Automation is a fundamental enabler for any business looking to improve efficiency and scale. For financial institutions, this is especially true when automating Know Your Customer (KYC) processes. That involves the verification and due diligence checks required to onboard new clients and comply with anti-money laundering (AML) regulations.
API helps to expedite the process of automating KYC by providing a secure, standardized way for financial institutions to connect with data providers. Financial institutions can verify customer identity data quickly by using an API. It eliminates the need for hosted data centers or manual contact with data providers.
Employing API for KYC automation comes with many benefits. In the long run, it can help financial institutions save time and money while reducing the risk of compliance breaches. Here are the benefits of automating KYC with an API.
1. Faster Customer Onboarding
API-based KYC automation can help financial institutions onboard new customers in seconds. Reading and verifying information from identity documents is a time-consuming process when done manually. By using an API to automate this task, financial institutions can verify customer information faster without sacrificing accuracy. For instance, KYC API can automatically read it from an ID card and match it against international databases to verify identity.
When doing customer onboarding manually, there’s always a chance that an agent might make a mistake while keying in the information. That means they will need to begin the process again, leading to frustration and customer churn. Automating KYC with an API can help to eliminate such processing errors and improve the customer experience.
2. Reduced Costs
API-based KYC automation can help financial institutions to reduce operational costs. Automating repetitive tasks like identity verification can free up staff resources to focus on other business aspects. It can also help to reduce the reliance on paper-based identity documents, which can be costly to store and manage.
Financial institutions can be subject to heavy fines during a compliance breach. API-based KYC automation can help avoid the cost of compliance breaches. You can maintain an up-to-date record of customer identity data by automating KYC processes with an API. That can help to reduce the risk of compliance breaches.
3. Improved Data Quality
Maintaining a clean record can be uphill. Customers often change their information, like contact details, addresses, and even names. These changes must reflect in the system to maintain data quality. But how can you achieve this? Various sources of data may have significantly varying information. Juggling all these changes can be a nightmare, but API-based KYC automation can help.
API-based KYC solutions can automatically update customer data in your system by cross-referencing it with international databases. This way, you can be sure that the data is accurate and up-to-date. The business will have fewer wrong references that can cause privacy and compliance issues.
4. Better Security
How safe is your customer’s information on the servers? API-based KYC automation can help to improve the security of customer data. API uses tokenization which replaces sensitive data with non-sensitive equivalents to secure customer information. That ensures that even in the vent of interception, it would be meaningless to the interceptor. For example, a randomly generated string of numbers can replace a customer’s Social Security number.
In addition, API-based KYC automation eliminates the need to store sensitive customer data locally. Customer information stored on secure remote servers reduces the risk of data breaches. If there is a data breach, the financial institution will not be liable as the customer information does not reside on their servers.
5. Improved Customer Experience
API-based KYC automation can help financial institutions to improve customer experience in several ways. When logging in to their portal or app, customers can use their biometrics, such as fingerprint or facial recognition, to verify their identity instead of remembering multiple passwords.
Another scenario is when a customer applies for a new credit card. Traditionally, they would have to visit the bank branch and fill out a paper application form. With API-based KYC automation, a customer can apply for a credit card online and receive instant approval. The entire process is paperless and can be completed in a few minutes.
6. Reduced Fraud
API-based KYC automation can help financial institutions reduce fraud. Automating identity verification processes can help to eliminate human error and improve accuracy. Additionally, API-based KYC solutions can cross-reference customer data to help identify fraudsters.
Identity theft is a common form of fraud. By automating identity verification with an API, financial institutions can verify the customer’s identity before they can commit fraud. For example, when a customer applies for a credit card, the financial institution can use the API to verify their identity.
Summary
Managing customer information and complying with KYC regulations can be a nightmare for financial institutions. API-based KYC automation can help improve customer data quality, eliminate human error, and improve compliance. Also, it promotes customer experience, reduces fraud, and enhances data security.
Abhishek