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Demystifying IPA For Finance

Posted on | by Signzian

In a digitally advancing world, the need for automation is more than ever. This is mainly due to tech-savvy fintech and a surge in the demand for personalized user experience. Today, Intelligent Automation holds the power to accelerate growth. This can be done by integrating robots to digitize processes and systems.

What do we mean by Robots?

Robotic Process Automation (RPA) has been widely used by institutions. However, Intelligent Automation (IA) has been gaining the likes of organizations recently. Intelligent automation combines Artificial Intelligence(AI) and Process Automation to create smart workflows and business processes that think, learn and even adapt on their own. It and its modified forms are called Intelligent Process Automation(IPA).

Across financial institutions, IA has already helped companies drive productivity. This has been achieved by processing a range of structured and unstructured data.

However, the thought of shifting the burden of responsibilities to a robot might be an uneasy one. So without any further ado, let us burst the huge bubbles around Intelligent Automation in the financial sector.

Identifying Roadblocks And The Need Of IPA In Finance

Financial institutions deal with a lot of unstructured data from various sources. Manually processing this could be time taking. This also adds to the chances of error accounting to loss of the institution’s time and resources.

  • Gartner’s research report on RPA shows that organizations had 80% of their data unstructured. It states how processes that are most suited to RPA have a high transaction throughput of structured digitized data. This comes with relatively fixed processing paths and/or user interfaces. They do not change frequently and are rule-based activities.
  • Moreover, the banking experience must be customer-friendly. Providing a hassle-free and quick solution is a must. Leveraging IPA improves the institutions’ productivity. It also makes it customer-centric. This helps banks drive massive success.
  • IPA can process even unstructured data. It improves the accuracy & eliminates chances of manual error. It can also help to validate customer requests by accessing emails and other relevant data.
  • At the same time, it can process digital signatures and open bank accounts within minutes. It can execute transactions and account transfers and update the customer data into the CRM system.

Revolutionizing Banking and Financial Institutions Using IPA

 

Let us now see the applications of IPA and how it is transforming the banking and financial institutions.

Commercial lending operations: This life cycle starts with onboarding a corporate client. NLP, ML, OCR, and RPA can be leveraged to extract data from structured and unstructured loan documents and automate the entry of client data. This helps in the calculation of risk and loan eligibility. IA in commercial lending operations is a powerful and effective way to reduce costs. Along with this will help in improving controls, quality, and scalability.

Trade operations: Trade operations require multiple systems and high levels of documentation. IA can be used in several stages to extract data from different sources and formats. It also helps in identifying patterns and classifying the extracted data to get optimal results. IA can also be used in monitoring trade activities. Optical Character Recognition (OCR) technologies, as well as Artificial Intelligence (AI) algorithms, provide end-to-end automation of Trade Finance processes. Systems can improve their accuracy and spot red flags optimizing the use of capital. This can be done through supervised and unsupervised learnings,

Regulatory and compliance operations: There are several regulatory and compliance requirements in banking. This leads to high operational efforts, time and cost. Automation tools can be embedded in several processes. For example, data mapping and other labor-intensive processes. IA can be used to pick up KYC customers and automate the data into AML screening solutions. This can significantly reduce the cost and efforts of compliance operations. This will also help institutions overcome the challenges of inconsistency in data. This inconsistency is due to the long process and the chances of human errors. Several documents available in different formats can be collected. These can be further processed using NLP and OCR technologies.

Transaction screening: An ML engine can identify suspicious patterns and automatically remove them. It can also leave an audit trail of every bot decision for compliance reviews. This significantly reduces operational effort. IPA reduces variation in recording data improving consistency and accuracy. At the same time, it can continuously learn and improve quality over time.

Payment operations: Intelligent automation reduces the manual effort to investigate payment issues. ML can be used to identify a pattern in the payment processes of the customers. Issues related to payment processing can be fixed and suspicious transactions can be identified.

Manual labor is required to process and reconcile invoices. It is also needed to purchase orders in multiple formats. These can be simplified.

Customer Onboarding: The process of KYC collection and verification can take up to 24–30 days. Embedding IA in workflows speeds up the onboarding process. It brings the turnaround time to 2–10 minutes. Relevant data is extracted from the customer’s documents. Then an extensive background check is done by the system. Advanced analytics also help in assessing the potential risks. This also helps in providing a smooth, hassle-free customer experience.

Extending Support To A Wider Spectrum

IA helps banks and FIs stay competitive. It also helps evolve in terms of customer relationships. The capability of IPA solutions to self-learn based on a given set of rules is what makes it unique. Let us look through some other aspects where IA can extend its support.

Predictive analysis- Technology and several statistical techniques can help institutions. These can collectively make a better prediction about the forthcoming future events. Data mining, machine learning, and predictive modeling can help in analyzing the data. It can also gather facts from the present and the past to make better predictions. Incorporating IA with predictive analysis would ease the processing of the data collected. This will collectively improve automated end-to-end decision-making.

Fraud Detection- IA can prove to be critical for anomaly or fraud detection. IPA is capable of processing even unstructured data. Due to this, gathering transactional or other relevant information related to the identity verification of the user will become much simpler.

This collected data then can do an extensive background check of the said user. Any suspicious or fraudulent activity will be notified to the institution. Automating this process reduces the manual labor and time taken. It also increases the accuracy. It can also be used in online, credit/debit card transactions.

CRM systems- Customer relationship management (CRM) systems are useful tools. They help sales employees stay updated with their customers. Automating the update of the system will save the precious time of employees. It also increases accuracy. Employees working in the sales function can focus on maintaining customer relationships. Unstructured data saved in various formats can be processed using IPA.

