Protecting Everyone: What is eKYC?

Protecting Everyone: What is eKYC?

eKYC is the remote process of verifying the identities of users. Besides acting guarding against money laundering, eKYC also combats online identity theft.

06 May 20213 min read
Tun Yong Yapby Tun Yong Yap
Protecting Everyone: What is eKYC?

If you had applied for a loan, this should sound familiar to you.

As part of the onboarding process, you are required to send across a picture of your ID card and latest income statement, along with a host of other personal documents.

The lending platform promises to process your application within three working days.

That, in essence, is eKYC.

An abbreviation for electronic know-your-customer, eKYC refers to the remote and paperless process of verifying the identities of a user.

Do not be mistaken, eKYC does not only apply to lending platforms.

The majority of companies (both non-financial and financial) utilise eKYC processes to accurately identify the identities of their customers.

You may wonder - why is there a need for this? The simple answer is because of the proliferation of the internet within our lives and the economy as a whole.

Protecting the digital economy

Within Southeast Asia, the internet economy is expected to triple in value to hit US$300 billion by 2025. This brings along a host of challenges too.

From online money laundering to identity theft, the need for eKYC has never been stronger.

Furthermore, companies are now regulated by their respective authorities to conduct eKYC processes on their customers.

As part of Indonesia’s bid to cut down on corruption and push for membership on the Financial Action Task Force (FATF), the government - through the financial services authority/ Otoritas Jasa Keuangan (OJK) - are making it mandatory for financial companies to conduct eKYC.

These regulations would stem the increasing business frauds in Indonesia - where 48 per cent of businesses report experiencing rising year-on-year losses due to fraud.

Besides combating money laundering and identity theft, eKYC also acts as a risk management tool for businesses.

For example, an insurance company will require an applicant to furnish documents on their physical and financial well-being to ascertain the risk level before offering an insurance policy.

This benefits both the consumer and the company as a low-risk applicant (with no chronic diseases) would be paying a lower premium than a high-risk individual (with underlying medical conditions).

This is because a higher risk level entails a greater possibility of a larger payout throughout the policy.

Therefore, with such eKYC processes, companies can adequately risk-manage their products and services.

Types of eKYC

The process of eKYC varies across companies and customer groups. Generally, the majority of customers are put through a simple verification process that involves their ID card, address and phone number.

However, certain companies would identify groups of customers who would require a more stringent screening process given their background or the nature of products they are purchasing.

An application for a property loan would logically require a stricter eKYC process than a loan from a peer-to-peer (P2P) platform.

In that case, users may be required to furnish personal income and tax information for companies to conduct in-depth due diligence.

How an ideal eKYC process should look like (Image Credit: MicroSave Consulting)

Simple and accurate

For the eagle-eyed among us, you would have realised current eKYC processes are done through a ‘push’ method where documents are given by users.

However, this increases the inconvenience during the onboarding process as users are required to manually search for and present the documents, resulting in a higher probability of dropping off.

Furthermore, to ensure a robust and accurate eKYC process, companies should source information from different data points.

This prevents the deliberate fabrication of information on a single platform, which would result in an inaccurate verification process.

Automating eKYC, while ensuring information accuracy, is easier said than done.

From negotiating data integrations to creating machine learning models to process the data, it can be challenging even for tech companies.

This is where Finantier comes into play.

Our eKYC API has integrations with a wide array of platforms in Indonesia to provide companies with accurate data to conduct their eKYC processes.

Through a single API that can be set up within hours, companies would be able to confidently verify the identities of their users before onboarding them - guarding against identity theft.

Speak to us today to learn more about how we can work together to fight online fraud.

At a Glance

✅ eKYC is the remote process of verifying the identities of users.

✅ Besides guarding against money laundering, eKYC also combats online identity theft.

✅ However, creating an eKYC process in-house is resource-intensive. Finantier simplifies this process for companies.