Category: KYC & KYB

Welcome to our meticulously curated KYC/KYB category, a comprehensive repository dedicated entirely to the multifaceted dimensions of Know Your Customer (KYC) and Know Your Business (KYB). As we stride deeper into the digital era, the procedures around KYC/KYB have emerged as a fundamental pillar, ensuring secure and compliant operations within the financial landscape.

The articles housed in this category plunge into the complexities of KYC/KYB, discussing its inherent challenges, potential solutions, and its indispensable role in the realm of identity verification. Our articles traverse a wide array of topics, ranging from the application of artificial intelligence in customer due diligence processes to the impact of regulatory shifts on KYC methodologies. These writings cover a broad spectrum of subjects, offering relevance to businesses and professionals operating within the financial industry.

As a leading industry player in the domain of digital identity verification, Signzy stands at the helm of innovation in KYC/KYB. Our cutting-edge solutions are engineered to simplify KYC, making these procedures faster, more efficient, and notably secure.

Regardless of whether you’re a compliance officer diligently maintaining regulatory standards, a fintech entrepreneur navigating the challenging waters of the financial industry, or simply an individual interested in gaining a deeper understanding of the evolving world of KYC/KYB, our category offers a treasure trove of information and insights.

We invite you to join us on this journey of exploration as we dive into the future of KYC in the rapidly evolving digital age. Our articles aim to enlighten, inform, and provide a well-rounded perspective on the significant role that KYC processes play in today’s digital financial landscape. Welcome to a world where knowledge becomes power, and compliance becomes simplified.

The Road Ahead For KYC- 7 Ways Compliance Is Set To Change In This Decade

Posted on | by Signzian

$45 per employee is what companies pay on average for compliance training. The total average time is 5 hours for this training. When we do the math, if the company has more than 1000 employees, the total cost will amount to a minimum of $225,000 a year. Will this change?

Absolutely, yes!

A wave of increased regulation guidelines worldwide has made KYC(Know Your Customer) compliance more difficult, ergo, more expensive than before. Companies that previously snuck past by treating compliance as simply a checkmark operation now face a future filled with questions.

But, with newer technology and emerging trends, this is changing. This will change the associated expenses and the entire process of KYC compliance. We need to keep an eye out for these. Let’s have a look at the 7 major trends that will

 

  1. The Inevitable ‘Perpetual KYC’

Financial institutions(FIs) were content just reviewing customers periodically according to risk ratings. On average, it used to take up to 20 days for a single file to refresh a customer’s details. But now, future KYC compliance is more focused on Perpetual KYC. While regulators were not adamant about reliable, independent source data/documents or information until very recently, expectations will increase as government regulations strengthen with time. Companies should grasp this opportunity to begin working with structured data providers. They can provide event-based, real-time monitoring of alterations in customer details.

  1. Digital Adoption With Better, Increased Automation

Banks have started to use better AI(artificial intelligence) and ML(machine learning) to assess AML CFT risks. AML in finance is very important, and automation will help fortify it. In cases where they don’t use these outright, they will start to use large, open datasets, with dependence on smaller teams with extremely specialized skills. Moreover, total automation will trigger the quicker adoption of digitization. This will help CFT in banking improve, providing a safer approach to ecosystems even outside of finance.

  1. Dependence On Centralized Repositories

Decentralized data is a headache for regulatory entities and respective companies. Instead of forcing clients, providers, and regulators to obtain KYC information from multiple sources, centralized repositories will help streamline the data. In addition, it will remove the requirement for institutions to approach clients.

This has a significant impact on the mechanics and dynamics within the industry. Data sourcing is a considerable concern for the involved parties, but centralizing that information and data brings forth other problems to accompany increased capabilities. FIs should select structured data partners scrupulously as this change develops. This will also improve processes for AML in finance.

  1. Importance Of Operational Resilience Will Increase

Flexible companies can bear better through storms than rigid ones. Conversely, businesses not optimizing processes find themselves outmatched and outgunned by more elastic and agile organizations that acknowledge the need to adapt.

Organizations should focus on enhancing and stabilizing sustainability within KYC processes in order to survive high scrutiny and external pressures. This is particularly true in a post-COVID era, where regulators bring newer priorities and associated concerns to businesses with individual compliance requirements.

