Global Movement towards Digital KYC in Online Banking

10 Jul 2020

As the social distancing measures get stricter, customers want to head towards digital banking solutions. And this is where a reliable identity verification system can make all the difference. In fact, the timing could not be perfect for neobanks and challenger banks to utilize the Identity Verification system.

GetID’s automated Identity Verification solution can help online banks usher a new era of digital approach that simplifies the onboarding process and regulatory compliance. Besides, the Identity Verification solution is a win-win that takes into account everyone’s safety and security.

Introduction

The time has come for online banks to trust digital client onboarding solutions. Besides, online banks are aware that mobile devices have become an indispensable element in customers’ daily lifestyle. The consideration for KYC onboarding, however, is more than just about mobile integration.

In fact, it is an opportunity for online banks to stand out in the competitive market. Today, the first digital impression can make all the difference. Therefore, digital KYC has become a crucial stepping stone to win the trust of tech-savvy clients.

It is imperative to understand that even when an online bank offers attractive banking products, it would not amount to much without digital customer onboarding. With a catchy and easy customer onboarding process, online banks can fulfill the marketing promises into facts and have a digital omnipresence.

As the traditional financial institutions are shaking from the impact of coronavirus, online banks can set a new precedent by using IDV systems with a robust technological foundation. Well, it does more than help online banks remain compliant.

Online banks can utilize the Identity Verification solution of GetID for an automated, instant, and flawless onboarding process. Digital banks now have the power to transform online banking and serve clients’ needs.

Quick Overview

• It has become essential to implement an onboarding process that comes with technical superiority to manage data, ensure compliance, and improve user experience.
• KYC processes will allow online banks to improve digital operational activities on a broader scale.
• Online banks should not view the KYC process in purely digitized terms; it is a new way to solve traditional banking challenges.
• Online banks have to maintain and uphold regulatory compliance.
• Online banks can ensure internal digital requirements and move on to the needs of the users.

What Constitutes the Best Onboarding Experience in Online Banks?

KYC process refers to verifying and identifying the identity of a client. It is an understanding that the bank and the customer share. Furthermore, it involves risk evaluation of fraudulent activities that are related to a particular customer. In simple terms, KYC is a user verification and identity process. Most of it is automated through modern technology.

Technically, online banks should have an onboarding experience that includes document verification, face match, and liveness check. However, challenger banks and neobanks must ensure AML compliance in their onboarding process.

Evidently, the streamlined onboarding process gets rid of extraneous friction and offers the best sign-up rates. Simultaneously, neobanks should adhere to updated regulatory compliance to avoid complications. In fact, the KYC onboarding process should be able to ensure the requirements of regulatory compliance.

In addition, online banks should concentrate more on mobile identity verification (IDV). The idea is to implement a frictionless environment for better customer experience with automated mechanisms to avoid numerous identity frauds.

In fact, it complements the acquisition of digital customers through multiple onboarding channels. Therefore, the focus of attention cannot be on the physical location when it comes to neobanks. Instead, the practical course of action would be to invest in omnichannel support that allows people to create an account through a mobile device, tablet, laptop, or desktop computer.

Popularity and Benefits of Online Banking Services in the Age of Digitalization

The vast majority of the traditional banks now want the digital transformation to achieve growth. Concurrently, banks need a progressive approach to remain competitive and deal with the emergence of fintech players in the market.

Evidently, the goal is still the same; to understand and meet the tech-oriented customers’ demands. However, the instant access and omnipresence of the Identity Verification functions offer more touchpoints. Online banks now realize that most of the customers prefer better user experience over other factors.

Therefore, a reliable digital onboarding process is the path neobanks have to take. Besides, it serves the purpose since neobanks are online and direct financial entities without having physical branches or networks.

Accessibility, Convenience, and Affordability

When you think about a challenger bank or neobanks, there is more convenience and access than traditional banking. Naturally, customers love the instant accessibility from various electronic devices.

This 24/7 accessibility grants customers more confidence to transfer funds, print bank statements, receive favorable rates, and automatically set up payments for bills.

In addition, opening an account has never been easier. On top of that, digital banking services offer customers a wide variety of banking services without the expensive price tag of traditional banks as financial institutions.

Frictionless Onboarding Process

Every neobank wants a flawless onboarding process to maximize traction. And why wouldn’t they? Users, after all, want the onboarding process faster and without any added complications. A frictionless online onboarding experience should be easy, fast, and seamless.

