Automated KYC

What is automated KYC?

Automated KYC is the process where companies and financial institutions automate the entire user and document verification, which is otherwise paper-based, slow, and time-consuming. Whether it is banks or government agencies, KYC (know your customer) is important to prevent fraud and illicit activities, comply with AML and other regulations, and build mutual trust.

But the problem existing with KYC is it is done manually taking days or even weeks, making it frustrating for both customers and verifying officials. Automated KYC is the way to do fast onboarding at reduced cost, staying fast and agile in a digital-first world.

Why KYC automation?

Customers need instant access. But a typical KYC process takes up to 5 days average. With KYC automation, that can be brought to minutes or seconds. For example, documents get scanned, data extracted, matched, and verified automatically, routing to an official only when it needs special attention.

For industries like finance, banking, insurance, crypto, and investments, compliance checks related to anti-money laundering, terrorist funding, and other finance crimes. This is why the list of screening and due diligence is more complex, which with automation could be done in more fast and accurate fashion.

Risk assessment must become a part of workflow, monitoring customers data consistently for risks and suspicious signs. Automating KYC will make that happen; a proactive risk management from start.

Banks and traditional finance companies must level up their services and fulfil customers' expectations and thrive among fintechs, neobanks, and digital-first institutions.

Modern banks report modern felonies: forged documents, fake proofs, and deepfake attempts during video KYC, and even more heinous activities. AI-driven automated KYC can identify them, even when humans can’t.

How to automate KYC?

Automating KYC will employ a set of technologies like AI, machine learning, OCR, real-time data integration, and identity and behavioral biometrics, and more. Here's how it works.

Set up digital interface: To allow users to update documents and do video KYC, a digital interface or application will be set up. Here they could enter their personal details, capture a picture, and upload their documents.

Document verification: OCR can be used to extract data from documents like address proof, ID proof, credit statements, utility bills, etc. This could also match the input details on the form with the extracted data, checking if the fields match.

Biometric data capture and verification: The next step is video or photo check, which involves liveness check and anti-spoofing check, something that can verify a person’s face with his ID proof picture without them leaving the home.

Other screening: This optional check involves running the name of the applicant against global databases: PEP (Politically Exposed Person), criminal watchlists, EU sanction lists, address verification, geolocation, address matching through utility bills and more.

Risk scoring: Based on the document data matching, watchlist results, and other verification, a risk scoring model auto assigns a risk score to every applicant.

Connecting the results and decisions to the core banking system: This involves pushing back any verification data of KYC into the CBS, insurance, or investment banking platforms.

Continuous monitoring: KYC automation doesn’t end with customer/client onboarding. It goes beyond that too, monitoring customers, their behaviors, unusual activities, major changes, and other risk alerts.

Industries that benefit from kyc automation

Commercial and retail banks: Banks require KYC automation, especially to streamline identity proof verification, due diligence, and prevent facial verification fraud.

Insurance companies: Insurance companies could also benefit from KYC automation, helping around in areas like claims processing, compliance management, sanctions screening, ownership checks, and other fraud detection use cases.

Investment companies: Likewise, investment companies need KYC automation for enhanced due diligence, so they could understand investor profiles, their fund sources, financial goals, risk appetite, and more. Especially, they need to recommend suitable risk profiles.

Wealth managers and brokerages: Personal wealth managers, brokerage firms, and trade reporters could also streamline their reporting and compliance adherence checks with KYC automation.

Benefits of KYC automation

• Risk scoring and assessment is much more manageable.
• Better data integration, where banking and KYC systems could talk to each other and where real-time data movement happens, so banks could maintain accurate records.
• Every data point resides digitally. Hence, there is a clear audit trail and better traceability.
• Improved customer experience, where they could perform an entire account sign up from home and don’t have to wait for weeks to receive confirmation.
• More adaptable systems for businesses operating across globally, each having to follow different regulations.
• Employees could work with better efficiency, without having to perform time-consuming tasks like manual data entry or identity verification.
• Due to less overhead, tightened risk controls, and fast services, financial institutions could save money as well.