  1. Fading Opaque Ownerships

Increased transparency does not work well for companies obfuscating operations on purpose. As a result, regulators plan to storm down on OCS(ownership concealment strategies). Now that companies and regulators both have improved tools to detect suspicious situations. These institutions that have become accustomed to hiding their UBOs(ultimate beneficial owners) will have a troublesome awakening.

  1. More Stringent Global And Government Regulations 

What do regulatory bodies do when newer processes and tools permit them to detect more rulebreakers? Rarely are they happy with the results. Instead, they double down and increase regulations and lean harder on better technology to eliminate problems that could have been bigger than they initially expected.

After the initial wave of regulatory actions, businesses that remain compliant will not become complacent. Alterations will continue, either in cryptic and coded law or in the practice and execution of existing rules.

  1. More Data Sharing By FIs

As organizations understand more about compliance concerns, they look to their ecosystem partners to eliminate other issues they might have overlooked. In addition, they will share information through newer content and better practices, improving compliance strategies. Institutions in this regard should be accustomed to sharing more info and advice while working closely with other companies’ compliance teams.

 

What The Future Of KYC Compliance Holds

As newer regulatory guidelines enter the KYC ecosystem, companies must be vigilant. As technology evolves, best practices and the corresponding expectations of governments, regulators, and entities in the system also develop.

These trends are reshaping the world of KYC compliance. As newer insights and better tools come to light, more recent trends will augment or replace them. Although companies cannot precisely predict the future, they can craft flexible processes and the mindset necessary to traverse the unknown.

But for this, they will need the best resources they can find. That’s where Signzy can help you. Signzy’s state-of-the-art tools for KYC compliance and smooth processing will help and fasten your processes. They are AI-driven and completely customizable.

 

About Signzy

Signzy is a market-leading platform that is 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 totally customizable workflows. 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 it 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.

3 Major Reasons Why Your Business Can not Skip Out On KYB

Posted on | by Signzian

Do you know how many shell companies are there in India?

Apparently, no one does. But, authorities identified 230,000 shell companies in the last 3 years. Scrutinized data mining revealed nearly 300,000 shell companies involved in hawala and other illegal transactions. Just government regulations won’t cut it to cut down on these launderers. Individual enterprises need to take action. Each business needs to know with whom they are getting involved.

When it comes to low, mid, or even high-level corporate collaborations, KYB (Know Your Business) is the ultimate evaluation mode to secure business interests and stay compliant with AML(anti-money laundering) obligations. Before an enterprise associates with another company, it should ensure authenticity. KYB provides this while verifying the organization on multiple dimensions.

Ponemon Institute concluded that companies unnecessarily spend more than $4 million due to not taking action and investing in regulatory and compliance practices. KYB, unlike KYC, verifies enterprises and businesses instead of customers. They use certified identification parameters that include the owner’s OVDs(Officially Verified Documents), CRN(Company Registration Number), etc.

Here are the 3 major reasons why you should always have KYB processes set up for your enterprise’s collaborations.

Reason 1- Safe and Secure Business Relationships

Any B2B service and interaction depends on mutual interests and understanding. The changing world of digital technology impacts significantly on your business. On top of this, business partners do not have directive authority over their partner’s vendors. Hence there is a constant and inevitable need to verify trust between the businesses for a stable relationship. This is where KYB forms a reliable standard for building trust and acts as a secure communication channel.

KYB essentially solidifies the reliance of companies and businesses on each other. Additionally, it also provides security and safety from external threats. Many regulatory bodies demand this as well. Hence a regulations compliant tag requires processes involving KYB.

Reason 2- Increased B2B Conversions

Any company that has accessed KYB processes generates more credibility and trust. Partner organizations receive a positive impression. The process is solid and safe with multiple identity checks and verification procedures. Since everything can be automated, any face-to-face fiddle can also be avoided. Trust between involved parties is directly proportional to a greater B2B conversion rate.

This way, the relationships help establish a well-formed reputation for the enterprises. Trust directly impacts the conversion rate; it is relevant for up-and-coming start-ups to ensure they have a built-in KYB process. KYB helps organizations identify themselves without any physical presence at sites or offices. It also helps provide interest-oriented services that increase the conversion rate for B2B services.

Reason 3- AML CFT Compliance

The increase in financial crimes worldwide makes it necessary for governments and law enforcement agencies to ensure regulatory measles. For example, the 1970’s Bank Secrecy Act in the US was established to combat tax evasion and unlawful drug dealings. This was the first step in AML’s history. In addition, organizations like FATF((Financial Action TaskForce) and FinCEN (Financial Crimes Enforcement Network) are aimed at this same goal of AML and following government regulations.

