn’t be efficient due to high costs or poor performance.

How small banks can make the most of AI?

In several of our conversations with executives of smaller banks like Community banks in the US, it became very apparent that they were seeking a differentiator in their intense competition with the larger banks. Big banks are using cutting-edge artificial intelligence techniques by using in-house teams of Data Scientists and Quants for risk assessment, financial analysis, portfolio management, credit approval process, KYC & anti-money laundering systems. On the other hand, small banks can use AI for achieving operational efficiency and better customer interactions.

Some of the several applications of AI that smaller banks can benefit from are:

Better Customer interaction using chatbots

Accurate recommendations using Recommendation engines

Fraud detection using machine learning algorithms

Conclusion

Digital transformation has erupted at a rapid pace especially with the pandemic crisis making it difficult to execute daily operations on a physical basis. Rapid transformation of banking operations in AI is no joke, and hence with no-code AI one could say that the process can certainly move along faster. While in its infancy no-code AI still leaves a lot of room for skepticism, one can certainly agree to it that this is the way to banking — now and in the future!

About Signzy

Signzy is an AI-powered RPA platform for financial services. No matter how complex your workflow or operational complexity, Signzy is able to completely automate your back-operations decision-making process into a real-time API. This is possible due to a combination of Nebula — Our no-code AI model builder and our Fintech API Marketplace of over 200+ APIs. Today we work with over 90+ FIs globally including the 4 largest banks in India and a Top 3 acquiring Bank in the US. Globally we have a strong partnership with MasterCard and offices in New York and Dubai to serve our customers in the 2 geographies. Our Product team of 120+ people is building a global AI product out of Bangalore.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Contact us

Reach out to our team: reachout@signzy.com

For sales queries: Swati Saxena

Email : swati.saxena@signzy.com

References:

https://www.mckinsey.com/industries/financial-services/our-insights/ai-bank-of-the-future-can-banks-meet-the-ai-challenge

https://towardsdatascience.com/the-growing-impact-of-ai-in-financial-services-six-examples-da386c0301b2

https://www.tcs.com/blogs/low-code-no-code-platform-benefits

https://learn.g2.com/ai-in-banking

https://www.levity.ai/blog/no-code-ai-map#:~:text=The%20promise%20of%20no%2Dcode%20AI&text=No%2Dcode%20AI%20tools%20allow,or%20drag%20and%20drop%20UI.&text=Easy%2Dto%2Duse%20ML%20platforms,and%20to%20solve%20business%20issues.

https://www.easysend.io/four-things-to-look-at-when-considering-a-no-code-platform-to-take-your-insurance-company-digital/

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Author: Tathagata Chakrabarti

Bio: I am a Technical content writer who likes to talk about new innovations in banking, technology, and other areas.

 

The Saga Of KYC In US Banking Regulations — BSA To Patriot Act And The Road Ahead In The Digital Age

Posted on | by Signzian

KYC regulations have critical implications for consumers in the financial space. Banks need to comply with KYC to limit fraud. However, KYC requirements for banks are often passed down to those with whom the banks do business.

KYC In Banking — The Base At The Banking Secrecy Act”?

KYC requirements for banks help them verify the identities of their clients. It is also a way to assess any potential risks of forming a business relationship with them. The goal of KYC is to prevent banks from being used, intentionally or not, for money laundering and other illegal activities.

In 1950, the Federal Deposit Insurance Act was passed to monitor the Federal Deposit Insurance Corporation (FDIC). The bill included a list of regulations that banks must comply with in order to remain insured by the FDIC. This event was crucial to forming the foundation of modern KYC laws.

In 1970, the U.S. Congress introduced the Bank Secrecy Act. The BSA is an amendment to the Federal Deposit Insurance Act. It requires banks to produce 5 types of reports to FinCEN and the Treasury Department:

 

  • Currency Transaction Reports (CTR): This contains any cash transaction that exceeds $10,000 in one business day. It can include multiple transactions.
  • Suspicious Activity Reports (SAR): This report shows any cash transaction where a customer violates BSA reporting requirements.
  • Foreign Bank Account Report (FBAR): Any U.S. citizen/resident with a foreign bank account of at least $10,000 is required to file an FBAR report each year.
  • Monetary Instrument Log (MIL): Banks must keep a record of all cash purchases of monetary instruments. This includes money orders, cashier’s checks, traveler’s checks, etc.
  • Currency and Monetary Instrument Report (CMIR): Anytime a person or institution physically transfers monetary instruments in excess of $10,000 into/outside of the United States must file a CMIR.

The ABCs of KYC — The Major Focus Of Patriot Act

KYC laws were launched in 2001 as part of the US Patriot Act. The law was passed after 9/11 to provide a means to hamper terrorist behavior.

The particular section of the Act that pertained specifically to financial transactions added requirements and enforcement policies to the Bank Secrecy Act of 1970 that had thus far regulated banks and other institutions. These changes had been in the works for years before 9/11. The terrorist attacks finally provided the thrust needed to enforce them.

Thus, Title III of the Patriot Act requires that financial institutions deliver on two requirements for stricter KYC. These two are the Customer Identification Program (CIP) and Customer Due Diligence (CDD).

 

CIP — The First Pillar Of The Patriot Act

CIP is the more straightforward of the two components, and likely more familiar.

To comply with CIP, a bank asks the customer for identifying information. Each bank conducts its own CIP process, so a customer may be asked for different information depending on the institution. An individual is generally asked for a driver’s license or a passport.

Information requested for a company might include:

  • Certified articles of incorporation
  • Government-issued business license
  • Partnership agreement
  • Trust instrument

For either a business or an individual, further verifying information might include:

  • Financial references
  • Information from a consumer reporting agency or public database
  • A financial statement

Nonetheless, every bank is required to verify their customers’ identity and make sure a person or business is real.

CDD — The Second Pillar of The Patriot Act

The second component, CDD, is more nuanced.

In conducting due diligence, banks aim to predict the types of transactions a customer will make.

This is done in order to be able to detect anomalous (or suspicious) behavior.

This also helps assign the customer a risk rating that will determine how much and how often the account is monitored.

Finally, it also helps identify customers whose risk is too great to do business with.

Banks may ask the customer for a lot more information. This can include the source of funds, the purpose of the account, occupation, financial statements, banking references, description of business operations, and others. There’s no standard procedure for conducting due diligence. This means banks are often left up to their own devices.

In fact, the Patriot Act doesn’t even directly highlight a CDD requirement. On the contrary, it denotes that a bank is required to file a suspicious activity report if it suspects or has reason to suspect such activity. But without knowing about its clients, a bank won’t be able to meet this requirement — hence the CDD.

The Financial Crimes Enforcement Network (FinCEN) regulates and strictly enforces KYC. FinCEN also manages other regulators for banks. It also manages the Fed’s Board of Governors, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency of the U.S. Treasury. Other financial institutions can be regulated by the SEC, the U.S. Treasury, the IRS, or the National Credit Union Administration, among others.

As a result of due diligence, a bank might flag certain risk factors. These are like frequent wire transfers, international transactions, and interactions with off-shore financial centers. A “high-risk” account is then monitored more frequently. In such cases, the customer might be asked more often to explain his transactions or provide other information periodically.

KYC requirements for banks in the Digital Age

Today, banks and their fintech counterparts can go to great lengths to assure compliance with KYC standards. As a result, more money is poured into new KYC technologies constantly. This was found as a study of the CEB TowerGroup. Currently, KYC solutions rank amongst the most valuable banking technologies. More than 62 percent of executives are certain, KYC investments will grow even more in the future.