Focus on User Experience

One of the reasons why challenger banks are rapidly growing is due to their acceptance and integration of perfect user experience. It is a page neobank and challenger banks took from small startups of Silicon Valley. It has become apparent to online users who want minimal designs, navigational apps, and a smooth onboarding process.

Common and Rare Challenges for Online Banks

More Fraudsters

As the digitalization of online processes becomes a standard, more fraudsters want to tamper or exploit the user data. Besides, neobanks does not allow anyone to register for their digital services. Nonetheless, the online onboarding process is specifically vulnerable to various frauds.

It is, however, vital to understand that neobanks are more customer-centric and at initial stages. It means many people are waiting online to register until neobanks become completely authorized ADIs.

But, online banks can be quite vulnerable to money launderers. One of the sinister aspects is how fraudsters use cash to process stolen payments or as gateways. Contemporarily, fraudsters prefer to convert online funds in the form of a cryptocurrency.

Just like traditional banks, neobanks also function as a middleman. On top of that, e-commerce scammers can also use accounts that look legitimate to get deposits for non-rendered services. Additionally, bonus or promo abusers open more than one account to benefit from referral programs and registration bonuses.

Synthetic and Stolen IDs

In simple terms, the IDV system eliminates all potential and current criminal attacks. However, neobanks have to make sure the legitimacy of users to authenticate processes for better security. At this point, verification of documents should not have to face legal hurdles.

Similarly, KYC (know your customer) processes should be regulated to maintain a legal framework. So long as the process is updated, fraudsters would not be able to steal the IDs or create fake synthetic identities.

On the other hand, stolen IDs are an entirely different realm for online fraudsters. It often shows data breaches when there is no sign of a breach. Ultimately, the last destination for stolen IDs is darknet marketplaces.

You’d be surprised how far fraudsters go to acquire personal data of the users. Mostly, fraudsters use fake data through plain hacking or phishing to steal IDs or collective records. Furthermore, cybercriminals who use AI-based algorithms can often create audio or video recordings of individuals without permission, which is another concern for IDV systems.

Account Resellers

Often, fraudsters go through an application process just to sell the login information to third-party buyers or marketing entities. Also, the process is susceptible to newer regulatory guidance. Though mostly, the continuous changes from regulatory bodies become a major challenge for neobanks.

Advantages of Automated KYC Process of GetID Solution

Low Fraud Rate

GetID offers an automated KYC process that results in decreased fraud rates. It is no secret that traditional banks spend millions of dollars on fraud prevention.

With amalgamated IDV solution of GetID, digital banks would get fraud detection and document verification features that would thwart the money laundering efforts of the fraudsters.

Automated Identification Process

Digital banks should think of it as a validation system that makes it easier to identify individual users with registered IDs.

Compliance

Interestingly, the same automated flexibility of GetID can help online banks minimize compliance risks. As the anti-money laundering regulations tighten the grip, online banks should not have to face hefty non-compliance penalties.

Therefore, it makes sense for neobanks and challenger banks to avoid these penalties that traditional banks are accustomed to. According to estimation, UK and US regulators will impose $400 billion penalties by the end of 2020 alone.

With the automated KYC process of GetID, online banks would not have to worry about different regulatory compliances. Contrary to naïve misconception, each country has its regulatory compliances. For instance, EU regulatory compliances involve AMLD6, PSD2, and, of course, GDPR.

Conversely, US major regulatory compliances include PCI DSS, FISMA, SOX, and HIPAA. It is high time for online banks to rely on vendors to carry out numerous operations. An automated onboarding process would allow online banks to scale up operations and remain regulatory compliant.

Flexibility

Through GetID, it has never been simpler to review AML checks. It is the omnipresence nature of the GetID solution that offers superior flexibility and customization options. And by flexibility, you can integrate GetID solution into different types of workflow.

Compatibility matters, and now online banks have the chance to offer financial products or services digitally according to electronic device preference and without geographical limitations.

Reduced Cost

The KYC onboarding process of GetID is highly cost-efficient. Online banks can use a wide array of features to make the onboarding process easier for users.

Summarized Step-by-Step: Onboarding Process of GetID

GetID offers the most straightforward onboarding process. In fact, the authentication of IDs takes little to no time. Once you take a picture of your ID document via a mobile device or desktop camera, you’re pretty much done.

