How do digital identity solutions boost eKYC compliance?
Digital transformation continues to accelerate across industries. Driven by constant fintech innovation and the ongoing impact of COVID-19 – which overnight forced many firms to reconsider their digital offerings to clients – our world is increasingly moving online. While this brings a host of benefits, it also introduces a range of new risks.
As more people begin to conduct more of their activities online, enjoying the benefits of enhanced connectivity and 24/7/365 availability, there is also a growing need to protect against highly sophisticated financial criminals who are harnessing the same digital capabilities to defraud both organisations and individuals.
For firms conducting business online, ensuring that their cyber security is adequate can quickly become a minefield. Many firms are still constrained by legacy systems that lack sufficiently robust security features, and still more simply do not have the funds to invest in cutting-edge security.
A balancing act between compliance and clients
Against this backdrop of rising risk, banks and financial institutions (FIs) must ensure that they are taking adequate steps relating to fraud management and that they are screening customers and third parties, both at the start of any new relationship and on an ongoing basis.
Consequently, KYC remains a central focus for FIs that operate within a strict regulatory environment, and one in which the threat of regulatory action, financial penalties, and potential reputational harm remain ever-present.
A focus on KYC, however, can quickly present a challenge at the start of any new relationship. Banks and FIs typically face a balancing act in which they must ensure that they meet their compliance obligations, whilst also controlling costs and ensuring a favourable client experience.
Digital identity and eKYC
Innovation in the KYC space is stepping up to the plate to solve these challenges.
Digital identities in particular offer tremendous opportunity when compared with the old-school approach of identity verification that relies on hardcopy documentation. Unsurprisingly, these traditional processes are fast being replaced by digital equivalents.
Digital identity solutions can vastly improve negative client experiences in contrast to manual, often paper-based KYC customer due diligence (CDD) processes that are typically time-consuming, inefficient and costly, leading to customer frustration.
They also offer fast, reliable digital ID verification and screening across all geographies; can boost operational efficiency; and generally enhance compliance levels, as they remove the factor of human error.
Many FIs are undoubtedly turning to digital onboarding, eKYC, and digital identity verification because they appreciate that these processes form an integral part of a new client’s first impression and as such can set the tone for future engagement.
Ever-increasing competition in the digital space means that all firms certainly need to fully complete their KYC processes, including identity and document verification, and deliver a seamless and engaging client experience, right from the get-go.
About the author: Marcelo Hiratsuka is the Global Sales Strategy & Execution Director for Refinitiv. He is a strategic leader with a successful 20-year career delivering sales results for global corporations through innovative business strategies and digital marketing. Marcelo's extensive experience in large and complex environments helps enterprises to effectively address operational challenges and improve their bottom line.