In the modern context of digital, border-free and contactless payments, AML and KYC cannot deny their beginnings. Many KYC procedures still derive from a time when financial services were stationary. Back then, the client had to be physically present in a banking branch to access them. Identity verification was a simple matter of seeing the client physically. This was usually followed with collating the paper documents and ID with official records. The client databases had to be updated manually.

Users supply bank account data, social security numbers, etc to fulfil the KYC requirements for banks. They may also provide hard physical proofs of identity like a valid passport and utility bills (water or electricity bills). Should the customer deliberately hand over false information, the reviewing company will have the case investigated. This may ultimately lead to legal action. Modern technologies help alleviate the human factor. AML procedures today are more about lines of code on a server than types of seals on paper documents.

Yet, in many cases, banks and fintech businesses don’t settle for the state-of-the-art in regulatory tech. A KYC Market Report by CEB states that the systems by which banks identify their customers are often outdated. With general anti-money laundering technology, the situation gets even worse.

This is why banks and financial institutions are invited to rethink the KYC requirements for banks in light of modern software solutions and technologies like:

 

  • Blockchain: Sharing of KYC related data without intermediaries
  • Artificial intelligence: Approvement of documents via self-learning algorithms
  • Biometrics: Identification through biometrical features
  • CDD and EDD by evaluation of social media activity
  • Streaming: Voice and face identification via video chat

Regulatory technology (or RegTech) like this has the potential to make processes a lot faster, more accurate and transparent with digital kyc.

Conclusion

In our current time of digital disruption, KYC and AML are in a constant state of change. The online market for financial services and products is growing and so are the risks for customers engaging with them. The international banking and fintech scene keeps changes this will keep regulators occupied. Innovative technologies and flexible software give businesses an edge, allowing them to stay compliant and to adapt to new forms of cybercrime.

But within this period of change, one thing remains firm:

There will always be customers. And knowing what they are up to, will always be a key factor for corporate success.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

The Era Of Digitization-Fintech Strategy of Digital Onboarding And What’s In Store For The Future

Posted on | by Signzian

Introduction

The world fintech market share across 48 unicorn fintech companies is north of $187 billion. This amounts to more than 1% of the global financial industry. A sensible question that comes to mind is, how are they doing this?

Fintech startups are considered underdogs in the financial ecosystem especially when compared to financial behemoths that are already present. Nonetheless, they are growing at a tremendous pace posing a challenge to these traditional giants. This is evident from the pace at which they acquire new customers. Some take less than 4 minutes to complete the entire end-to-end customer acquisition flow and in most cases right from the customer’s smartphone with almost no human interaction.

The reason for their excellent presence is due to multiple factors. The fact that they have defined a specific customer base to explore helps them identify their market. Their diligent proximity with advancing technology helps them create innovative and cheaper solutions. But mere statements for how they are doing it isn’t enough. We need a thorough understanding of the mechanics and strategy. Let’s have a closer look at how fintech startups approach digitization

How the Fintechs Have Fared in the Past Decade

The era before the dot-com bubble was the time of startup boom with over $30 billion in venture capitalist investments in the US. But once the bubble burst, investments for startups, especially fintech startups declined. By the early 2000s, the total investments were barely meeting the $5 billion mark.

The situation has been on a drastic change since the beginning of the past decade. Investments have grown tremendously, coming back on top to over $22 billion in the US alone. A good example is Venmo (launched in 2009) whose valuation rose from $150 million in 2013 to $38 billion in 2020. The company had proven that they had fresh ideas and excellent execution strategies for investors. The fact that they had grown from 10 million users to 40 million users was one of the primary reasons for this. This attracted the backing they required, boosting the venture.

Braintree, a division of PayPal acquired the company for $26.2 million in 2012. This was no epiphany for the fintech giant, but the result of years of close observation. Not only was the startup gaining customers, most of them remained active. Currently, with more than 26 million active users, Venmo is set to grow faster and better.

Venmo is merely one example of this potential opportunity. 2018 was particularly a crucial year as 18,000 startups received more than $254 billion globally. The majority of these were from the US. The global fintech market was worth $127.66 billion in the same year with an expected growth rate of 25% to $309.98 billion by 2022. All this was due to how sedulous catering of their customers.

 

What Are The Fintech Startups Doing Right To Grow?

Fintech startups are not bound by traditional methods. They have the freedom to think outside the box for they know not where the boundaries of convention confine them. They can understand the most fundamental concept in running a business. Gaining a customer is harder than retaining one.

Retaining your customers will help you forage all the low-hanging fruits. One of the vital aspects of any financial venture is to create retainable, loyal customers while improving the ease of onboarding new ones. Thus, it is easy to conclude that onboarding customers are the key to a company’s growth. But, whether fintech startups have done so is a question to be pondered upon. They have amalgamated technology into their onboarding process by making it completely digital. In an industry where 71% of consumers end their relationship with a company because of poor customer service, it is essential to provide the best service you can from the get-go.

Most Fintech Startups focus on certain areas of improvement when it comes to customer onboarding and service. Some of these areas are:

Selective Niche

The Startups define their customers. Mostly focusing on Gen X and Millennials, they cater to a younger customer base. This is beneficial in the long term as most of the current younger generations can be converted into long-term loyal customers with considerable financial assets in the future. For example, Most of Venmo’s customer base is aged lower than 34 years. 7.4 million P2P payment service users are between the ages of 18 and 34. 4.1 million of them are between 25 and 34 years. Since they are focusing on the younger generations, only 1.4 million consumers are above the age of 35 and below 44.

Digitization and Consumer Experience

The traditional methods of onboarding are tedious for newer customers. Fintech Startups acknowledge this by making the process easier. The first step is to provide digital onboarding options. Not only does this reduce the time required for the process, but it also enhances the overall user experience. Expenses too are reduced for the companies due to reduced exploitation of resources for storage and manpower.

The best technology usable will meet contemporary expectations in customer service. Banks with no websites or no online presence are yet to come out of the dark ages. By 2020 more than 67% of consumers have used a fintech platform. This was 33% more than in 2017. This number will soon reach absolute saturation. Giants in the insurance sector are wise in predicting this. More than 63% of CEOs in the sector believe technology like IoT(Internet of Things) will impact the whole financial sector.

60% of the consumers opt for transactions with financial institutions with a single online platform. This number is set to increase as a 2020 survey pointed out that 96% of the global population is aware of one or more fintech companies

Mobile Onboarding

The human palms are more powerful than ever with the advancements in mobile technology. Any financial task is performed on a smartphone with a mobile app by customers. This is made possible by the institutions welcoming and adopting this technology. Payment services companies promote this to a greater extent increasing mobility for the customers. Tipalti.com predicts mobile transactions to grow 121% by 2022. This will constitute 88% of all bank transactions. Fintechs are targeting this latent market.

 

The Road Not Taken- What the Fintech Startups can do going forward

The financial landscape is expected to change in the coming decades. 2021 has more than 90% of users making at least one payment using a smartphone. By 2022 78% of Millennials in the US will become digital banking users with credit cards, debit cards, and e-wallets surpassing cash at all points of sales. Fintech Startups see all this as an unavoidable opportunity.

Fintech startups’ methods of digitization and mobile onboarding have become inevitable for customer experience enhancement. They save time, energy, and in most cases, even money. Unfortunately, the traditional banks are struggling to adopt what the fintech startups have already embraced. Meanwhile, the startups are looking ahead in decades. They are understanding new technology that can be used for better customer service.