Tech support- In a digitally advanced world, simpler customer interaction is a must. IA can help solve simple issues. Ex: password resets. It can also diagnose issues by asking a series of questions. This saves the institution’s time and also improves the overall customer experience. Incorporating such technologies will help address the grievances faster saving manual labor.

Financial reports- Aggregating data for financial reports can be a tedious task. Ex: Data on quarter-end. Gathering, processing data from different sources and formats can be made simple and faster with IA.

Benefits of Applying Intelligent Automation In Finance

 

IA tools can perform a series of tasks ranging from basic data entry to complex risk analysis. IA tools can also be leveraged for dynamic feedback learning. It is also useful for identifying patterns and detecting anomalies. Institutions can benefit from the application of Intelligent Automation in the following ways-

  • Reduction in manual efforts- Incorporation of IA can reduce the manual grunt work. Automation of structured and unstructured data processing reduces the burden on employees. It also eliminates the scope of manual error.
  • Increases productivity- Employees can then focus on higher priority tasks. This is because time taking tasks are automated. This will improve both the quality of work as well as the work-life balance of the employees
  • Better Customer Experience- IA allows institutions to track the progress of work at every step. This end-to-end audit trail is beneficial in optimizing results, thereby making the customer experience far better.
  • Reduced operational costs- Digitization ensures better risk assessment and assists in faster decision-making. The processes are executed efficiently at a higher speed. This creates a great value for resources.

Conclusion

Intelligent Automation can be incorporated into many such labor-intensive processes across various sectors. It can help in identifying the sources of inefficiencies. It also ramps up productivity effectively. Fintech providers are emerging with simpler solutions with applications that improve customer relationships. Implementing IPA will allow institutions to significantly reduce risks and improve decision-making. Manual resources can then be used to work on high-quality optimal tasks.

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.

Digital KYC In Health Insurance

Posted on | by Signzian

Health insurance policies are a vital instrument in the insurance industry. The Insurance Regulatory & Development Authority Of India (IRDAI), which acts as the regulatory body for all insurance companies in India, has allowed the use of paperless KYC collection, or e-KYC. This e-KYC will also be very useful in the current lockdown in the country. To enable this the government has allowed insurers to avail of the Aadhaar-based authentication services of the Unique Identification Authority of India

KYC Compliance Norms By IRDAI

IRDA has amended the Anti-Money Laundering (AML) guidelines and AML screening solutions which apply to general Insurers. This was done by circular no. IRDA/SDD/GDL/CIR/020/02/2013 on February 07, 2013. According to the guidelines. KYC documents (Proof of identity with photo, address proof) are compulsory for health insurance claims. This is highly applicable if the claim amount is Rs.1 Lakh and above.

Insurers need to verify the identity, address, and recent photograph (in the case of individual customers) as part of Know Your Customer (KYC) compliance norms. In this regard, the following documents are acceptable:

  1. Recent photograph of payee
  2. Proof of Photo Identity of payee
  3. Proof of Residential Address of payee

The following documents are listed as valid Photo Identity Proof (Any One):

  1. Passport
  2. PAN Card
  3. Voter’s Identity Card
  4. Driving License
  5. Aadhar Card
  6. Letter from a recognized Public Authority. (As defined under Section 2 (h) of the RTI Act or Public Servant (as defined in section 2(c) of the ‘The Prevention of Corruption Act, 1988’)
  7. Personal identification and certification of the employees of the insurer for the identity of the prospective policyholder.
  8. Job card issued by NREGA duly signed by an officer of the State Government

The following documents are listed as valid Address Proof (Any One):

  1. Telephone bill with respect to any kind of telephone connection. This can be mobile, landline, wireless, etc. This document should not be older than six months from the date of the insurance contract
  2. Current Bank Passbook — details of permanent/present residential address (updated up to the previous month). Health insurance policies are a vital instrument in the insurance industry.
  3. Updated bank account statement with details of permanent/present residential address
  4. Letter from any recognized public authority
  5. Electricity bill
  6. Ration card
  7. Aadhar Card
  8. Valid lease agreement along with rent receipt which is within the last three months

Points to be NOTED:-

If the Insured person does not possess any of the above, then the following documents are acceptable:

  1. Employer’s certificate as a proof of residence
  2. Written confirmation of identification/proof of residence by the banks where the prospect is a customer

Medical Exam For Insurance

The Medical Exam is compulsory for many insurance companies, especially for volatile cases and cases with large claims value. It allows them to review your medical history and basic information that was used to make your insurance application.

All of the information is collected in the two stages of the medical exam. It is then combined with the statistical longevity data. The information on the insurance application is used to determine if you will be accepted for your insurance policy or not. It also determines what the annual premium will be.​

The medical exam will usually include two parts:

  • A verbal questionnaire in which the medical professional will ask a series of health-related questions
  • Standard and basic sample collections: During the medical exam a sample of urine and blood may be required for submission. These tests can often be done in your home. You should be notified in advance by your insurance agent or broker which tests need to be conducted.

Duration Of The Medical Exam

The exam is approximately 20 minutes to thoroughly review your medical history verbally with the official. Then, it takes only a few minutes to collect the samples.

Need For Medical Exam By Insurance

There are three reasons health insurance companies administer medical exams:

To verify the authenticity of the information submitted to the company in the application

To review the full medical history of the applicant. The questions pertaining to the exam are designed for an in-depth analysis of your medical history and your family members.

To identify any underlying medical conditions. The applicant may be subject to medical conditions such as diabetes, inconsistencies in the blood work, or HIV. Sometimes the applicant may not be aware of the condition or may have chosen to not declare the same. The company will also verify drug or nicotine use. The information from the medical tests will be matched against the sample test results.

