eKYC (Electronic Know Your Customer) has revolutionized the financial industry by making the online onboarding process of prospective customers easier. Various financial products such as banking, electronic money, loans, and business insurance provide eKYC to customers through applications.
Below, we will explain what eKYC is and how the process goes on 'behind the scenes' to complete the verification process with only a cellphone.
First of all, it is important to understand the meaning of KYC (Know Your Customer), which is the forerunner of eKYC. KYC is a method used by financial service institutions to find out the identity of customers. When prospective customers want to create a new account, they will come to the bank, fill out several forms, and submit a copy of their identity card. During filling out and fulfilling documents, the officer will validate their identity.
Along with its development, KYC is now expanding into digital services through eKYC, eliminating manual processes in data fulfillment. According to the Financial Services Authority (OJK), eKYC is a platform that helps provide identification and verification services for prospective and active customers using population data sourced from the Directorate General of Civil Registration and Civil Registration.
The eKYC platform developed by financial service institutions can be developed in-house or utilizing technology from third parties. Currently, eKYC is regulated in the regulatory sandbox at OJK based on POJK No.13/POJK.02/2018.
Development of eKYC
The need for eKYC services is getting bigger, along with the development of the financial technology sector (aka fintech). The implementation of eKYC is a mandatory aspect that developers must consider for financial services such as savings, loans, electronic money, investment services, etc. Legitimate data is also needed to minimize crimes such as money laundering.
An eKYC system must be able to verify data using quality sources to ensure data validity. For example, population data must be validated by the government's Directorate General of Dukcapil. This is done to ensure that what is written or uploaded by the prospective customer is appropriate.
Modern eKYC systems also need to apply the latest technology to simplify the process. There are several technologies that are starting to be widely applied to eKYC.
First, biometric technology in Optical Character Recognition (OCR) service allows applications to read image files or photos uploaded by users. The data verification process can be carried out automatically without manual human hands.
Second, artificial intelligence technology can be used to ensure that the selfie process is done by humans. Third, machine learning is used to study data and identify possible cases of fraud.
eKYC Innovation in Open Finance
The current Open Finance innovation allows financial service institutions to transform digitally swiftly. Open Finance with ready-to-use technology infrastructure services can help developers when building applications. There are various kinds of products that are presented in the Open Finance ecosystem, one of which is the Verification service that helps the eKYC process in a fintech service.
Open Finance technology provides its infrastructure services through an Open API (Application Programming Interface) connection to the backend of the related application. Players such as Finantier, which also provides a suite of eKYC products, are connected to the Dukcapil system to ensure that data verification runs smoothly. With modern technology, Finantier can work in seconds to provide an instant eKYC process.
There are several benefits that financial service institutions can obtain by utilizing eKYC services from the Open Finance platform, including:
- Quality product guarantee; services provided by Open Finance developers, such as Finantier, offer high data accuracy by combining the most up-to-date data sources to assist verification. On the other hand, the services provided also ensure compliance with existing regulations, including better information security guarantees.
- Easy service integration; through a standardized Open API, Open Finance services can be integrated into a highly interoperable system. The platform can adapt to various types of frameworks and development environments. Moreover, there is currently a special regulation from Bank Indonesia regarding the Open API National Standard.
- Reduce server workload; by entrusting the verification process to a trusted third party, the workload of application server services is also reduced. So it does not interfere with the main business processes of the products/services.
- High scalability; utilizing eKYC services from Open Finance is also suitable for business applications on various scales. For small businesses, Open Finance can eliminate complexities in the development process. Meanwhile, for large companies, Open Finance can quickly provide robust services that process thousands or millions of concurrent transactions.
- Impressive customer experience; Open Finance providers such as Finantier are committed to providing a better customer experience. For eKYC services, there is a one-click verification feature that provides a short verification process — in minutes.
The innovation of financial products and services towards digital cannot be stopped. A qualified verification process is needed to ensure a smooth process of onboarding prospective customers to the application or web while minimizing the risk of digital crime that threatens technology-based financial systems.