Some of these are:

Blockchain Technology
Neo-Banks are considering better methods for data storage and security. Blockchain technology is an excellent option for this. Blockchain is a DLT(Distributed Ledger Technology) that permits data to be stored globally on multiple servers. A form of cryptocurrency is used by two entities(people or companies) as payment. The agreement forms the ‘block’ in the chain. This type of financial technology revolutionizes central banks and financial markets.

More than 24% of the world population is familiar with this technology. This is because Blockchain and Regtech(Regulatory Technology) are leading in terms of growth in the fintech industry. Blockchain technology is set to reach $20 billion by 2024. This includes P2P digital lending which was at $43.16 billion in 2018. It is expected to reach more than $567 billion in 2026 with a CAGR greater than 26%

Artificial Intelligence
AI is already prevalent in the current fintech ecosystem. It is used for automation and related processes. It can vary from simple automation to complex Machine Learning(ML). AI and ML in the financial sector are used to perform tasks that are traditionally done by a human worker. Such repetitive tasks being automated will aid the company both financially and in aspects of time.

But fintech startups are looking at the next stage of AI implementation. Banking-related chatbot interactions are expected to go to 3150% by the year 2023 from 2019. This will enhance the experience the customer has while onboarding and interacting with the institution. Along with this $2 trillion will be managed by ‘Robo-Advisors’ by the same year.

AI will also enhance labor productivity by a maximum of 40%. The projected expectations of 2035 estimate profitability of 39% for all industries, let alone banking. Even customers are expected to prefer Machine interaction over human interactions in the coming future. Startups analyze these data and evolve their modes to suit the future customer base.

 

Conclusion

The financial niche has been altered by the booming fintech startups. Among traditional banks and organizations, nearly 82% intend to collaborate with fintech companies in the next decade. If they do not, they might lose the total customer base by the end. With nearly 90% of banks fearing their consumers to be lost to up-and-coming startups, they are willing to adapt.

Consumers demand a seamless digital experience while onboarding and transacting. Smart traditional banks see the solution and upgrade their methods. If that is not possible they collaborate in partnerships or contracts with fintech startups and other technology companies. Most of this helps in onboarding younger customers. This converts many B2C models to a more B2B model. They then gain access to a bigger client pool.

Established financial institutions need to focus on onboarding more customers, for their existing consumer base will soon be exhausted. Thus, while retaining their customers they must focus on expanding their presence in the future. For this Help of fintech startups can be used. This will be the swiftest and smartest step traditional financial institutions can take for the better.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

KYC in the USA- The Origin, Evolution, and Future of America’s Frontier Against Financial Fraud

Posted on | by Signzian

Introduction

In 2017 a survey from FDCI revealed that 25% of all US households were unbanked or underbanked. This meant that more than 30 million households did not have a bank or credit card account. In 2019 the numbers fell to less than 5.4% of the households being unbanked. That was an estimated 7 million households. This indicates the untapped potential in the banking industry.

More customers than ever will start a bank account in the coming years. This pace at which citizens are starting a relationship with a bank is impressive. But how much can we ensure that all the applicants are legit? How can we make sure that no fraudsters are aided? To put things into perspective 2019 alone saw 650,572 cases of identity theft and 271,823 cases of credit card fraud in the US. To prevent this, KYC comes into play.

KYC process in banks is used to obtain information about the customer with their consent. The obtained information includes their identity details and addresses. It ensures that there is no misuse of the bank’s services. This stops fraudsters who try to imitate or forge identities for financial crimes.

We must also notice that fraudsters have found newer ways to evade KYC through the ages. These include digital synthetic ID frauds and scraping for ATOs(Account Takeovers). In 2021, we have enough resources and methods to maneuver the issues with traditional KYC processes. An upgrade is inevitable. The introduction of Digital KYC is set to change the whole process of onboarding. Let’s have a detailed look at the KYC process in banks in the US and what its future holds.

Does KYC Require The Attention It Demands?

Before the introduction of the KYC process in banks, fraudsters conducted crimes without much resistance. The lack of regulation coupled with unverified customer identifications caused easy manipulation of the financial system. Combatting this was inevitable. With the introduction of KYC financial crime has reduced, but new challenges await the sector.

According to a report from Atlas VPN, Q1 2020 saw a 116% increase in loan/lease fraud, alone. Credit Card frauds were at an all-time high of 435.8% during the same quarter. To add flame to the fire, overall fraud reports compared to Q1 2015 were over 435%. We can not attribute this to solely human errors or insufficient data collected.

The real culprit( other than the fraudsters, of course) is the inefficient handling of KYC. It might come as a shock that all this fraud occurred even after concerned institutions implemented the KYC process in banks. One can only imagine the outrageous leaps these numbers might have taken if such a regulatory process didn’t even exist.

KYC acts as the firewall against these fraudsters, but with advancing technology and global connectivity the fraudsters have an edge. The era of traditional KYC is nearing dusk. It is only a matter of time before the government brings regulations and advises for digitized KYC process in banks.

The primary objective of KYC is not fraud prevention, even though it does filter out the fraudsters for the better. The Patriot Act intended CIP or KYC to prevent Terrorist Funding and Money Laundering. To an extent, it has been effective. But as all things go, it can be better. This is where banks should upgrade their processes..’ A system devoid of human errors and manual processing will be the next step for this.

How KYC process in banks Came Into Being In The US

 

The need for KYC came with an increase in financial crimes in the Country. Every decade fraudsters find ways to commit crimes avoiding the regulatory oversight. To eliminate the problem at the source, the government and experts came up with KYC. Proper verification of the customer helps identify fake and fraudulent activities if any.

Though KYC was introduced under The USA Patriot Act, its history spans several decades before. Here is an overview:

  • In 1950, Congress passed the Federal Deposit Insurance Act to govern FDIC( Federal Deposit Insurance Corporation). It had regulations for banks to comply with to be insured by the FDIC. This was the first primitive step towards modern KYC.
  • In 1970, Congress passed the FDI Act Amendments also known as the Bank Secrecy Acts(BSA). It was a modified take on the FDI Act adding five types of reports for banks to file with the Treasury Department and FinCEN.
  • On October 26, 2001, Congress passed the USA Patriot Act. This act contained all the ingredients for modern manual KYC.
  • On October 26, 2002, The Secretary of Treasury finalized regulations defining KYC mandatory for all financial institutions. All associated processes conformed to CIP(Customer Identification Program) under this act.
  • In 2016, FinCEN made it necessary for banks to collect the name, address, social security number, and date of birth of persons owning more than 25% of an equity interest in any legal entity.

KYC was met with mixed reception during the two decades that have passed since it became mandatory in the US. Nonetheless, none of its criticism countered that KYC helps ensure safety and prevent fraudulent activities. Rather most of it was associated with the difficulty in implementing such a procedure and the privacy concerns.

What Does KYC Mean In The US?

KYC refers to the process implemented by a financial institution or business to:

  • Establish verified customer identity.
  • Understand the exact nature of the customer’s activities. This is to confirm that the source of associated funds is legitimate.
  • Assess money laundering risks.

 

It has 3 aspects:

1. CIP- Customer Identification Program

Any individual associated with a financial transaction requires identity verification in the US. CIP ensures this. This is under the recommendation of the FATF( Financial Action Task Force). FATF is a pan-government anti-money laundering organization.

A pivotal element to proper CIP is risk assessment. This has to be at the institutional level as well as at the level of procedures for individual accounts. Most of the exact implementation decisions are left to the institution, but CIP provides a guideline to follow.