Need For Digitization in Health Insurance

Well, it’s nothing but the process of changing information into the digital format. With each passing year, digitization is becoming vital for the insurance industry. In 2005, people first started searching for digital insurance plans. Since then, digitization has consistently increased in strength in influencing the masses. Fast forward a decade and you can now buy digital policies online within a few minutes. You can find insurers everywhere, selling digital insurance online using social media prowess, and achieving resounding success.

The digital insurance market in the country is witnessing a compound annual growth rate of 25.36%. Digital media has played a crucial role in this spectacular growth and set the blueprint for digital insurance plans. Insurance companies embrace the digitization process with regards to proper digital norms as IRDA spearheads this empowering movement.

Despite filling the details on a website, this conventional method has the following drawbacks:

  • About 85% of the time and effort goes into manual form-filling, which is a huge pain point for customers and insurers alike.
  • The conventional method provides lesser room for fraud detection.
  • Human-errors can lead to catastrophic back-ops failures.
  • Increased turnaround time leads to increased time for processing claims, onboarding, etc.
  • Conducting a medical exam can also take time in terms of scheduling and verification.

What do the people gain from going digital for health insurance policies?

The conventional method can have the following disadvantages in terms of customer experience:

  • 93% of customers get irritated by a lengthy & time-consuming onboarding process.
  • Lack of proper methods of ID verification leads to higher chances of fraud.
  • A bad customer experience during initiation leads to a broken onboarding journey.

 

Insurance policies like any other investment are prone to security risks which causes inconvenience to the insurance buyers. Apart from security, there are many other issues that will be resolved due to the Digitization of insurance policies. What is the solution? How is it related to Digitization?

Document portability: One of the major solutions offered by digitization is that the insured will get an e-copy of the documents related to the digital policies in question. Managing Documents has always been a hassle for policyholders. A majority of them end up losing premium receipts, policy cards, and other related documents. These documents may seem insignificant. However, if you plan on availing of tax deduction they can be a golden egg. If the insurance period ranges for more than 5 years, losing documents during such a long period of time may seem logical but is simply unacceptable. Here is where digital insurance comes into play. Since e-copies are stored in cloud-based data-servers; they can be preserved and acquired without putting in much effort. The documents are easily available on any digital device capable of reading and displaying the data. The database is managed by IRDAI approved Insurance repositories. They are

  • CDSL Insurance Repository Limited (CDSL IR)
  • Karvy Insurance Repository Limited
  • National Insurance-policy Repository by NSDL Database Management Limited
  • CAMS Insurance Repository Services Limited

Better customer service: When people visit the insurance providers for any clarification or data-related queries, they are given a date and are told to come on that day. When you ask them for a reason for this delay, they simply provide polite excuses. This solution is not acceptable for some customers who may require the documents on priority. This may be to file a return urgently or to claim the insurance money. With digitized management not only, the conservation of the data would be easy but providing the customers with the necessary information will be at the push of a button. With a properly formulated digitization, the process of handling customer queries like generating premium calendars, claims, and premium records, online payment of premiums, and tracking consumer requests will gain a faster pace leading to more satisfied customers.

No need to provide KYC for a new policy: When applying for any other type of insurance from the same company, the consumers are often asked for their KYC documents as identity proof. Here, Digitalization might be one of the most convenient solutions for consumers. With their KYC data stored in the company’s repository, all the company must do is overwrite the (Digital) application form with the data cached in their repository.

Monetary Efficiency: Not only do the providers who profit from digital insurance, but also the buyers experience ease in a transaction. Digital insurance can help the term insurance buyers save money on premiums with a 35–40% difference margin. How? When people buy term insurance, they usually buy it from an agent or a broker who adds brokerage or commission which is 30% of the insurance amount on the term insurance premiums. However, when you purchase term insurance online, you get insurance without any brokerage or commission added to the premium which saves you a margin of 30% easily.

Digital KYC For Fraud Prevention In Health Insurance

Fraud in the health insurance industry via impersonating a person is something where some people even go so far as to copy credit cards of another person and make payments using them. Fraudsters often use the medical insurance demographics of a person to gain healthcare benefits or purchase prescription drugs. Any of these situations can prove to be seriously harmful to the victim’s reputation.

Medical identity fraud has some extreme consequences on a person’s life. The financial shock can often be devastating for the insured. The emotional shock is of greater magnitude when a person gets their medical identity stolen. The medical institution itself has to overcome difficulties due to the type of fraud which it encounters. Medical identity theft is on the rise and a growing concern for both patients and healthcare providers. However, modern technology has revolutionized fraud prevention in healthcare.

The Healthcare industry is a booming sector in India and it is also replete with various challenges. Health insurance policies are designed with the intent of providing medical aid smoothly. It is equally vital to understand the health insurance details to gain optimum coverage.

However, the past decade has witnessed a rise in the fraudulent claims made by individuals. There is a constant need to revise the health insurance details, to avoid such deceitful claims. Both the insurance companies and policyholders must work together to tackle the problem.

Let us begin by first understanding the types of fraud in health insurance.

Different Types Of Health Insurance Frauds In India

  • Opportunity Fraud: This occurs when the policyholder provides inaccurate information while making a claim. One can hide a pre-existing condition or mislead the insurer to get the underwriting in their favor.
  • Deliberate Fraud: This involves the deliberate presentation of an accident or damage that is covered under the policy.
  • External Fraud: This is the fraud committed by policyholders, beneficiaries, medical service providers, or vendors against a company.
  • Internal Fraud: This is the fraud committed by agents, managers, or executives against a company. Even a policyholder can be at the cheating end of it.
  • Policyholder’s Fraud: It basically comprises the below-mentioned 3 types of frauds — claims, eligibility, and application.
  • Claim Fraud: Of the various other health insurance frauds in India, this is another one. Under this, the person can make an illegal claim to take advantage of the insurance coverage.
  • Eligibility Fraud: This is one of the many frauds in health insurance. It occurs when the person fills in incorrect information regarding the pre-existing condition or employment status.
  • Application Fraud: The concerned individual can enter wrong information to avail the extensive coverage.