AML practices safeguard the safety interests of businesses. Non-compliance with AML is an expensive deal. Companies pay more than $5 million to regulatory authorities for non-compliance with AML.

The 4AMLD, the anti-money laundering directive from the European Union, dictates and encourages financial institutions to follow KYB practices. This keeps a tab on potential money laundering and terrorism funding initiatives. Therefore, KYB is mandatory for AML implementation. As a matter of fact, it is the cornerstone in identifying potential dangers in B2B interactions.

A Bonus 4th Reason For You:

KYB Reduces Operational Costs

It is no novel fact that automation and digitization help reduce operational costs and TAT. It also helps reduce human interventions and, in essence, human resources. But KYB, primarily digital KYB, takes this up a notch. Digital KYB, just like Digital KYC, maintains the status quo of technological independence. The processes involved are designed to create minimal human intervention while providing the safe and secure fortification it demands. This reduces errors, resulting in costs saved from human errors while maintaining security for the businesses. As it reduces the TAT, this increases the scalability of operations. This renders the future of processing faster for the involved enterprises.

To summarize, KYB is an effective method for creating secure business relations. This is done by reducing the total operational expenses, enhancing the conversion rate in B2B services while complying with AML policies and procedures.

If you wish to create a fortified and user-friendly Digital KYC/KYB process, we can help you with the best resources in the industry. From scratch, Signzy helps build entire onboarding and KYB processes for our clients. These are incredibly customizable too. Of course, you can understand how secure they are as we use state-of-the-art AI rule engines and APIs on our website.

About Signzy

Signzy is a market-leading platform that is 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 totally customizable workflows. 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 it 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.

Blooming Blockchain- How It Can Help You KYC Faster, Safer, And Better

Posted on | by Signzian

Does $10 billion seem like a boatload of money to you? According to Compliance Week, financial institutions across the globe were charged $10.4 billion as KYC and AML fines in 2020. Adjusted to inflation, that’s nearly half the revenue of the entire Hollywood in 2020. That’s wasted money that could have been saved.

Know Your Customer(KYC) processes form the spine of financial institutions’ safety. It primarily encompasses their Anti-Money Laundering (AML) efforts. Traditionally they have always been tiresome and time-consuming. Even after, they were not issues-free, and they were not unhackable. The processes are inefficient and labor-intensive. The risk of error is also pretty high. 80% of efforts go for information collation and processing, whereas the rest 20% is only spent on assessing and monitoring. 

Let’s have a look at how we can change this.

How Traditional KYC IS Falling Short

Customers dread KYC. For them, it serves no purpose other than to increase the activation energy required for CTA. Traditional KYC is out of the question as it:

  • Is manual and prone to human errors
  • Tiresome and time-consuming
  • Heavily dependent on physical attributes like space, storage, etc.

Digital KYC was the solution some years ago. They had:

  • AI-based processing that reduced errors
  • Quick TAT
  • Server storage
  • Better user experience

Many institutions shifted to Digital KYC with advanced Video KYC as an option. But before that metamorphosis could complete, we got newer and better modes. The digitized is getting digitized. This was primarily due to the shortcomings in safety, security, and universal ease of accessibility for the data and the users. An incompetent digital KYC process also Misidentifies fraudulent data and cannot track the customers for verification.

The era for change is here, and it begins with understanding blockchain technology. Blockchain is versatile and resilient. But above these, it records information as electronic databases in the form of blocks.

 

Blockchain KYC- The Next generation of KYC Processing

 

A blockchain is a specifically distributed database shared among the nodes of a digital network. It stores information electronically as a database. Blockchain KYC occurs in multiple stages in a specific Distributed Ledger Technology (DLT).

Stage 1- KYC DLT System

IFI or Initial Financial Institutions ensure users set up their digital identity using valid documents on a Blockchain KYC platform. The data becomes available with consent to institutions for verification. Some of the available options for storage are:

  • DLT platform
  • FI’s server
  • Centralized server

Stage 2- User can transact with FI

The user provides consent. The FI can verify and save the data on the DLT platform using the ‘Hash Function.’ FI delivers digital copies of KYC to the users marked with a Hash Function which matches the DLT platform’s one. This ensures that if the KYC data is changed, it will not correspond with the one on the DLT platform. In addition, it will alert the FIs about the change.