The minimum requirements for opening a financial account in the US are:

  • Name of the customer
  • Address of the customer
  • Date of birth
  • Identification Number/ Social Security Number(SSN)

The documents verified for KYC include social security card, passport, driving license, and credit/debit cards. It is up to the institutions to install the necessary protocols for the specific documents.

The institution is to verify this information within a reasonable time. This includes comparing provided information with information from public databases, consumer reporting agencies, among other diligence measures.

2. CDD- Customer Due Diligence

CDD ensures if you can trust a particular client. It assesses the risks and protects the institution against criminals, PEP(Politically Exposed Persons) presenting a high risk or even terrorists.

It has 3 levels:

  • SDD(Simplified Due Diligence)- it is a simplified procedure. The risk of money laundering is low.
  • CDD(Basic or Standard CDD)- standard procedure for average or moderate levels of risk. Performed for most clients.
  • EDD(Enhanced Due Diligence)- Additional information is obtained. It has a clearer understanding to mitigate associated risks. Mostly done in high-risk circumstances.

Some of the important measures taken during CDD are:

  • Confirm the identity and location of the client including a proper understanding of their business venture. This might be a simple act of verifying the name and address of the potential customer.
  • Categorize clients based on their risk profiling. This must be done prior to any digital storing of information and documentation
  • In areas that require EDD, ensure that the entire process is performed. This is an ongoing process as any low-risk client can become high-risk. Thus, periodic CDD is necessary.
  • The necessity of EDD depends on certain factors. These include the location of the person, occupation of the person, types of transactions, and pattern of activity.

3. Ongoing Monitoring

It refers to the program monitoring the customers on an ongoing basis. This includes oversight over accounts and financial transactions. This includes accounts with spikes of activity, adverse media mentions, or any other concerning occurrences. Periodical reviews of accounts and risk factors are done.

What Are The Types Of KYC?

 

Standard KYC

Includes the KYC performed for individual customers and clients. It is most widely done. The process has slight variations depending on the jurisdiction the banks fall under.

KYB- Know Your Business

It is an extension of KYC for anti-money laundering. It verifies a business including the registration credentials, UBO(Ultimate Beneficial Owners), location, and other factors. The institution screens the business against the grey and blacklists that include entities involved in fraudulent activities. It identifies fake businesses and shell companies.

It is also known as Corporate KYC.

KYCC- Know Your Customer’s Customer

It identifies the activities and nature of the customer’s customer of a financial institution. It includes identifying the people involved, assessing the risk levels and major activities of all entities.

eKYC- Electronic KYC

eKYC, also known as Digital KYC is the remote and digital transposition of the KYC process. Authentication is done through electronic and digital methods with verification performed digitally without the requirement of physical documents. It uses the aid of technology like OCR and live-video access.

The Not-Too-Distant Future Of KYC

KYC is criticized for the increase in dropout rates during onboarding as it makes the process more complex. This overwhelms the customers trying to onboard who become reluctant to do business with the banks.

This is worth notice as newer fintech startups are increasing their customer onboarding every year. Since 2018, Venmo has performed KYC on more than 30 million customers before onboarding them. They do this through technology and digitization. eKYC or digital KYC was the key factor that gave such impressive results.

Another concern regarding KYC is the amount of machinery and expenditure associated with the traditional modes. In 2016, regulatory compliance cost banks over $100 billion. This cost was expected to rise by 4% to 10% by the end of 2021 by Forbes. The expenses banks have to bear for KYC compliance is high.

This can be reduced to fascinating degrees with proper digitization of the entire KYC process. The perks of adopting such revolutionary technology will drive companies to success. It is time we understand this and proceed further into the future. For the future is not too distant!

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

Importance of KYC For Rental Economy In India

Posted on | by Signzian

In India, there are many instances in which people choose to rent goods or services for mostly two reasons. Youngsters do not know which city they might have to live in when they relocate for work purposes. Second, many items ranging from clothing to furniture may have a price tag that may not be suitable with one’s income. People who need formal wear for a special occasion may not wish to wait a year to purchase it.

There are other instances as well. There are people who might have transferable jobs and require frequent travel or need to relocate on a yearly basis. Buying a house may not be as prudent a solution as renting it. It is due to these instances that the rental/shared spaces

Rental/Shared Workspace

Starting your own company, or simply relocating to another city for your new job, rental is the way to go. In the last few years, India has seen the rise of startup companies that offer co-working and co-living spaces. They are near each other. Most working professionals or students prefer staying near colleges/schools/workplace.

Some popular co-working companies include WeWork, InstaOffice, GoWork, and Innov8. These offer premium working spaces for developing businesses with a smaller workforce. These office spaces provide premium amenities at pocket-friendly rates like:

1.High-speed Wi-Fi

2. Unique common areas

3. Business-class printers

4. Wellness room

5. Phone booths

6. Meeting rooms

7. Event space

8. Cleaning services

9. Professional & social events

10. Complimentary refreshments

11. Outdoor space

12. Parking

However, the current Covid-19 crisis has changed this equation to a great extent. Most organizations have shifted their employees to the work from home model. In a recent survey conducted by Knight Frank India, reports indicate over 70% of companies sampled for a poll are willing to extend the work for home policy by another six months. A similar trend is emerging globally. Companies worldwide have announced remote working for employees to contain the virus spread. This has triggered a debate if work from home could replace office spaces in the future.

Office utilization rates will fall as remote working increases. Landlords with exposure to short-term leases are the most vulnerable. This is mainly due to the delay to investment activity and softer rental growth than previously forecast with respect to 2020 overall performance, These findings are per JJL’s report titled COVID-19 Global Real Estate Implications.

In 2019, flexible workspaces with 11.2 million sq ft were responsible for 18% share in total leasing. This was according to Colliers International India. Experts suggest that corporates are unwilling to invest in commercial space currently. This will have an adverse effect on shared space providers. With the overall economy in the doldrums and companies/employees getting into the habit of the ‘work from home’ concept, office space is being considered as an additional overhead cost. Many are not willing to invest, at least for the coming two-three quarters.

Rental Accommodation

In 2019, rental living companies have expanded to providing a wide range of services. Living spaces by Zolostay, Nestaway or NoBroker are perfect if you are looking for a place to rent/share.

Some key facts about rental accommodation:

  • A December 2018 survey by Knight Frank India shows that 72% of millennials gave co-living spaces a thumbs-up. Over 55% of respondents were in the age bracket of 18–35 years. They were more than willing to rent co-living spaces.
  • In a short span, Oyo Living has opened 150 properties with 10,000 beds. Their properties include studio apartments and 1/2/3 bedroom apartments on a shared/private basis. They offer living spaces in Bengaluru, Noida, Pune, and Gurugram. The company is set to expand to the top 10 metropolitan cities with over 50,000 beds.
  • In the last four years, NestAway has raised around $94.2 million from marquee investors. The company has over 55,000 tenants living in 25,000 plus homes across 12 cities. It hopes in the next five years, at least a million tenants will call NestAway spaces their homes. The company is set to enter 10 more cities, including Chennai, Kota and Mysore.
  • Delhi-based student housing startup Stanza Living manages 2,000 beds mostly in Delhi-NCR. The company plans to have another 10,000 beds that will be launched across cities in the coming months. Stanza is backed by Matrix Partners, Accel Partners and Sequoia Capital,

With the Covid-19 scare hovering above our world, most Indian shared accommodation businesses have come to a standstill. In India, millennials account for 47%, approximately share in the country’’s working-age population, they are an integral target group for coliving spaces.