Using AI for Fraud Prevention in Healthcare

Health insurance frauds in India can be checked by analyzing the fallacious behavior of frauds. Certain measures have been put in place to deal with health insurance frauds in India.

A strict screening process is being implemented by various insurance providers in India nowadays. Many insurance companies are leveraging technology to detect fraudulent behavior. In order to mitigate risks that threaten the healthcare industry, one must harness technical tools.

In today’s world, there are several third-party identity verification service providers. They offer digital KYC systems that use advanced AI and HI (Human Intelligence) to pick up attempts of fraud.

Online identity verification services authenticate individual users through document and facial verification techniques. This allows them to identify whether a person is using fake or stolen credentials and attempt to defraud the system.

KYC for a Better Customer Experience

Emerging technologies for online identity verification are critical because KYC adds friction to the onboarding process as customers go through the necessary identity verification steps. Long wait times are expensive for insurance companies and frustrating for customers who expect quick and easy interactions. In fact, research by Signicat found that more than 50 percent of retail banking customers in Europe abandoned their attempt to sign up for new financial services. The leading cause? The process simply took too long and was too onerous.

The challenge that every business faces, therefore, is how to balance KYC with the need for fast, efficient onboarding processes that deliver a positive customer experience.

Risk Management

It’s not enough to look at a customer’s risk profile only during the enhanced due diligence process of onboarding. Banks and other organizations must also look for signs of terrorist financing, suspicious activity, or other high-risk behaviors throughout the course of the business relationship.

In general, once a customer has been identified and verified, there is no requirement to re-verify their identity. The exception is when there is a trigger event, for example:

  • A product or service that you supply the customer changes
  • Suspicions are raised regarding previous demographic information collected and its authenticity.
  • Suspicions of money laundering are raised

By performing ongoing monitoring, businesses can implement a continuous risk assessment process that flags customers who may pose increased risks as circumstances change.

Digital KYC As A Means For Customer Onboarding In Health Insurance

 

With the latest norms for digitization, Signzy has developed two unique KYC products to suit all onboarding scenarios in the health insurance sector. RealKYC & VideoKYC have been developed in compliance with industry standards and offer you the following benefits:

  • Remote Verification Of Medical Records: When purchasing a new health insurance claim, our digital KYC products ensure the authenticity of all submitted medical records.
  • Faster Onboarding Of New Insurers: Skip the long wait times for claim verification with RealKYC. Claims can be passed instantly as our patented AI helps reduce 90% of back-ops effort.
  • Real-Time Insurer Authentication: VideoKYC records the time stamp and audit trail for every application, ensuring all applications are authentic.
  • Online Medical Exam Through Video Conferencing: The insurers can directly connect with the medical examiner for the medical review which can be completed without hassle in a matter of minutes.
  • 80% Lower Cost For Acquisition, resulting in easier and cost-effective onboarding

Future of digital insurance

Insurance, in most developed countries, is mandatory for every individual. Whereas, in India, policies like Mediclaim are availed only by people in urban areas. The insurance industry, however, is booming with success despite the facts. According to the reports from the BCG by the year 2020, a growth of 2,000 percent is predicted from its current state, while the turnover from the same range up to RS. 15,000 crore.

In a consumer trend analysis conducted by Google, there has been a significant 450 percent growth of searches related to life insurance and health insurance since 2008. On the other hand, the insurance industry itself has witnessed a 600 percent growth in the past five years. Experts believe, in the coming 2–3 years, 75 percent of insurance policy purchases all over the world will be done through digital channels.

The Government’s initiatives like Pradhan Mantri Suraksha Bima Yojana and Rashtriya Swasthya Bima Yojana encourage citizens to take insurance. Many governments in the country are in the early stages to digitize processes of obtaining and claiming insurance.

Digitization might be an elaborate process as most of the companies have employees who are not accustomed to the new digital procedures. On the other hand, it might need to be regulated with proper guidelines and rules to protect both the insurer and the insured against data misuse. One can say, Digitization will give a fair experience to each policyholder.

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:

Signzy

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

Digital Onboarding in Life Insurance Sector

Digital Onboarding in Life Insurance Sector

Posted on | by Signzian

The Life Insurance sector, historically reliant on paper-based processes and face-to-face interactions, is undergoing a transformative shift with the adoption of digital onboarding. This digital evolution not only streamlines the cumbersome enrollment procedures but also caters to the modern customer’s demand for quick, hassle-free experiences.

Life insurance policies play a crucial role in the insurance industry. The Insurance Regulatory & Development Authority Of India (IRDAI) is the regulatory body for all insurance companies in India. IRDAI has now allowed the use of paperless KYC collection or e-KYC. To enable this, the government has allowed insurers to avail the Aadhaar-based authentication services of the Unique Identification Authority of India (UIDAI)

Life Insurance Companies can use KYC For Fraud Prevention

Insurance fraud is a reality in this day and era. Many people who commit such frauds do so without realizing that their actions result in higher premium rates that have to be paid by other people. On average, insurance companies lose around $30 billion every year on account of fraud. The costs of these frauds are levied upon innocent, hard-working people. The necessity for fraud prevention systems in the industry is the need of the hour.