Stage 3- User transacts with Final Financial Institution(FFI)

Users consent to share data with FFI, and the KYC is performed. Then, FFI reviews the data and the respective hash function with the ones IFI uploaded. If both match, FFI finalizes the data as valid.

The Benefits of Blockchain KYC

  • Quality data with real-time monitoring and tracking.
  • Lower TAT- FIs have direct access to data without collation.
  • It eliminates paperwork
  • Decentralized, distributed data collection
  • Mandatory consent ensures safety for the user’s data.
  • Reduced expenses due to unhackable security and fortified operational efficiency.
  • Accurate information validation with DLT
  • Real-time user data appraisal- blockchain technology updates the FI of any new addition of user data.

The Culmination of Blockchain Technology and KYC

Collating user data and processing is expensive and time-consuming. But it has always been a mandatory part of any KYC process. But now, this has changed.

Blockchain not only provides an alternative for this but also helps enterprises monitor and assess user behavior. It saves time from tedious, laborious tasks of data accumulation and processing. It uses this time for the companies to focus on finding solutions for more creative KYC challenges.

It is important to note that Blockchain Technology is not magic and hence not the answer to all problems in KYC. It mainly helps in data collation. The validation process still is an unavoidable task.

Blockchain coupled with AI and cognitive processing technologies helps resolve this. They will create a synergistic and efficient system. However, it is hard to find the right solutions for your enterprise in such a saturated market. Signzy offers state-of-the-art resources and solutions for all your fintech needs. Ranging from onboarding to KYC, we have customizable solutions powered by AI decision engines to get you the best in the industry. 

About Signzy

Signzy is a market-leading platform that is 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 totally customizable workflows. 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 10 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 strong global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and it 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.

 

References

Evolution Of Digital Identity Verification

Posted on | by Signzian

As society and businesses move online, an identity check has evolved to digitally verify a candidate’s name, date of birth, address, and Nationality. However, digital verification is a must if you want to run a profitable organization, reduce fraud, stay compliant with international regulations and reduce the manual effort involved in physical verification. 

Digital verification supports multiple technologies like Image rectification, Blurriness detection, and Optical Character Recognition. These technologies will automate the identity verification process, making it reliable and time-efficient. 

But with the changing business behavior and behavior, how do you know that you are ready for what the future holds? This guide will cover almost everything about digital identity and related topics. In addition, we will be examining the current and emerging technology for online identity verification. 

What is Digital Identity Verification, and Why is It Necessary? 

Digital identity verification is a process that validates a person’s details and identifies who they are by computer technology. Digital identity is an online identity claimed in cyberspace by an individual, organization, or electronic device. 

In simple words, digital identity is the body of information about an individual that exists online. 

Through unique patterns, each identifier makes it possible to identify individuals. Initially, a digital identity arises from personal information on the web, and it may be the Pseudonymous profile linked to the device’s IP address. 

Why Has Digital Identity Verification Become Necessary? 

As technology helps us perform various complex tasks, cybersecurity threats also can’t be overlooked. Unfortunately, however, many people have their identities compromised. And cybercriminals are always on the hunt for frail networks. 

That means loopholes will be created in the complete identity management system that can be fatal for any organization. Organizations have to face millions of financial losses only because of the increase of identity thefts. 

That’s why the more robust line of defense in the form of digital identity verification is becoming necessary. 

Rise of Digital Identity Verification 

In the mindset of the social alarm created by the Coronavirus, many efforts are focused on regaining stability. However, since March 2020, we all have been asked to change our habits in most circumstances like everything has to be done without leaving home. 

From watching movies to banking, everything should be done remotely. With the rise of digital transactions, there is a positive impact in the world of banking. However, digital transactions open up various advantages and opportunities for users. 

But it also has some risks that did not exist before. That’s why digital banking requires a lot of security and trust between banks and consumers. For example, while interacting with new customers, banks need to know whether the customer is who they say they are. 

In that case, Banks conduct a Know your customer process to ensure that the individual is not a fraudster. Therefore, during the customer onboarding process, the online real-time identification of an individual’s identity through digital identity verification is also a must. 

Recently, the Fintech company allowed their customers to transfer money through an online app; as a result, their shares rise to 13% on the first day, and its market value reached up to $7.8 billion. 

Below, we will show you some points that will clarify the concept of digital identity verification evolution. 

  1. Rising Trend in the use of Digital Identity 

Identity verification is a critical issue in many companies that need to comply with KYC regulations during the personal onboarding process. Many financial institutions are turning to digital identity verification to safely and securely onboard remote customers. 