  • With 60% of the students being outstation students, the demand at present stands approximately 100,000 beds across the country for student accommodation.
  • Coliving space in India enjoys a worth of 85 Cr INR, approximately. This is responsible for about 2.5% of the entire rental market. This is based on the industry expectation and the forecast which stands at 2X growth in three years.

Before the coronavirus outbreak, government policies were not in place. Shared accommodation, mostly paying guest (PG) facilities were running without definitions. Once the news of Covid-19 took everyone by surprise, the landlords who run PG owners, without giving further notice, asked their tenants to vacate the space with immediate effect.

The reflex from these landlords was a knee-jerk reaction and unfortunate. During such time, people are supposed to be united, but sadly the reality is far distant. However, this could be a boon to the coliving industry. This is because working millennials and students opt for professionally managed accommodation. The co-living operators will see a surge in demand post the Covid-19 days for two reasons. They have firm policies towards safety and hygiene, and hands out a contract to live by — something that was missing in the paying guest format. Safety and hygiene environment will be the critical outlook for the renting of shared accommodations.

Some of the organized players continue to run the space with the booking of 85% of accommodation of total beds, though there is 20%-30% of physical presence. Rest have left to their hometown before the lockdown announcement to be with their family. Experts suggest that the situation will revive post-Covid-19 days.

Need For KYC In Rental Workspace/Accommodation

In modern times, technology is overtaking every sphere of life. Rental companies today are offering remote services for renting office workspace or homes. As such, remote verification for the identity of customers is a must. Digital KYC presents itself as an ideal solution to reduce risks and maximize profitability. Imagine a business environment for PG accommodation. The identities of potential clients are actually ensured before handing them the living space — the true asset of the company. All the risks are properly assessed and background checks are performed to rid the company of any potential legal proceedings.

Rental/Shared Vehicle Industry

  • In 2010, with the onset of Ola Cabs in India, hailing a cab became much easier for us. The event marked the onset of a new industry — the vehicle rental industry. In 2013, Uber launched operations in India & the app cabs became quite famous across the nation. and people easily adopted it.
  • However as the years have passed, the vehicle rental industry has taken a new turn. With companies like Zoomcar, Revv, Drivezy, Bounce etc, a new chapter began in this sector. Instead of renting cabs at higher prices, people can now rent vehicles like cars or bikes directly without any driver. In a report, Avis mentions that the car rental industry in India is growing at the rate of 35%. It is expected to accelerate further to reach INR 1000 billion by 2022.
  • The present COVID-19 crisis has not spared the rental vehicle industry in India. With the lockdown procedures, the rental vehicle economy came to a virtual standstill. Cab-hailing companies such as Uber and Ola have resumed services in certain cities under green and orange zones amid the Covid-19 outbreak. They are likely to have their operations hit significantly even after the lockdown.
  • The Covid-19 crisis has created an aversion to public transport amidst people. As such, self-drive and rental car companies have seen a steep rise in subscriptions and inquiries. Car rental companies like Eco-Rent-a-Car and Revv have seen a sudden spike in demand. Other companies like Zoomcar have witnessed a 4x increase in rentals while some like Drivezy are launching new services to ride the wave. Work from home, fear of infection in public transport, and schools being shut are some of the factors that are contributing to greater demand for car rental companies.
  • Currently, the individual cab business for Eco-Rent-a-Car is up to 350 cars a day. However, travel and tourism which used to be 200 cars a day is now down to almost zero.
  • Revv have seen a 30%-40% increase in subscription
  • Drivezy has slashed the price of the monthly bike subscription to Rs 6,000-Rs 7,000 per month for a duration of 3-months.
  • The demand spurt is also leading to markup in the tariff. Self-drive rental Zoom Car has nearly quadrupled its tariffs on self-drive cars in multiple select cities.

So why is KYC necessary?

Rental companies like those in the car rental space can benefit greatly from Digital KYC. It will assist them to authenticate the credentials of their users, before renting out expensive vehicles. This will not only lead to greater transparency but also would reduce the risk of auto theft for car rentals. The danger of Identity thefts and use of fake IDs can be minimised with KYC advantages like fraud management, background checks would lead to streamlined business operations..

Rental Consumer Goods

Moving to a new place but cannot afford new furniture? Companies like Rentomojo, Furlenco and Quickr will help you get rental furniture at affordable prices. Anything you can imagine you need but can’t buy, you can find on rent today.

  • According to a report by PricewaterhouseCoopers, the sharing economy is set to generate potential revenue of $335 billion by 2025 globally.
  • In 2019, the rental industry has made a huge market in India with estimates that the market stands at about $1.5 billion.
  • In an article by Livemint, a rough estimate shows that the market for rental of furniture is seen at around $800–850 million. Rentals of electronic appliances are approximately a market of $500 million while that of bikes is $300 million.

KYC As A Benefit

The need for KYC in the rental goods market is just like all the examples mentioned above. In fact, there are many companies like Furlenco, GrabOnRent which have already started to adopt the online KYC process. Most rental goods companies operate via the Internet and the business model is set up in such a way that the tenant never has to meet the seller. Other than security issues, knowing the customer is important considering most users pay online for their rentals. Rental/shared economy operates on a large customer base. To maintain customer data, KYC collection and verification is required.

DigitalKYC By Signzy For The Rental Market

Digital KYC has been a huge success in the banking industry. In recent years, most Indian regulators have also accepted the use of VideoKYC to secure banking and financial services in terms of onboarding new customers. With social distancing and remote digital services becoming the norms for all businesses, it is only a matter of time before digital KYC collection becomes the standard for all business sectors

With the new government regulations and the current Covid-19 crisis, , electronic KYC collection is now an easy option for rental companies. At Signzy, we offer a unique e-KYC solution known as RealKYC. The solution offers KYC collection as well as background verification and checks.

Signzy provides 2 unique digital KYC solutions with its proprietary AI technology — RealKYC & VideoKYC. Here are some benefits of using Digital KYC for rental businesses:

Advantages of RealKYC & VideoKYC

  • Secure System: A customer’s account information during rental onboarding are secure because the entire process is online. Identity theft, fraud, etc. are all minimized with RealKYC.
  • Pre-Filled Forms: Real-time data pre-population from uploaded ID proof eliminates the need for manual form filling for the customer during signup on the rental platform.
  • Real-Time Document Verification: This can be used to effectively verify KYC documents without the need to wait for an indefinite period. This may be crucial to services like rental accommodation where the customer may need to avail the service on an immediate basis.
  • Faster processing: The VideoKYC service is completely automated online. This means that KYC data can be processed in real-time without any manual intervention. The paper-based KYC process can take days up to weeks to get verified, but the VideoKYC process takes just a few minutes to verify and issue.
  • Efficient Maintenance For Records: The VideoKYC service by Signzy features collecting time-stamps and keeping an audit trail. This can help businesses maintain track on customers in terms of when the rent/subscription period starts.

Conclusion

The future looks bright for the rental companies looking to expand across India. But the need for effective management of their customer base is also a burning need. Like banks, KYC is the best way to, as the term suggests, ‘Know Your Customer”. These companies will soon have to look towards a more digital approach towards KYC collection and verification

With rental/economy growing at such a fast pace, the companies that operate rental goods/services may need to reconsider their current approach and go for a more structured business model that can effectively manage a large consumer base.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

Regulations & Revenue- How Digital KYC For CASA Can Be A Relief For US Banks

Posted on | by Signzian

Introduction

KYC (Know Your Customer) has become a crucial part of the financial framework in America. Banks in the US are required to have a proper understanding of the identity of their customers. This requirement with advancing technology creates challenges for the banks in conducting KYC. The cumbersome methods of traditional KYC are becoming outdated. It is time for Digital KYC.