Moreover, the smaller cases are most harmful as they get ignored. After a while, they add up to become a cumbersome amount. Background checks are conducted in the insurance industry as they can single out money launderers, if not the fraudsters. Most people who engage in insurance fraud use fake or stolen identities to execute their schemes. As we proceed with the article, we will point out how KYC services providers can assist the insurance industry.

Frauds Mitigation Through KYC For Insurance

There are many types of frauds that happen with life insurance companies. However, some can be easily avoided by applying secure processes.

Fronting: The insurance policy is taken out using the details of another person to get favorable terms such as lower rates on premiums. Criminals or fraudsters usually use this process to carry out their scams. They use fake or stolen identities to identify themselves as someone else. Then they proceed to create fake documents to support their taken identity. KYC service providers can isolate such attempts and prevent them from happening.

Money Laundering: This is a global problem. Insurance companies too are a common target to launder money. The products offered by insurance companies are easy to target for fraudsters. This is because the processes that are associated with them make it easy for money laundering. Life insurance policies are extremely tempting to money launderers. This is because they allow for heavier premium deposits. Money Launderers take out such policies and deposit large amounts of money while canceling the policies after a while. KYC service providers conduct conclusive background checks. This helps prevent these types of frauds.

The KYC Screening Process

For a productive business, corporates require to deal with the right people with beneficial and favorable intent. Sectors that are particularly in the profession of handling money need to be careful. They must be sure that they are dealing with genuine entities. This is why the life insurance sector has to adhere to KYC norms mandated by their respective regulatory bodies.

As part of the Anti Money Laundering Act, KYC norms help in ensuring that the entity in question has an authentic identity. It is made sure that the source of money is not a shady one. The money would not be used for fostering any criminal activity either.

If we take the life insurance industry as an example, insurance companies deal with three entities-

  • the insured party
  • policy taker
  • agent.

All these entities need to be KYC screened.

Insured party — this is the entity on which the insurance policy is being taken making it imperative to be checked for authenticity. There have been instances when insurance policies have been taken on non-existent or fake identities or on persons who no longer exist. There also have been times when the policy is taken by tweaking a few pertinent details of an individual. The goal of KYC screening is to avoid such a situation.

Policy taker- the entity who is taking a policy should be eligible for taking such insurance. This is the rationale behind screening policy takers.

The insured party and the policy taker are screened with the same method. Their identity proofs are examined for authenticity and the specified address is examined by paying a site visit.

Agent- Insurance companies depend on agents to generate business. An agent is the one who markets the insurance products to individual customers. Agents also educate customers about various products and help them choose the most suitable one. Subsequently, they are also expected to provide all sorts of assistance in taking the policy, paying the premium, and receiving the insured amount when required. Given this significant role, insurance companies are extra cautious about their appointment of agents.

Drawback Of The Current KYC Process

Multiple insurance companies struggle to deliver digital experiences. This is because legacy applications are the most common obstacle for digital transformation. Onboarding a customer in lesser time with due diligence is a challenge.

The existing onboarding process for most insurance companies is similar to the following:

  • Customer lands on company website
  • Selects insurance type and plan
  • Fills-in Occupation, income details, and PAN details as (ID proof).
  • Life-cover details: pre-filled form
  • Basic Info: partially filled form
  • Customer Identity undergoes verification
  • Customer must enter Lifestyle-associated details
  • The customer fills the Nominee details

With digital KYC, the following areas can be addressed for a smoother customer experience::

  • Form filling is smooth
  • Liveliness check ensures more sanity
  • Telemedical video conference eliminates back and forth.

Digital Onboarding — Need For Digitization In Life Insurance

  • Industry analysts and large consulting firms claim onboarding is a top priority for digital transformation efforts across the insurance industry. After all, bad onboarding can increase customer attrition rates by between 25 and 40 percent, according to The Financial Brand.
  • Industry analyst firm Celent emphasized the need to focus transformation efforts on onboarding. In its November 2018 report, it also talks about industry trends for wealth management firms.
  • In a study by Bain & Company, customers who use digital channels tend to be loyal to their banks. Digital banking customers tend to own more products, and they transact and engage more with their banks. Mobile-first customers contribute to higher loyalty scores to their primary bank. This in comparison to the clients with low digital behavior. Globally, it is 50% higher approximately.
  • As noted by Argo executives at the InsureTech Connect conference in October 2018: “Customer acquisition is just the beginning. How you deliver value to customers — that’s the real benefit to them in this ecosystem. We’re trying to create a better experience for everyone we engage.” That means a better onboarding experience.

Major Challenges in The Life Insurance Onboarding Process

 

Fragmented signup process — There may be some customers who are unable to complete the signup process in just one session. Ideally, the onboarding process should track progress and let them stop. The process can later restart onboarding effortlessly, from where they left off.

Complex information requirements — Several industries have complicated data requirements and strict compliance regulations. Instances can be financial services, healthcare, and government. State or regional rules frequently oversee the information that needs to be gathered as well as the format. In general, customers have to sift through forms with irrelevant questions. This leads to a struggle to comprehend the exact requirement from them. This often results in high NIGO (not in good order) scores.

Multiple channels and devices — It is possible for customers to choose to onboard across multiple devices, or even via a call center. However, the experience is often inconsistent. Enterprises must provide clients with an integrated and seamless experience on each channel.

Paper-based processes — Many business processes require customers to complete and sign paper forms. They can either scan and fax or even worse, mail them back. No one enjoys this tedious and time-consuming effort, either externally or internally.