About 85% of BFSI companies have already started the digitization process and provided digital account opening. However, the budget allocated to the digital account opening has almost doubled the size before the current pandemic. 

After the COVID-19, many Financial institutions partially started digitizing the customer verification process. For example, an individual has to initiate a loan application online and then finalize it with an in-person visit to show their online identity. 

  1. Strong Security, Privacy and Compliance Requirements

The customers want to open a bank account with minimal friction. In addition, they want to feel secure that the right level of security is in place to protect their identity. 

Therefore, digital verification must consider anti-fraud, all security, and data privacy with the security of customers’ data. Anyone aiming to digitize an account opening process will be well aware of many requirements that need to be met.

  1. Some Financial Institutions have a Solid Competitive Advantage in Enabling Digital Identity Verification by Adapting to New Customer needs

The digitally-enabled financial institutions whose employees work from home best fit social distancing and online financial services. The banks with a mature digitalization channel are on the success line, while others have to kick start their digitization program from starting. 

  1. Digital Transaction Volume Increases, But so do Fraudsters and Cyber-Attacks

Fraudsters are also taking advantage of the insecure online transactions during COVID-19. When the WHO declared the pandemic, there was an apparent rise in the loan fraud attacks and took the form of first-application fraud, third-party application, and synthetic identity fraud. 

That’s why financial institutions are incredibly vigilant in their onboarding and digital identification process to detect and prevent application fraud. 

How Does OCR Work for Identity Verification? 

The manual job of feeding the data needs to be automated to improve the process of identity verification. In that case, OCR (Optical Character Recognition) converts all the information on an ID into text for input and information validation. 

First, the digital identity will be scanned, then analyzed, and finally translated into the character codes. Further, you can use this machine-encoded text to validate the information against a genuine verification source. 

It will help you verify National IDs containing numbers, addresses, names, and various other parameters. 

Benefits of Using OCR Technology for Identity Verification

Here, we will walk through some of the benefits of using OCR technology for digital identity verification. 

  • Time-efficient: OCR will eliminate the need to enter details on every form or HR portal manually.
  • Cost-efficient: It will reduce manual labor for document sorting and filing, thus saving delivery and raw material used for physical verification. 
  • High accuracy and improved service: OCR ensures that the employees only access accurate and reliable information whenever needed. 
  • Storage space and data security: You can store the data inputted through OCR on servers that reduce the cost of maintaining the physical files. 

How Does Signzy Add Value to Your Digital Identity Verification Process? 

The benefit of partnering with Signzy for Banks and other financial institutions is that our combination of Artificial intelligence and blockchain will ensure that digital compliance is convenient but secure. 

Our solution is trained for document reading and facial recognition accurately representing an individual’s personal details. Our scalable backend operations help businesses to scale faster, cut turnaround time and reduce cost. 

Our data protection infrastructure can identify different types of IDs to input correct details and generate accurate and reliable results. 

Wrapping Up 

The organizations that haven’t yet indulged in the digital identity verification process gradually lose their customers. However, the evolution of OCR technology for digital identity verification benefited many financial institutions in time and cost efficiency, providing high accuracy and improved service. 

About Signzy

Signzy is a market-leading platform that is 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 totally customizable workflows. 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 10 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 strong global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and it 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.

 

Licensing NBFCs & PSOs to Authenticate Aadhaar

Posted on | by Signzian

Payment System Operators (PSOs) and NBFCs can apply for authentication licenses to become KYC User Agency (KUA). These entities may also apply for a Sub KUA license to perform the authentication process through a KUA. The Reserve Bank of India, on Monday, September 13, 2021, invited Non-Banking Finance Companies (NBFCs), Payment System Participants, and Payment System Providers to apply for Aadhaar e-KYC Authentication License.

Presently, banks are the only institutions allowed to do customer identification and verification. It is through one –time password (OTP) based on the Aadhaar card. The OPT is received through a mobile device.

The Prevention of Money Laundering Act, 2002, provides that the Central Government may permit through a notice to a non-banking entity to perform Aadhaar authentication using the e-KYC authentication facility. However, the entity in question should comply with standards of security and privacy as prescribed in the Aadhaar Act, 2016.  

In addition, consultation with the appropriate regulator and UIDAI should happen before the issuance of the notice of permit. The credentials of the reporting entity should satisfy the regulator and UIDAI.

