KYC alternatives disrupting traditional KYC methods
Technology is building bridges between businesses and consumers across the barriers of distance and language. This has created a world of unrivaled economic opportunities. In doing so many risks of fraud have also emerged that cause damage to businesses. By dealing with different persons on a remote basis, businesses are attacked by fraudsters so the pressure is building upon them to verify the identities before onboarding them. Internet of Things (IoT), robotics, virtual reality (VR) and artificial intelligence (AI) are changing the trends in marketing and revolutionizing the way we deal in every sector.
Dealing with different people present in different parts of the globe is not easy and risk-free so businesses need to analyze and understand who they are doing business with especially to abate the threat of terrorism and financial crime. Identity verification is obvious to an eye as KYC and AML regulations are fairly uniform across the global business environment. Businesses have to meet the KYC and AML compliance standards as they are under the radar of regulatory authorities.
What is KYC?
KYC stands for “Know Your Customer”. It is basically a legal and regulatory requirement for businesses to authenticate the identity of their clients. Back in 1970, when the Vietnam war was on full swing, a deadly confrontation erupted regarding drug trafficking. As a result, the administration laid a strong foundation against the War of Drugs.
The Bank Secrecy Act of 1979 (BSA) was a part of this policy agenda to deter illegal fundings lawfully. This act requires all U.S. financial institutions to report certain types of customer activities to the regulatory firm – FinCEN, the federal Financial Crimes Enforcement Network.
The purpose of these regulations was to put a halt to drug smugglers and other productive criminal enterprises from laundering money through the US. The BSA visualized the transactions vigilantly hence starving the actors from their profits. The act has laid a foundation for the anti-money laundering (AML) regulations and Know your customer (KYC) compliance. With intentions to curb the flow of money laundering to terrorists, these regulations were imposed to manage crimes. Businesses are required to meet these regulations in order to fight back financial crimes.
Traditional KYC process and their shortcomings
Manually it is hard to verify the identity and in this era, when businesses are working online, it is no less than an uphill task to know who you are dealing with. Moreover, many errors and omissions are expected during this process. Manual verification is not as easy as it takes a lot of time and resources. This makes it frustrating for both businesses and customers. It is a daunting task to verify IDs and documents of people but not with digital identity verification. Each step takes strenuous efforts to be done. Manual identity checks are a team effort and require a lot of laborers to be hired for this purpose.
The need for Digital solutions
Due to the above-mentioned flaws of manual identity verification, digital KYC solutions are the need of the hour for businesses. Digital KYC solutions streamline the whole process of verification and take less than a minute to accurately identify someone at the time of onboarding. Manual identity verification requires huge administrative costs and manpower. Fake and forged documents could not be identified by the naked human eye which are now identified in no time using AI-powered digital KYC for document verification. All the data of a person can be recorded to maintain a hassle-free and easy KYC process. To maintain accurate customer data and regulatory requirements, digital KYC solutions are a great help. Data breaches, identity theft frauds, and other digital financial frauds can be reduced by using proper channels for identity verification. These solutions provide enhanced security and customer experience. Customers build their trust in businesses that are concerned about their time and security and are ready to deploy proper KYC solutions for verification and to combat fraudsters.
KYC alternative solutions for businesses
In this time of chaos, where a global pandemic has been proving catastrophic for the world businesses need to work remotely. During this lockdown, operations have to be performed by sitting in homes. Scanners which were used for verification like fingerprint scanners at airports or offices are considered a medium for the spread of novel coronavirus. So in this situation to avoid physical contact with sensors and documents, businesses need contactless identity verification solutions to comply with regulations.
Moreover, many coronavirus related fraud attempts are already taking the headline. So in order to combat coronavirus-scammers and fraudsters businesses need to have a touchless verification process to authenticate an identity. Following are some alternatives of KYC which every business need to adhere to:
Digital KYC verification
1.1. Online identity verification:
Businesses need to verify identities without physically contacting or meeting with them in this pandemic. In this case, digital KYC verification solutions provide an easy and accurate way to know if someone is who he says he is. Such solutions assist businesses a lot in fighting back the fraudsters who are trying to take advantage of this situation.
1.2. Document verification
Individuals can upload the images of documents online to get their identity verified. Such documents include passport, ID card, and driving license. The digital document verification system is intelligent enough to know if the documents are original or forged. In this way, KYC verification is performed within seconds without the hassle of touching the documents, which is also beneficial to contain the virus.
Biometrics identity verification solution
Biometric verification having face recognition and palm scanning without touching the scanner are powerful solutions to identify an individual without physical contact with anyone. To contain this virus spread, the first thing is to avoid contact with people in terms of social distancing. Biometric verification is a simple and convenient method for identification. Facial recognition technology using 3d liveness detection for spoofing is very efficient and it is impossible to forge such a system. So such a system makes it a lot easier to comply with KYC requirements. Moreover, these systems eliminate the difficulties related to repetitive document scanning and record keeping. This method provides seamless integration to work with the core system for the KYC process.
Video KYC
Individuals are identified during a video call with a business representative. Automated AI-based video KYC enables identity verification in no time during the video call. By using OCR technology the information from the documents shown to the camera is extracted which is then verified. This is another better alternative KYC form to avoid contact with anyone in this pandemic.
The way forward
AI-powered alternative KYC solutions which include biometric verification, digital document verification, 2-Factor authentication, and video KYC help fight many frauds in the business sector. The identity verification industry is expected to reach USD 18.12 billion by 2027 as it is growing steadily in recent years and more and more businesses are adopting it. Even in this time of pandemic businesses need to adopt alternative touchless solutions to provide KYC verification.