What is eKYC?

In the world of account opening and customer onboarding, electronic Know Your Customer (eKYC) verification is one of the most advantageous technological developments available to businesses. With the right solution, you can streamline authentication and deliver an unmatched experience all at the same time. 

Read on to learn the basics of eKYC processes and how they can benefit your organization.

eKYC stands for “electronic Know Your Customer.” It’s also sometimes referred to as digital KYC, as it aims to digitize and streamline the traditional KYC process, which is largely paper-based.

In simple terms, KYC verification is what businesses use to identify and authenticate someone’s identity during customer onboarding. It works by checking the user’s provided information to ensure they’re a legitimate customer. Therefore, the main objective is to prevent identity theft, fraud, money laundering, and other types of financial crime.

Identity verification is an essential process for many different types of organizations, but it’s perhaps most applicable to financial institutions. In most places, banks, credit unions, and other financial service providers are legally obligated to implement customer identification systems.

For example, if someone were to apply for a personal loan, a financial institution can use an eKYC solution during customer onboarding to ensure the applicant is who they claim to be. This not only satisfies KYC compliance but also protects against identity fraud.

eKYC vs. KYC: What’s the difference?

The key difference between eKYC and KYC verification is how they go about collecting, processing, and authenticating personal information.

The traditional KYC process relies on paper-based manual identity verification. In other words, customers are required to provide physical documents as proof of their identity, normally by visiting an office or branch in person.

An employee then checks their identity document — like a passport or ID card — and compares the submitted information against databases and watchlists. Meanwhile, the customer must wait for a response, which may not arrive for days or weeks.

eKYC verification takes a much different approach. Since this is a digital onboarding process, consumers can submit information electronically, such as by scanning and uploading physical documents from the comfort of their own homes. Moreover, organizations can equally speed up the process by automatically authenticating an identity document through online tools and artificial intelligence (AI).

eKYC verification has quickly become an indispensable asset for financial institutions and other enterprises in heavily regulated industries.

During the COVID-19 pandemic, organizations experienced a rapid influx of identities that needed digital verification. Ever since, people have grown accustomed to ubiquitous connectivity and the convenience of a digital-first customer experience. In fact, as of 2022, 78% of adults preferred to open new accounts and manage their finances online.

Now, even though the crisis has subsided, consumer expectations haven’t changed. Customer onboarding must be smooth and frictionless, as even the slightest hiccup could lead to abandoned registration. And, with more digital identities to manage than ever before, organizations require an identity-proofing solution that balances customer experience with high-assurance security.

Unfortunately, the traditional KYC process falls short. Firstly, it’s often inconvenient for people to visit branch locations and submit physical documents in person. Likewise, manual data entry is slow and inefficient, leading to delays in onboarding that frustrate customers.

Not only is this burdensome and time-consuming, but it’s also potentially error-prone. A small mistake during KYC verification could lead to identity theft, money laundering, or another negative outcome. And, with financial crime running rampant, regulatory bodies are cracking down on organizations that don’t comply with their KYC compliance standards.

Benefits of eKYC

Fortunately, with an eKYC solution, there are numerous ways organizations can make the customer verification process a smoother, more efficient experience for all parties involved. The best way to understand the advantages of eKYC is to break its benefits down by group.

For example, businesses can look forward to:

• Faster customer onboarding: No more manually checking physical documents. With a digital onboarding scheme, you can automatically verify identities within seconds. This reduced workload translates into fewer employees dedicated to KYC, allowing organizations to lower costs and better allocate resources.
• Reduced risk: A traditional KYC process involves storing customer identity data, in a centralized database. This makes that database an enticing target for hackers, who can steal a swarm of personal information in just one attack. However, by combining eKYC with decentralized identity, organizations can reduce the risk of identity theft. In short, rather than one central authority controlling the data, it’s managed by the person who owns it in a secure digital wallet.
• Increased scalability: eKYC solutions can scale more efficiently to handle a large volume of customer verifications compared to manual processes. This is particularly important for businesses experiencing rapid growth or operating in industries with high customer turnover rates.
• Improved compliance: Automation ensures that accurate and consistent customer information is collected during the verification process. This helps in meeting stringent requirements regarding the completeness and accuracy of customer data. Likewise, eKYC systems generate audit trails, including timestamps and digital records of customer interactions. These provide evidence of KYC compliance and can be used to demonstrate due diligence in the event of audits or investigations.

Customers can also benefit from:

• More convenience: eKYC makes account opening much more accessible. Consumers can initiate the process anywhere with just a few clicks on their mobile phone, tablet, or computer. Plus, it’s available 24/7 and isn’t limited by normal business hours.
• Faster approval: Legacy methods keep people waiting, sometimes for weeks at a time. Digital onboarding accelerates ID verification from start to finish, reducing it to just minutes. That way, customers can initiate the transaction and be on their way without any holdups or frustrations.
• Greater privacy: Digital KYC automates customer identification, which means fewer people are reviewing personal information.