According to the Circular issued on May 9, 2019, the process of application by Non-Banking Finance Companies, Payment system Participants, or Payment System Providers starts by applying through the respective regulator. The regulator determines the format of applications. 

The regulator reviews the submitted applications and can reject them if unsatisfied. If satisfied, regulators forward applications to UIDAI for further scrutiny. UIDAI finally sends a recommendation to the Department of Revenue, Ministry of Finance for notification. UIDAI may issue some conditions when submitting its recommendations. If satisfied, the Central Government issues the notification. UIDAI will then authorize the applicant to do authentication upon payment of required fees and adherence to terms outlined in the Aadhaar Act.

These are the possible implications of permitting Non-Banking Finance Corporations and Payment System Participants to obtain e-KYC authentication license:

Simplify the process of onboarding customers. Instead of relying on the cumbersome process of verifying physical KYC documents, e-KYC authentication will make the process smooth through digitization.

In addition, NBFCs, Payment System Participants, and Payment System Providers will save on the cost per transaction by eliminating manual paperwork and adopting Aadhaar e-KYC verification. It is because customer information is already pre-captured.

Save on the cost of operation. Through digitization, NBFCs and PSOs will realize savings through a reduced staff. A digitized process requires less staff than a manual one. In addition, the entities seeking e-KYC authentication would eliminate travel expenses to verify the physical address of clients since this information is in the Aadhaar card. 

NBFCs and PSOs will experience a faster authentication process. As a result, they will serve a large population in a short period rather than the slower manual processing of KYC documents.

E-KYC authentication will help NBFCs, and Payment Operators reach more micro, small and medium enterprise (MSME) borrowers. Turnaround time for loan processing will reduce. Ultimately, a broader population will have easier and faster access to credit, resulting in a positive impact on GDP and the general growth of the economy.

Improve trust and confidence levels. Customers will have more trust and confidence to engage with NBFCs and PSOs that are licensed. Approved entities will have met the cut after undergoing the rigorous application and vetting process. More trust would translate to more business for non-banking entities as they strive to offer accessible and affordable financial services. 

KUA or Sub-KUA licensing would help curb incidences of fraud that would pass through a manual validation process by NBFCs and PSOs. E-KYC is robust and foolproof. It would safeguard NBFCs reputation and prevent loss of resources through impersonation and other fraudulent activities, making it a safe platform for customers.

Improve compliance. NBFCs offering financial services have been relying on third parties to onboard customers. Once they acquire a KUA license, they can directly authenticate clients and be more compliant.

It is a novel program. The need for a ready and central data repository is unprecedented. Invitation to Non-Banking Finance Companies to come on board is a testament that the demand is high. There is no need to reinvent the wheel. Licensed entities will leverage the online database and verify the identity of customers. It will enable better and convenient service delivery by entities that tap into this system.

On the other hand, possible misuse of customer data is one of the biggest challenges this authorization will create when more entitles could access customer data. Regulations to address the same are in place, but enforcement to ensure compliance will be necessary. 

For example, in 2018, the Supreme Court of India had banned Private Entities to use Aadhaar numbers for verifying customers. It was due to complaints following allegations of commercial exploitation. The cabinet, through an ordinance later, allowed private companies to authenticate via Aadhaar. However, the customer will voluntarily choose to avail their Aadhaar information with these private entities such as banks and telecom operators.

Supreme Court has in the past recognized privacy as a fundamental human right. This ruling delivered on August 24, 2017, should be a constant reminder to those who have access to people’s data to protect it by all means. Privacy recognizes each person’s autonomy and the right to make personal choices. 

Hackers can find a way of interfering with servers and access Aadhaar data for malicious use. Technology is good, and with it comes challenges. However, Aadhaar data is secure and in the Central Identities Data Repository of UIDAI and has not been breached. NBFCs and PSOs will have to ensure their systems are foolproof so that they can protect customers’ data and deter any possible system hacking.

Besides, service providers with the authority to access the Aadhaar system are required to use data only for the intended purpose. This helps in data protection. By granting more entities access to the Aadhaar system, all Aadhaar number holders hope that effective data protection measures will hold.

Conclusion

The notification inviting other players besides government and banking institutions to apply for e-KYC authentication to address the growing demand of social and financial inclusion by various players is a step in the right direction. It will be interesting to see how entities that pass approval will revolutionize their operations. Customers will also reap greatly.

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:

Rahul Raj

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