Before a consumer is onboarded, Automated KYC Onboarding uses technology to confirm their identification. It assists businesses in comprehending the backgrounds of their clients to prevent fraud. KYC is an essential business process, particularly for financial organizations. One can say that automated KYC is more efficient than the frighteningly long time that the manual process takes
The companies also collect other personal information from the customers, including name, address, date of birth, and ID number. The algorithm then evaluates the possible risk associated with the customer’s onboarding. Any sanction list or prior criminal records are an important part of this evaluation. The system monitors its clients daily and doesn’t believe in one-time checks.
How is Automated KYC Onboarding Important in Financial Services?
It plays a significant role in verification not only in financial organizations but also performs crucial roles in fields related to cryptocurrencies, real estate, and insurance industries. It is paramount because:
- Averts Financial Crime
KYC is important because there are many illegal thefts like money laundering, online fraud, and terrorist financing. It is found that criminals hide a large amount of illegal money using financial systems. In this regard, automated processes can help detect fraud and take preventive measures instantly.
- Compliance With Rules and Regulations
Several companies require compliance with legal regulations to perform KYC as an integral part. The other frauds, such as money laundering, are also prevented. Any amount of non-compliance with the rules of the company can attract heavy sanctions and penalties. Several regulatory bodies like FATF set rules to combat financial thefts and KYC is a central part of the strategy.
- Mitigation of Risks
KYC is the most important to reduce the risk of fraud at the time of onboarding new customers. It keeps a check on clients regularly to observe potential risks that can be taken into consideration and resolved timely.
- Customer’s Trust
Despite all the requirements, people are still concerned about their privacy and the protection of their personal information. KYC ensures that the new customers are verified and their data is kept safe in the databases.
Challenges Faced By the Manual KYC Process
Despite its convenience, the manual KYC procedure has several drawbacks. The primary drawback of the manual procedure is its time-consuming nature. It becomes challenging for an individual to manually verify all the documents and gather all the consumer information. However, the same task can be completed in a few hours and with greater efficiency using an automated procedure.
Furthermore, there would be a greater possibility of errors in manual KYC processing, which is real when done by a human. Many people have a lot to manage, which can lead to human fatigue and frustration, which can cause any data to be miscalculated.
This is an aged system of KYC loaded with many flaws-for example, it will eventually become both time-consuming and error-prone to humans-the list goes on. Eventually, this will prove to be an outcome of non-compliance, which may even involve severe fines and penalties.
What are Automated KYC Verification Advantages?
KYC solutions are extraordinarily important in maintaining the credibility of businesses and financial institutions. The automated process has tried to overcome the challenges faced during manual processing.
- The documents are verified and scanned in a short period using techniques like OCR and AI-based facial recognition systems.
- The system automatically instantly compares the photos and IDs for the verification of the new customers.
- Automated KYC check allows businesses to process data in real-time and the new customers can be onboarded within a few minutes. This has reduced the wait time of the customers and allows businesses to serve more clients.
- In case of any risk, the automated process can identify the user and the theft immediately by looking into all the activities of the customer.
- Automated processing doesn’t need a team. It has diminished the need for a large number of people for manual processing.
- Automated processing has reduced the risk of human errors. The system extracts the data using Optical Character Recognition (OCR) with accuracy.
- The system is better at detecting fraudulent activities using advanced algorithms.
- Lastly, an automated system ensures the same process for all customers which leads to consistent decision-making.
Conclusion
After examining several issues with manual KYC processing, it is thought that automated processing is far superior. In terms of accuracy, cost, and time, automated KYC and AML solutions have become widely accepted. With the use of cutting-edge algorithms, the procedure can quickly onboard multiple new clients while using fewer resources. Additionally, it has been advantageous for those who live in rural places. Additionally, it has made remote client verification easier.