The solution to these problems is similar to solutions to most problems in banking. Digitizing the entire process with technology does the trick. Unfortunately, most banks overlook this and stick with more clumsy routes from tradition. More than 64% of account opening applications in 2020 Q3 were either online or through a mobile device. This was a huge jump from the previous year’s 53% during Q2-Q4. The evidence is clear on how customers are changing their preferences.

One area in banking that can benefit from digitization is CASA (Checking/Current Account Savings Account). It’s a very beneficial option for the bank as the revenue from CASA and checking accounts is high. This is because of the low interests that they offer while providing other attractive options for the customer. Unfortunately, the regulations are strict in this area and conducting effective KYC is a tedious process.

Digital KYC is useful for CASA customers and banks. With efficient implementation it will save time and effort for both parties, rendering less attrition and more benefits. A detailed look at how the machinations will reveal a better picture.

Role of CASA In The US Banking Sector

Before understanding CASA we must know the exact difference between savings and checking/current accounts:

  • A savings account is a deposit account that bears interest at a bank or any financial institution. Even though they provide modest rates of interest, they are often set against growing inflation. Nonetheless, they are safe and reliable with good liquidity. They are not very profitable for the financial institutions as they would have to provide interest to the customer.
  • A current account/checking account on the other hand has no or low-interest rates. They have safety and liquidity too. But what makes them stand out is their option for unlimited deposits and numerous withdrawals. They are also called demand accounts or transactional accounts. They are far more profitable for the banks since they can hold the money while paying no or low interests.

 

CASA combines the features of both these accounts. This will have an appealing effect on the customers to keep the money in the bank. This is beneficial for the bank as they pay no or low returns on the checking/current account while maintaining decent interest on the savings portion. It doesn’t have a specific maturity date. Thus, it is valid as long as the account holder needs it to be open. Banks always prefer customers to have a CASA or checking account than a savings account.

Even though CASA is usually a combined type of account, the term is often used to refer to both Checking and Savings Accounts together. In most parts of the world, they are used separately, but West and Southeast Asia predominantly have CASA along with the other types of accounts. Such bank accounts are located in markets with saturation and cutthroat competition. The US banking sector is headed towards such a scenario.

During the COVID-19 pandemic, the USA has seen a fall in new checking accounts in regional and community banks. The major reason was the unease of the physical process of account opening. It is noteworthy that digital banks and Large banks (like JP Morgan Chase and Bank of America) who had digital KYC and onboarding options accounted for nearly 55% of all accounts in 2019 and increased it to 69% by Q2 2020

 

Source- CORNERSTONE ADVISORS

What Happens When Banks Don’t Know Their CASA Customers?

Even though KYC helps build better relations with the customer and smoothens transactions in the long run, it’s primary objective is to prevent fraud. Several frauds may lead to money laundering and even terrorist funding. In Q1 2020 alone saw a 104% rise in financial fraud reports compared to Q1 2019. This amounted to more than 430% increase from Q1 2015.

This is where KYC comes into play. An established data on the credibility of the customer helps banks determine the risk involved in dealings with each individual. Government bodies like FinCEN(Financial Crimes Enforcement Network) and international entities like FATF play a role in ensuring AML/CFT(Anti-Money Laundering/Combating the Financing of Terrorism). But financial institutions have their responsibilities.

The Federal Government has taken certain steps to ensure this. In 2016, a rule which mandates financial institutions to verify the identities of customers was established. This was especially for legal entity clients and their beneficial owners including corporations, partnerships, LLCs and others.

Banks and financial other institutions are advised to secure from the customer:

  • The customer’s full name
  • Residential address
  • SSN(Social Security Number)
  • Date of birth.

CASA is a lucrative option for the banks. They are sometimes given lenient customer onboarding directives. This might lead to inefficient KYC procedures. Unfortunately, money laundering and other illegal activities are mostly done through checking accounts. CASA will also be subject to this as it has similar accessibility. Thus KYC for CASA is of the utmost necessity.

Digital KYC Is The Next Step…Here’s Why!

Another major factor that comes into play is the digitization of bank functions. Customers prefer remote and digital KYC and onboarding procedures to physical and traditional ones. Some of the important reasons for this are:

  • Ease of access as they can do it from their homes
  • The time required is extremely low relative to traditional methods
  • Health concerns amidst the COVID-19 scenario

In 2020 most of the US citizens preferred to access their old and new accounts through an online portal. Some of them went as far as to change their primary accounts from a traditional bank to a bank that provides uber digital access.

The biggest surge was from mobile users who found it much easier to access their bank accounts from anywhere in the world at any time they wanted to. They were literally carrying the snippet of a bank in their pockets.

From the data on fraud alone, it makes it necessary for banks to switch to digital KYC for onboarding process, combine this with the fall of new secondary checking account opening from 63% in 2017 to 24% in 2020 at traditional banks, digital KYC becomes essential

Source- CORNERSTONE ADVISORS

Source- CORNERSTONE ADVISORS

Digital KYC For CASA Operations Comes With A Plethora Of Benefits

Digital KYC is an idea that even governments are entertaining. With proper regulatory guidelines, they will be stringent and secure. It is the most efficient way to conduct KYC for CASA. As a matter of fact, it would be the most efficient method to conduct KYC for any aspect of the banking sector. The reasons for these include:

  • As the numbers of in-person account openings have fallen it is clear that customers prefer other modes.
  • As the entire populace has access to smartphones, it is only sensible to provide them with the option to create a CASA account from their mobile devices, if they wish to
  • Long Queues and formal delays will be avoided due to the virtual onboarding process
  • TAT can be reduced to a matter of hours or even minutes.
  • Health concerns amidst the pandemic are nullified as no human contact is nil.
  • Once implemented the procedure will be cheaper than traditional KYC.
  • If regulatory guidelines for Digital KYC are strictly followed, fraud risk can be reduced to a minimum.
  • With efficient and experienced third parties’ oversight, the platform can be user experience-driven.
  • Overall customer experience and satisfaction is met.

Even without any push for digitization customers are preferring all their banking processes online. KYC usually is a one time process, if enough activation enthusiasm can be generated from the customers, permanent customers can be ensured by the institutions.

Conclusion

The facts are in front of us. The citizens of the world’s largest economy prefer to go digital due to the convenience, security and safety it brings. Digital KYC for CASA in US banks is gaining importance and is becoming the need of the hour in the banking industry. It’s becoming inevitable. Perhaps, in a decade or more the entire industry would go online rendering any physical interventions either useless or extremely unavoidable.

CASA is a symbiotic option for both the customers and the financial institutions. Welcoming more customers into using it would benefit all. It is the responsibility of Such institutions to ensure that customers are attracted and easily integrated into their user-base. Digital KYC is the next step for all entities in the banking sector. Without further adieu, that is where they should head their wheels at.

 

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

A Year In Review — APIs, AI & NO-CODE

Posted on | by Signzian

This has been a crazy year by every count. Doctors now do physical checkup scans using video, US election saw 2x more mail votes than in-person votes, Staycation is now a travel category and of course, Banks are now onboarding users completely remotely without a salesperson or branch touchpoint (Purposely skipping the pandemic part, to keep spirits high !!). So year-end summaries would make for an interesting read.

And you might have got multiple such new year messages from feel-good ones to the ones with the 2020 year reviews and ones that predicted 2021. So writing this note as hard as I realized that maybe I have nothing new to add. But sometimes old incidents become very relevant today. So if I have nothing new to add, maybe I will just relive some old. And nothing better than Gates’s big gaffe about the internet.

