AI-Powered Verification: How Fintech Platforms Can Harness KYC For Enhanced Customer Onboarding Experiences

Prominent fintech platforms are utilising AI algorithms to analyse and verify submitted identification documents swiftly, ensuring a more seamless and responsive onboarding experience.

As businesses grow, manual KYC processes can become increasingly challenging to scale.

Source : Getty

By Ajay Trehan

The fintech space is undergoing a rapid evolution. With more than 3,000 fintechs operating currently, India is positioned to become one of the largest digital markets with the rapid expansion of mobile and internet. The fintech revolution has redefined the way we engage with financial services. From seamless transactions to innovative lending solutions, fintech platforms are at the forefront of shaping the future of finance. 

However, at the heart of this digital transformation lies the imperative to establish the identity of customers securely, and this is where KYC steps in as the guardian of trust and security. Let’s delve deeper!

AI and automation to enable fraud detection in real-time

Prominent fintech platforms are utilising AI algorithms to analyse and verify submitted identification documents swiftly, ensuring a more seamless and responsive onboarding experience. Liveness detection and biometric anti-spoof algorithms help validate a customer’s identity against the submitted NIDs in real time. OCR extract text data from various NIDs, capturing crucial information and eliminating manual effort. This helps track the discrepancies in real-time and mitigate the risks of identity thefts and financial frauds before onboarding customers in banks, NBFCs, mobile wallets, gaming, e-commerce and P2P marketplaces. By implementing these advancements, financial institutions can proactively identify potential frauds, saving financial resources that could otherwise be at risk.

Prioritising simplicity, accessibility, and user-friendliness

Fintech platforms place a premium on incorporating intuitive and user-friendly interfaces, ensuring that the KYC process can be seamlessly completed through clear and straightforward steps. The focus on simplicity, accessibility, and user-friendliness not only enhances the overall customer experience but also cultivates a positive perception of the brand.

A noticeable shift in customer onboarding through mobile applications has prompted fintech firms to develop highly user-friendly apps, ensuring the ease of completing the KYC process directly from users' smartphones. This strategic approach condenses the entire process, from document upload to identity verification, into just a few taps. Such initiatives empower modern-day customers, granting them greater control over their interactions with financial institutions.

Meeting the comfort and time-saving of customers

There was a time when customers had to visit the branch to submit the same documents, with no alternative in sight. Today's modern customer demands a seamless, secure, and swift onboarding experience, and to meet this expectation, digital KYC and onboarding are rapidly becoming the standard.

A practical and widely used example is Digilocker, which allows users to access their digital documents anytime, anywhere, and share them online. With digital signing capabilities, customers can also complete the document signing formalities using Aadhaar-based eSign. This is particularly useful in obtaining legally valid digital customer signatures for various purposes, such as loan agreements, account opening forms, or investment-related documents. Digital address verification further facilitates contactless KYC and quicker onboarding, eliminating the need for physical site visits. Fintech's adoption of advanced KYC technologies significantly minimizes the time and effort required for the verification process and enables swift onboarding for customers.

Cost & Resource Optimisation

Digital and Video KYC solutions are enabling Fintechs with instant verification with the power of AI, ML, and deep search algorithms. Faster the customer onboarding process, lower the account activation TAT. This also translates into reduced churn rate and operational costs, helping the business scale up at speed. Automating KYC not only enables faster go-to-market but also reduces the need for dedicated personnel and physical infrastructure, contributing to overall cost savings. This is a win-win situation for both parties.

Legal and Regulatory Compliance

Digital KYC has made it easier for financial institutions to align with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations and stay on the right side of the law. Fintechs are increasingly harnessing digital KYC solutions to assess customers against comprehensive compliance checks, maintain audit trails, and automate and document every step of the verification process. This makes it easier for businesses to maintain detailed audit trails, facilitating easy demonstration of compliance during regulatory audits, offering efficient consent management, and staying in line with data protection regulations. Ultimately, digital KYC not only streamlines processes but also helps businesses stay current with evolving regulatory requirements, ensuring ongoing adherence to legal standards.

Scalability and Global Reach

As businesses grow, manual KYC processes can become increasingly challenging to scale. AI-powered verification technology allows for scalability, enabling businesses to handle a larger volume of verifications without a proportional increase in manual effort. Whether targeting international markets or offering online services to a broader audience, businesses are harnessing digital KYC to reach customers without geographical constraints. The ability to scale and expand globally is becoming a significant growth driver for businesses of all sizes.

An increasing number of Fintechs are at the forefront of revolutionising their KYC process to reduce complexities and align with the fast-paced expectations of today's consumers, making it a more agile and user-centric alternative to traditional banking procedures. The integration of emerging technologies, coupled with a relentless focus on customer-centricity and compliance, will drive the next wave of innovation. Fintech platforms that master the art of harnessing KYC for enhanced customer onboarding experiences will undoubtedly stand out in this competitive landscape.

(The author is the Founder & CEO, AuthBridge)

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