It is not magic, but a facial recognition technology that takes into account your random actions (i.e., smiling, blinking, and moving head) to verify liveness detection. Traditionally, you might think you may have to go through a complicated procedure, but the onboard process of GetID is as simplified as it gets.

GetID also offers complete management of your KYC process through a wide admin panel. With a single click, you can take a look at the application information in a centralized digital space.

Identity Verification: Banks Must Utilize Digital Onboarding Solutions to Attain More Customers

Historically, there has been a multitude of issues when it comes to AML KYC compliance. Although it is still a challenge for neobanks, technological advancement has made the barriers far less lethal to onboarding processes.

From small to large neobanks, the advent of automated identity verification system has paved the way for heightened user experience and eliminated hurdles. Furthermore, the IDV solution allows a competitive edge to neobanks to serve their customers better.

N26 and Revolut

N26 is a European-based online bank where anyone can register or open an account. However, you have to be the EEA or EU resident. Currently, the online bank operates in 26 different countries. Revolut, on the other hand, allows clients to open restricted accounts without identification.

Consequently, it limits the amount of transactions to €250. However, if the transactions exceed the standard limit, you will have to move to the KYC process of Revolut. Recently, the money transferring app, Revolut, and online bank N26 announced to build an international Identity Verification agreement.

Similarly, other fast-moving players like Bunq and Monzo want to make the most out of digitally-concentrated banks. After all, it offers much better flexibility to customers. And that is because the model of Identity Verification inherently revolves around a customer-centric approach that boosts user experience.

Also, people have less trust in established financial institutions. In fact, there is a pattern of invasive tactics from traditional financial institutions that halt the AML adverse media effects. It means the customers do not want to be at the mercy of traditional banks.

In fact, after the global financial crisis, people are more suspicious about bailouts and the use of taxpayers’ money. Therefore, if neobanks want to reclaim the trust of these customers through a digital onboarding solution that offers more results.

Contrary to misguided perception, today’s users are more politically knowledgeable and keep an eye on social media trends related to banking. The same misconception that neobanks are cash burning institutions is false.

In fact, neobanks just do not want to profit at the expense of customers’ exploitation.However, a challenger bank that offers licensed banking services can offer the same level of transparency with licensed banking.

And before Facebook, Apple, Google, and Amazon completely jump on the bandwagon and take over the financial markets, online banks will have to adapt to digital onboarding solutions that cater to the needs of the customers. Online banks may not have a database of billions of users like Facebook, but it offers complete transparency and trust to the users.

A Complete Onboarding Solution is the Need of the Hour

From the point-of-view of digital transformation, the utilization of the IDV solution and onboarding process has a long way to go. It means the transformation is still in its infancy. There will be new technological advancements, higher compliance standards, and extensive operating models for neobanks to follow.

Thus, it makes complete sense to fundamentally use a digital onboarding approach to create a sophisticated online ecosystem beforehand. For example, the N26 online model offers a wide array of banking solutions such as currency transfers, saving accounts, investment solutions, and calculation of credit score to users.

Again, most of the conventional financial institutions are not even close to the adoption of digitalization. Conversely, fintech firms will take some time to harness the true power of digital onboarding. There is an opportunity to speed up banking processes without unnecessary costs and through utilization of KYC onboarding solution.

Besides, the new generation of neobanks deserves a sophisticated IDV system like GetID that would eventually become a default strategy in the online landscape. However, as long as digital banks embrace new digital technologies, there will always be new reformative modules that would further improve the level of programs and services.

Conclusion

For the sake of frictionless onboarding, favorable user experience, and security, online banks should opt for a complete identity verification solution that streamlines the onboarding process and helps digital banks remain compliant with new regulations.It is a window of opportunity where time is of the essence for online banks to avail AML fraud detection.

In essence, the digital onboarding and AML compliance program would usher a new era for online banks. An era where business processes will have no sign of fraud. Consequently, online banks would be able to analyze risks through automated flagging and machine learning capabilities.

GetID serves as a modern IDV solution for online banks to speed up the onboarding process. Furthermore, it can help banks detect and prevent online fraud. Plus, online banks would also be able to remain compliant with all the regulatory requirements.

You can find out more information about how GetID optimizes the customer onboarding process to perfection.