Gates, one of the best thinkers of our generation, In 1994 commented: “ I see the little commercial potential for the internet for the next 10 years” at a conference

And of course, he was wrong — Amazon, Google, FB all sprang up in those 10 years and now dominate the top 5 largest companies in the world.

To his credit, by the end of 1995, he wrote an internal memo describing the internet as a tidal wave that will change everything.

We are at the cusp of the next tidal wave, but like in 1994, it seems too far away. And hence all of us are taking things as they come. To give a bit more context let me just recap a bit of this tech wave history :

The first wave was about indexing information fueled by the birth of the internet — Yahoo, Google, eBay

The second wave combined internet, with satellite-enabled GPS, 4G/5G tech and solved for real-time communication — WhatsApp, Zoom, Uber

The third imminent wave and probably the biggest would assist in intelligent decisions.

This would make your devices smarter :

  1. Your cooking dish would understand when the dish is done and self shut off
  2. Your car would self-drive, get maintenance at right time and come back and park itself.
  3. Your gym equipment would self adjust for weight based on your body goals

And this list can go on…

Consumers will start demanding more and more. If they are today demanding ‘Digital interfaces’ as Web, Mobile, and Chat apps. They will start demanding ‘Intelligent’ interfaces, which learn about user’s unique needs and assist them.

While all this can seem intimidating and a 1000 feet level gyan. I also do have some prescriptions. As business leaders, we might not be able to predict everything, but what we can do is be ready for change and build capabilities in the right areas. I am listing below the ones I think are key to nailing this new tidal wave:

AI — Systems Learning to make decisions

  • According to a Gartner study, around 37 percent of all companies reviewed were found utilizing some type of ML in their business. It is anticipated that around 80 percent of modern advances will be based around AI and ML by 2022.
  • According to Autonomous Next research seen by Business Insider Intelligence. the aggregate potential cost savings for banks from AI applications is estimated at $447 billion by 2023, with the front and middle office accounting for $416 billion of that total.
  • Most banks (80%) are highly aware of the potential benefits presented by AI, per an OpenText survey of financial services professionals. In fact, many banks are planning to deploy solutions enabled by AI: 75% of respondents at banks with over $100 billion in assets say they’re currently implementing AI strategies, compared with 46% at banks with less than $100 billion in assets, per a UBS Evidence Lab report seen by Business Insider Intelligence.

In the banking world, AI has made significant strides. From Wells Fargo, Bank of America and Chase launching mobile apps to JP Morgan harnessing RPA, tech adoption has deeply infiltrated the banking sector. banks have realized the importance of these disruptive technologies and intensified digital transformation in their processes and solutions.

But the real question is — banks are adopting tech, but are they understanding it?

In another incident, customers have been complaining about a technical glitch on the bank’s digital banking mobile application While tech transformation comes as a boon to customers, it might also become a source of problems for both you and your customers if it’s not implemented and adopted the right way.

Here are a few things to keep in check:

  • Keep an eye on the cost, hire an AI partner: Production and maintenance of artificial intelligence demand huge costs since they are complex machines. AI also consists of advanced software programs that require regular updates to meet the needs of the changing environment. You need to build your own technology team which would have the right mix of AI partners and hiring talent. This is crucial in case you are building your own team where talent matters as well as experience, instead of hiring an external AI partner.
  • Tech Risks Vs Credit Risks: Technology will always remain susceptible to data privacy risks and human-made risks like hacking, credit fraud etc. So while automation may be the road forwards, banks must also consider the impact on every single/overall operation. This would require a suitable technology person/team who would be able to understand the tech risks and work accordingly.

APIs

There was a time when banks and other financial services worked in silos or based their truth on the data that was provided to them by their customers. It’s no secret that the last decade has been one of the most transformative periods for the global banking industry, at least from a regulatory perspective.

Financial institutions have been forced to evolve under this new era of transparency, with authorities taking unprecedented steps to ensure that consumer protection is maintained in the face of all of the business activity being conducted by banks.

Among the most comprehensive transparency drives is Open Banking, which requires big banks to share their customer data with third parties. And at the heart of Open Banking lie application programming interfaces (APIs).

  • APIs have become especially important to banks during the last couple of years, ever since the Revised Payment Service Directive (PSD2) came into effect across Europe in January 2018. This directive has expedited the development of APIs so that third parties such as fintech (financial technology) companies and online financial-services vendors are developing apps and services that can most benefit from the data they can now procure from financial institutions.
  • With consent driven data sharing architecture and more importantly with all the data being digitized over time be it identity (Aadhaar), bank records (internet banking) and even commerce (e-commerce sites and online trading); anything you would need w.r.t the customer is usually an identity verification API call away; provided the customer gives you consent.
  • Your data could only be accessed when you use your debit or credit card for certain transactions through the payment processors. Hence unless you are officially validated, you can’t access an individual’s banking history. However, your banking data still found a way to get to other companies who could use it for their business promotion. The usage data of the customers can be used to automatically target customers with offers that they can be availed by using their bank card.
  • In India, with the introduction of IndiaStack, newly reformed data privacy laws and DEPA architecture, it’s no surprise that the old rules are going for a toss. Its time for newer API driven data sharing techniques. Improvement of the entire service operations can be done through collaborative/partner-driven approaches like neo-banks or fintech/bank collaborations that have grown over the past decade.

What we are seeing is that banks are looking to combine Open Banking with real-time or instant payments and indeed, that is how a truly seamless customer experience can be created. The commercialization aspect of Open Banking is not only going to be about building APIs and exposing customer accounts to TPPs, it is also about combining these with propositions such as real-time or instant payments and then building a seamless user journey that a customer or a TPP would be willing to pay for.

Cloud and No Code

Gartner predicts that no code application building would constitute more than 65% of all app development functions by the year 2024, with about 66% of big companies using a minimum of four low code tools and platforms.

  • The potential benefits of utilizing an NCDP tool is that with web access and practical business intelligence one can become an application developer, which is transformational for enterprise productivity.
  • On the other hand, IT folks have pointed out that business users inept at debugging code may create further challenges for tech teams, given the sensitivity around cybersecurity and business theft events caused by software bugs.
  • Nevertheless, NCDPs users can create and experiment directly at scale and speed. They are the next wave in programming and techniques for rapid app development.

The evolution of cloud computing, combined with the power, flexibility and scalability of no-code platforms would mean that most if not all systems within the banking organization would be built using no-code, allowing even non-tech executives to build and modify systems in response to customer or market requirements.

This also means that now banks would have to put their focus on no-code and cloud technology and start building their teams around it. Especially focus on building internal cloud capabilities that can help them manage and scale their internal systems in response to changing demographics of the technology they might have to use.

  • If proper precautions are not taken by the vendors then entire confidential data will get corrupted. This could be avoided by encrypting the cloud service and the storage of confidential information in private storage can help in managing the risk.
  • Cloud computing reduces all the capital expense of buying and setting up hardware and software at data centers. This makes the banks focus more on banking functions. When purchasing the cloud, be aware of which functions are absolutely crucial to save costs.

To end on a star-gazing note, What would be the next wave?

My bet would be on genetics to make us super-humans, a close second would be the digital afterlife. Would love to hear your craziest predictions and also ideas on how this current wave would play out.

Also, a bit about Signzy’s 2020 to sign it off:

  • We won 7 awards including 3 international ones
  • Our customers grew from 87 to 160
  • Signzy team grew to 162 from 79
  • We are now present in 5 locations — Pune, Mumbai, Bangalore, Dubai and New York
  • And with additional funding, this year are well-capitalized with $10.5 M in the bank

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Reach us at www.signzy.com

Written By:

Ankit Ratan,

Co-Founder, Signzy

 

Boomers, Gen X And Millennials- What Fintech Startups Get Right About Digital Onboarding?