IRDAI Existing Guidelines For Life Insurance

  • Every insurer in the life insurance business must provide customized benefit illustrations to proposers or policyholders at the point of sale for all products. The exception can be to those issued under IRDAI (Micro Insurance) Regulations, 2015, Guidelines on Point of Sales (POS) — Life Insurance Products, 2016, and IRDAI (Insurance services by Common Service Centres) Regulations, 2019 as amended over time.
  • Such benefit illustration shall have to be signed by the prospective policyholder as well as the insurance agent. The signatories may also include the authorized person of an intermediary. Another alternative can be to include the insurer involved in the sales process, as the case may be, This should form part of the policy document.
  • Further, the benefit illustrations should be constructed as per the specific format prescribed by the IRDAI. The circular contains annexures specifying formats for these illustrations. These apply to different types of policies.

Need For Digital KYC — New Guidelines By IRDAI

Life insurance policy buyers will soon be able to complete KYC through a paperless process or e-KYC. This requires providing Aadhaar number as proof of identity to insurers, as per an IRDAI press release. This would make the Know Your Customer (KYC) process much easier for policy buyers.

This e-KYC will also be very useful in the current lockdown in the country. The government has allowed insurers to avail the Aadhaar-based authentication services of UIDAI. This can fulfill the KYC norms of policyholders.

The IRDAI press release, issued on April 24, 2020, mentions new KYC norms while availing insurance services. These norms will facilitate the general public to easily fulfill.

The release further states that the interested customers/policyholders/claimants may avail paperless KYC services in the coming days from the following insurance companies:

List Of Insurance Companies

  1. Bajaj Allianz Life Insurance Company Limited
  2. Bharti AXA Life Insurance Company Limited
  3. Exide Life Insurance Company Limited
  4. HDFC Life Insurance Company Limited
  5. ICICI Prudential Life InsuranceCompany Limited
  6. India First Life InsuranceCompany Limited
  7. Max Life Insurance Company Limited
  8. PNB Metlife India Insurance Company Limited
  9. SBI Life Insurance Company Limited
  10. Future Generali India Life Insurance Company Limited
  11. Reliance Nippon Life Insurance Company Limited
  12. Aegon Life Insurance Company Limited
  13. Shriram Life InsuranceCompany Limited
  14. Aditya Birla Sun Life Insurance Company Limited
  15. Pramerica Life Insurance Company Limited
  16. Kotak Mahindra Life Insurance Company Limited
  17. Star Union Dai-ichi Life Insurance Company Limited
  18. IDBI Federal Life Insurance Company Limited
  19. Edelweiss Tokio Life Insurance Company Limited
  20. Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited
  21. Kotak Mahindra General Insurance Company Limited
  22. Future Generali India Insurance Company Limited
  23. Manipal Cigna Health Insurance Company Limited
  24. ACKO General Insurance Limited
  25. Religare Health InsuranceCompany Limited
  26. Royal Sundaram General InsuranceCompany Limited
  27. SBI General InsuranceCompany Limited
  28. HDFC Ergo General Insurance Company Limited
  29. HDFC ERGO Health Insurance Limited (Formerly Apollo Munich Health Insurance Company Limited

KYC For Agent Assistance — How Digital KYC Helps

Agents are the fundamental constituents and the first step of the customer towards the onboarding journey. Insurance agents introduce customers to the various products on offer by a life insurance company. They also clear doubts and confusions of the customer and in many cases, collect the KYC for a new customer.

Given below are some highlights on why digital KYC can help insurance agents:

Client identification

The first step which involves identifying the correct name of the entity is a bigger challenge than most people would expect. A significant amount of time is wasted when front office staff or partners provide compliance with details, but of the wrong legal entity.

A common example is a deficiency of understanding in the front end around corporate structures. When a sales rep embarks on a new relationship with an entity, it’s easy for them to use the wrong name. It is very frequent for the holding company to not have the same name as the brand or branch with whom you are engaged in communication.

Initial risk assessment

This is a preliminary setup using customer-provided demographics to assign an initial risk rating, such as high, medium, or low. Such information can contain :

– director and shareholder details

– company incorporation documents

– a basic risk screen to identify major red flags, like sanctions.

Based on the top-level information provided on the client, it is easy to assess the level of risk they can inflict on your organization. However, not all customers will be high risk. With digital KYC, there is no need to dedicate time and resources to performing unnecessary due diligence steps which makes for an inefficient process.

Manual verification

Manual verification is a part of most traditional KYC processing workflows. They are multiple scenarios in which these aren’t the most efficient. Several agents have to go through several documents, make sure the information is correct and check for fraud. Humans aren’t anywhere close to being as fast as computers. Automating this process can mean a lot of time and money saved for the company, a higher rate of onboarding, and better employee satisfaction. ‌‌Digital KYC can thus help remove the cost and time involved without any additional requirements from the agent side.

Authenticity of Agent

The primary channel through which insurance is sold in India is with the insurance agents. To increase the numbers for sales, agents may end up selling the wrong products to the clients. In such cases, agents do not provide complete information to the customers. This ultimately leads to customers who don’t get the best product. The consequence is a poor customer experience which is a loss for the industry. With Digital KYC, the insurance information can be identified. These cases can then be isolated to prevent further misuse by agents in the future.

Innovating Life Insurance with Digital Onboarding

For easier onboarding, Signzy has developed 2 unique Digital KYC solutions — RealKYC & VideoKYC.

With RealKYC, remote onboarding of new insurers is no longer a hassle. There are many benefits to RealKYC in the life insurance sector as follows:

  • Zero Paperwork: With RealKYC, customers can easily upload their KYC documents and IDs to the system. No need for making physical copies for manual submission.
  • Policy In Minutes: With RealKYC, customers no longer need to wait endlessly for the verification process to be completed. Get your life insurance policy active within minutes.
  • Easy Form Filling: Real-time data pre-population to eliminate manual form filling for submission of new claims.

VideoKYC has gained a lot of attention recently and has been the winner of multiple awards and accolades. With VideoKYC, you can get the following advantages:

  • Proof Of Life: With real-time in-person verification, insurance companies can easily establish ‘proof of life’ of the insurer from time to time.
  • Lesser chances of claims fraud: VideoKYC uses a host of Signzy’s proprietary APIs to verify all official documents and financial statements to mitigate potential claim frauds.

Conclusion

The fact that Digital KYC can be used for fraud prevention and to build trust is evident. Along with this, proper implementation will create a reliable and better onboarding process for the customers and the companies. This can be a boon for the Insurance Sector in India.

The operative word here is ‘proper’. Such an innovative idea demands excellent execution. That can be achieved by collaborating with credible associate companies and startups. If the insurance companies acknowledge this and process it, they will thrive in the booming Indian insurance sector.

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:

Signzy

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

Indian Insurance Sector

Fraud & Forgery in Indian Insurance Sector

Posted on | by Signzian

With a US$ 280 billion evaluation, the Indian Insurance sector is a huge market for both domestic and international companies. Life Insurance portfolios alone are expected to grow nearly 75% in the next 5 years.

Unfortunately, insurance fraud has been on the rise around the globe and in India, particularly. The Financial Express reports that more than 9% of claims in the insurance sector are false or fraudulent. Annually, it results in more than Rs.40,000 crores loss. In 2019 alone this was more than Rs.45,000 crores.

Continued, this will result in a massive drain of India’s economic prowess. On top of this over $6.25 billion is lost by insurance companies to fraudsters. This in turn might cause the companies to increase premium rates for genuine customers.

This article takes a detailed look at how that is possible. With some selected cases of fraud that could have been prevented with technology, it gives a better perspective on how useful is technology against fraud.

Indian Insurance Sector Frauds & Its Types

An act performed to defraud an effective insurance process is called insurance fraud. It occurs primarily when a claimant tries to gain an advantage or benefit not entitled to them. Fraud is deliberate and willful. In this sector, it always involves financial benefits performed under false and illegal pretense.

The Apex entity and the overseer of all insurance business in India, Insurance Regulatory and Development Authority of India(IRDAI) defines 3 generalized classifications for insurance fraud in India:

  • Claims/Policyholder/Customer Fraud- This includes fraud against the insurance company during the purchase, execution, or claims processing of an insurance product or policy.
  • Intermediary Fraud- If an Insurance Agent/ Third Party Administrator Agents(TPA)/Corporate Agent or any intermediary perpetrate any fraud against the policyholders, customers, or the insurance company.
  • Internal Fraud- If a Director, manager, or officer in the higher ranks indulges in misappropriation or fraud against the insurance company.

Out of these three, claims fraud is most common, and they are divided into Hard Fraud and Soft Fraud. If an individual deliberately invents loss such as theft, destruction of property(like arson), or self-inflicted injury to claim benefits from respective policies, it is called hard fraud. Soft or opportunistic fraud includes exaggerated claims by policyholders. The real damages are hidden and an exaggerated representation of the situation is presented.

Insurance Fraud In Different Sectors

Indian Insurance Sector

 

Fraudsters find different ways to operate in different insurance sectors. Thus a detailed look at how each sector defines potential fraudulent methods is helpful. Fraudsters usually target the following major fields:

Life Insurance

This is the most expansive field of insurance. This renders it the sector most susceptible to fraud. Most of this fraud occurs during the application process usually with applicants misrepresenting their income, health, personal information, or in certain cases, the true documents. Some of these might be to get less expensive premiums, but many cases are for scamming the insurance companies.

Digitizing the processes by insurance agents is an excellent move by companies. But inefficient implementation of this is futile. Some ways in which fraudsters trick the companies is by creating an additional identity as a beneficiary or faking death to claim the life insurance benefits. Fraudsters may return after disappearing for a few years claiming loss of memory to avoid any penalty.

Sometimes fraudsters withhold information regarding multiple policies. This is not allowed. The customer must provide information regarding all policies concerning the insurer. This prevents a single individual from having multiple claims on a single issue.

Health Care Insurance

Health insurance fraud is the intentional deception, concealment, or misrepresentation of information resulting in healthcare benefits for an individual or group. It can be committed by the policyholder or the provider. Some of the major modes of healthcare frauds are given below:

  • A policyholder trying to hide pre-existing conditions while applying is fraud. This is done by submitting false medical data or other documents. The legitimate waiting period for individual policies is ousted in such fraud practices.
  • Documents are outright fabricated to satisfy the terms and conditions of the policy. Insurance companies prefer youthful and healthy people as their customers. But if an aged person approaches them, the company would provide insurance. But the premium costs for this would be high as the risk for the company would be high. People try to conceal their ages in such cases. Faking disability is a divergent fraud practice from this.
  • Submission of duplicate bills that are either forged or inflated is also fraud. This is important in cases where no actual expense occurred. This is because of the basic understanding that insurance policies are not for profit but security.
  • A person participating in a fraud ring i.e collude with an agent, doctor, provide, etc to create a false claim is also illegal.

Automobile Insurance

Fraud rings in this sector collude to fake traffic accidents, collisions, or even death to make a fake insurance claim. The objective is mostly money. This ring may include insurance claims adjusters and forgery experts who make phony police reports and other documents. The Insurance Research Council estimates 21% to 36% of all automobile insurance claims to contain suspecting elements of fraud.