Posted on | by Signzian

Introduction

Onboarding a customer has always been a challenge to the Financial Industry. With the USA having less than 32 bank branches per 100,000 customers makes the entire procedure tedious for the customers. If creating an account online is not an option, they can spend days in the physical process of onboarding. Such bad customer experience and high customer drop-offs while onboarding is harmful to the institution. The solution is Digital Onboarding, which onboards customers remotely with the help of technology.

Digital onboarding is a relatively new method that has not been implemented to the fullest of its potential. But the worldwide availability of the internet has made it universally accessible if designed properly. Most financial institutions are already onboarding their customers digitally. But the processes in which they do are vastly different.

Compared to the traditional and established banks, the up and coming fintech startups are doing a better job at digital onboarding of customers. A closer look at this will provide traditional banks with new ideas to improve their systems. This is evident as Neo-banks like Ally and Chime went public, in the mid-2010s. Many more fintech startups are expected to follow suit.

Some Banks Still Use Inefficient Traditional Methods To Onboard New Customers

 

New customer onboarding is one of the most important issues retail banks face. When someone visits a website or walks into a branch to open a new account the bank doesn’t have a relationship with the customer, yet. It simply has a new account holder and actions need to be taken to move that relationship forward to become a long term profitable banking client.

Traditional methods trying to accomplish these goals are outdated, inefficient, and ineffective consisting primarily of paper brochures and phone calls from personal bankers.

Though. Most Financial institutions at this stage have upgraded their systems to digitize customer onboarding and engagement via a combination of apps and digital onboarding platforms.

Most of them though haven’t done this efficiently. Traditional banks form a major portion of this category while the neo-banks including fintech startups have done a far better job.

Usually, Traditional onboarding involves:

  • Hardcopies of documents
  • In-person verification
  • 2–3 days required for onboarding
  • An excessive requirement of space for storage
  • Dreadful onboarding experience

This can be a long and excruciating process and the only reason customers put up with it was because of a lack of alternatives. In a way, almost all the existing financial services followed the same process.

This changed when NEO banks and other fintech came into being. Not only they gave an alternative from existing banks to the customers, but they were first to adopt the changing behaviour of the customers, which aligned towards everything digital, everything remote and everything private.

And this shows, from the rapid growth of NEO banks all around the world.

Why The Banks Aren’t Doing A Great Job at Digital Onboarding of Customers?

 

Most banks backed by regulators have slowly but steadily moved towards incorporating digital onboarding into their process.

Having said that, digital onboarding methods adopted by traditional banks have resolved some of these issues but they have not been efficient and leading to customers moving to NEO banks that offer a much easier onboarding and management. Some of the issues with traditional banks digital onboarding processes are:

  • Confusing interface-. Customers find it difficult to navigate the facilities provided online.
  • Extra charges and fees for digital access- many banks charge their customers for an online presence which can be provided for free.
  • Onboarding time can further be reduced as the process is confusing and results in wasted time.
  • Customer experience is poor- The applications and software used are not optimised to make the journey easy for the customers.
  • The targeted customer base is mostly from Baby Boomers and Generation X who are mostly unfamiliar with digital technology.

Some traditional banks have had the foresight and done the necessary to cope with advancing times. A good example is that of Bank of America. The Bank focused on digitization since 2015 which yielded excellent results. The company onboarded more than 20 million users between 2017 and 2020, the majority of whom were onboarded digitally. Unfortunately, barring a few titans like JPMorgan Chase & Co. and Citibank, most of the traditional banks are behind in adapting to digitization.

Why Do Younger And Older Generations Respond Differently To Digitization?

 

Hard data available indicates only 8% of US customers consider an online bank as their primary bank. Prima facie this might seem unimportant. But the numbers almost double to 14% when it comes to customers with two accounts. The share rises to a staggering 17% with Americans who have 3 accounts. These numbers became 2 digits as late as the mid-2010s.

The reason attributed to this is the level of comfort and convenience of online banking offers. More than 56% of Americans acknowledged this. Hence, this indicates that there is a market for online banking, but better onboarding procedures are required.

While there is a general consensus that younger generations usually prefer completely online procedures, even the older ones are warming up to the concept. 30% of Gen X and 27% of Millenials have an online-only account while 8.8% of Baby Boomers also embraced the online platforms according to Finder. They also reported that more than 4% of Boomers planned to open an online account. If they are keen on accepting online banking as a primary option, then digital onboarding is simply the first step in it.

Fintech Startups Are Doing It Different… And Better

Fintech Startups acknowledge the customers’ needs to a great extent plus being the upstarts in an industry dominated by behemoths they had to find ways to optimize costs and play on their strengths.

That’s one of the major reasons why they optimized user experience over everything else (since everything else was usually well defined by the regulators) leading to their digital onboarding systems to cater to even the most unfamiliar users. What might take days at traditional banks could be done within hours or even minutes through the new banks.

They know that even though boomers constitute the majority of the clientele and funds right now, in the long run, they will need loyal millennials on their side. Thus they cater to the need of the new. Most of their products and services are focused on Millennial and Gen X but yet are easy for the older clients to handle. Their digital onboarding procedures are designed to not tire the customer. Their primary aim is to get customers on board.

In brief, some of the important steps taken by fintech startups to better their customers’ digital onboarding journeys are:

  • User Experience driven process
  • Easy interface for onboarding
  • No or Low Cost of Onboarding
  • Reduced Time for Onboarding with Automation
  • Defining Clientele for Long Term Benefits
  • Comfortable Onboarding Process
  • Developing Loyal Millennial Customer-base

 

What Can The Traditional Banks Adopt To Improve Their Services?

In theory, the Traditional Banks should acknowledge and adopt the right approaches Fintech Startups use to improve their customer onboarding. But in closer observation, we will see that all that the new banks are doing will not benefit the Traditional Titans. The methods require scrutiny before implementation.

A good example is how different the primary clientele is for both groups in terms of age. A ditto approach of focus on newer generations will distance the traditional bank’s existing customers. But a good plan to secure future customers must also be implemented. Hence, Traditional Banks have the task of retaining their existing customer base while expanding it into newer generations.

Since they have enough funds to back them, they should emphasize on better research and outsourcing to international fintech startups. This will improve their digital onboarding processes. These companies would exhibit no competition in the US market. A collaboration would enable the traditional banks to understand and access the new ideas and models they bring.

Along with this, banks need to improve the overall experience of the customer. This results in:

  • Better User Experience
  • Lower Cost of Onboarding
  • Faster Processing
  • And all the aforementioned benefits of digital onboarding

Conclusion

As the USA is moving towards a more advanced future where remote access is preferred and time is of the essence, onboardings will be digitized. The entities in the financial sector are aware of this which has rendered them to upgrade their current systems. This is regardless of them being traditional giants in banking or the up and coming startups in financial technology.

Amid such cutthroat competition, banks must find ways to expand their customer base. As it is with most cases, the trouble is always getting started. An easier and more convenient experience of digital onboarding is what the customer seeks to begin his journey with a new bank. If traditional banks can cater to this with attractive options, they will flourish in the coming decades.

If the banks acknowledge the needs of the customer and empathize with their struggles, they can provide far better services. The banks being the spine of the financial sector need to make the changes. These changes will cause a ripple effect in the sector, advancing it towards a modern world.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

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Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

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