Automobile insurance frauds primarily fall under either of the following categories:

  • Staged Collisions- Fraudsters utilize a vehicle to stage an accident with innocent or involved parties. The fraudsters carry 4–5 passengers in a vehicle and the driver takes an unexpected maneuver that forces the innocent or opposite party to collide with their vehicle. Each fraudster can claim the insurance for the injuries he has been inflicted during the accident. Documents including medical reports and sometimes even identity proofs are forged for this purpose and submitted for evaluation.
  • Exaggerated Claims- After a real accident has occurred, the owner might incorporate a whole set of previous minor damage into the garage receipt associated with the accident. Personal injuries like whiplash might be exaggerated with false documentation.

Property Insurance

Fraudsters might try to insure a property and then destroy it to claim the insurance. This usually involves arson. They tend to forge the necessary documents to prove that the destruction occurred due to natural causes or disasters.

Selected Scenarios Where Technology Could Have Prevented Scammers

While taking a closer look at how individual insurance fraud cases have fared in India, one thing stands clear- We could have prevented them. Almost all fraud is motivated by money. With technology, we could keep better tracks on scammers and fraudsters. Some of those selected incidents are given below with how technology could have been used to prevent them.

Madhya Pradesh- July 9, 2019.

A 10 member gang in Madhya Pradesh that included a doctor and a lawyer pulled off a brilliant scam for nearly half a decade. With an estimated total of more than 2 crore rupees scammed from insurance companies, the gang was faring very well till early 2019. The gang operated from the Dhar district by forging fake documents of persons in a moribund state and terminally ill people.

The fraudsters first identified their victims that included terminally ill patients. Then they would obtain vehicle finances and life insurance claims in their names. After their natural death, forged certificates proving unnatural causes for their death are submitted. Even the age of these senior citizens was falsified to avoid suspicion. With these forged documents the gang claimed money from the insurance companies.

This is a classic example of how document forgery and pretense are used to defraud companies. This could easily be avoided with technology. If the documents were analyzed by specific and well-equipped APIs or other forms of automation, the fraud could have been detected. As much as a document can be forged, it could never be as good as the original. This difference which is negligible to the human eye can be caught by technology.

Andhra Pradesh- November 26, 2017

A 35-year-old woman declared herself dead to claim Rs.1 Crore from an insurance company. She appointed her husband to raise the claim. The woman’s husband, Syed Shakeel Alam submitted fake documents declaring his wife had died. He mentioned in the documents that his wife was the policyholder.

He approached the insurance company claiming Rs1 Crore insurance. The Rs.1 Crore policy was issued in 2012 and an annual premium of Rs.11800 was paid every year for 5 years. The death report of the woman specified the cause of death as ‘chest pain’. In truth, most of the documents and medical records were either forged or belonged to another woman who had in truth died. Though captured, they had almost pulled off the fraud.

This too could have been prevented if proper technology was used to analyze and identify the documents. Visual verification could have been used to ensure better credibility. The existing APIs available for such measures are very effective. Unfortunately, many companies are yet to adopt these.

Gujarat- January 18, 2021

Four individuals including a doctor, an insurance agent, administrator of a private hospital, and a policyholder claimed insurance with the help of spurious COVID-19 medical documents and records in Vadodara, Gujarat.

Dr. Anil Patel, insurance Agent Pravin Parmar and administrator Dipak Tiwari were the prime culprits. Patel and Parmar would obtain and use bogus medical records. They tried to claim north of Rs.4,00,000. Tiwari tampered with the COVID-19 test samples and pasted the names of policyholders on them. He even tampered with the test results to make them ‘positive’.

The lack of a proper database and the inefficient evaluation of the documents was the major reason this scam had been going on for some time. If the claims processing was more accurate and diligent, this could have been prevented. Technology provides us with APIs and RPA that can be used to make strict verifications and avoid such situations.

How Will Technology help the Indian Insurance Sector?

It is concerning that ‘insurance fraud’ is undefined in the Indian Insurance Act, 1938. Other instruments such as the Indian Penal Code(IPC) or the India Contract Act from the legal system are also void regarding insurance frauds. Thus, it is up to individual insurance companies to take action to prevent it.

One of the best ways is to use technology and automation to mitigate fraud risks.

Most claims are evaluated by agents or officers from the insurance company. They may make mistakes unintentionally or if dishonest may corrupt the process. This negative human factor can be eliminated with technology. It will also provide benefits to the company in the form of saved time and resources. Some of the specific reasons are given below:

  • APIs can be used to evaluate the document submitted at the time of application and claim. These APIs give unbiased and definitive results. Thus Forgery is detected much easily.
  • A digital repository of all policies can be digitally accessed by the APIs to decide if the applicant has applied for multiple policies for the same issue. This is not allowed by the government and the insurance company is not liable to pay the unmerited benefit.
  • Profiles of applicants and policyholders are double-checked with available repositories and history databases. This will help understand the background and history of the customer from a more credible perspective.
  • Immense time can be saved as a human evaluation would have taken days to complete. But technology can do this in a matter of minutes.
  • Constant monitoring for any fraudulent activities is possible as any kind of suspicious behavior in the database is detectable.
  • Lesser resource and manpower is required for conducting the process of policy claims. This saves the company funds.

Conclusion

As technology advances, the world too shall move ahead. Most of the financial sector acknowledges this and adapts to the changing world of automation. Unfortunately, the Indian Insurance Sector seems to be a little slow in this process.

With a growing number of fraudsters and scammers, it is wise for the sector to understand the technology and implement it in the most efficient manner possible This will save them time and resources while creating a well-fortified system devoid of human errors. This in turn will build their credibility and trust in the competitive arena.

It is only a matter of time before the whole sector transforms in the new era, but if the innovators in the field open their eyes and make the process faster, much attrition can be avoided for their companies. That is why adopting technology is not just necessary, but inevitable.

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 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/

Written By:

author photo

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.

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