The best eKYC solution for your needs will offer a high level of security without sacrificing customer experience. That may sound like a lofty goal, but in reality, it’s a lot easier to achieve than it seems if your chosen system has the right combination of key features and security capabilities.

Let’s examine the process from start to finish and highlight the essential tools that make it possible.

1. Customer enrollment

Digital onboarding begins when a customer initiates a relationship with a company, usually by triggering the account opening process. In some cases, they may do so through the company’s mobile application. Ideally, organizations will deploy an eKYC solution that can easily integrate with their proprietary apps, websites, and other customer-facing interfaces, as this makes for a better user experience.

Indeed, the advent of digital ID solutions is making authentication simpler across the board. Digital travel credentials, like ePassports, are a great example of how technologies are transforming identity verification in new and exciting ways.

2. Device verification

Next, the solution’s built-in AI tools will verify the device in use is not stolen and has not been involved in fraudulent transactions. This process is often called “reputation analysis.” In short, it checks the device’s passive signals to determine whether the user is telling the truth about who they are.

Passive signals can include:

• IP address
• Location data
• Device fingerprints
• Browser data
• Metadata

Comparing passive signals to active signals — more on that below — allows you to cross-check the user’s information for authenticity. For example, if someone claims they’re in one location but their IP address says they’re in another, it could indicate something suspicious is afoot. In this case, the eKYC solution would automatically trigger follow-up authentications to investigate further.

3. Document verification

Customers submit documents and information to prove their identity. For example, the app may prompt users to snap a photo of their official government-issued identity document, such as a passport, license, or national ID card. The eKYC solution uses optical character recognition to automatically capture personal information, like name and address, to pre-populate the application form. This is a great value-added capability that makes the process all the more convenient.

Next, to verify the provided information is authentic, the system analyzes active signals. This includes information the individual provides, such as their:

• Name
• Address
• Date of birth
• Social Security number

Then, it compares this information against third-party data sources, such as:

• Government watchlists
• Law enforcement databases
• Sanctioned entity lists
• Email risk reports

Depending on document specifics, an eKYC solution can conduct 50 or more forensic tests in real-time. If third-party data sources flag the individual's name, indicating potential risks or inconsistencies, appropriate action can be taken.

For instance, a financial institution may deny an application for a personal loan if the applicant's name has been flagged as a victim of identity theft or is associated with financial crime.

4. Biometric verification

In some cases, customers may also have to go through biometric authentication. This involves checking biometric data, such as a photograph, fingerprint, or iris scan. Most eKYC solutions ask customers to submit a selfie, using facial recognition software to verify its authenticity. This is often the most convenient option since the majority of users carry smartphones equipped with high-quality cameras.

But is it still secure? The short answer is yes. With AI tools, organizations can ensure selfies are a “live” image and not a photo of a photo, which is how some bad actors attempt to bypass biometric verification.

5. Identity verification

Finally, if the customer identity is authentic, the digital onboarding process is complete. And the best part? More often than not, this entire workflow takes less than a minute.

With the right mix of authentication tools, AI algorithms, and real-time access to global libraries and databases, identity verification is a fast and frictionless process. Ultimately, not only is it more convenient for the customers, but it’s also much more secure than traditional KYC.

Practically any organization that manages and verifies identities can make use of an eKYC solution. Here are some of its most notable real-world applications:

• Financial institutions: From banks to credit unions to brokerage firms, any financial service provider must comply with Know Your Customer regulations. The most obvious use cases for eKYC would be in account opening, loan processing, and investment transactions, as these carry a high risk of identity fraud. 
• Telecommunications: Telecom companies, such as mobile operators and internet providers, leverage digital onboarding solutions for account and SIM card activation.
• Healthcare: The patient onboarding process uses eKYC to verify patient identities during registration. This ensures accurate medical records, streamlines admissions, and also enhances the speed of healthcare delivery. 
• Online gambling: Sportsbook and casino operators work in a strictly regulated industry. eKYC solutions allow them to confirm a customer’s age and location, which are especially important to comply with regulations that differ by state and country. For example, using device reputation analysis, customers submit real-time location data. This helps the operator verify they’re in a jurisdiction where online gambling is legal.
• Government: Public sector services, such as voter registration, tax filings, or Social Security, require ID verification. eKYC can help government agencies streamline authentication, which in turn makes these essential services more accessible to the community.

Although eKYC is quickly gaining momentum around the world, most organizations have yet to deploy a truly modern identity verification solution. Many products on the market today are only marginal improvements on the traditional KYC process. As such, it’s important to find a provider that offers the key features and characteristics you need for a balanced digital onboarding experience:

• Comprehensive identity proofing: Having multiple layers of authentication is the best way to cover your bases. Look for a solution that offers biometric verification, live facial recognition, and device reputation analysis on top of document verification. These will help you limit onboarding friction while providing a strong line of defense against fraudsters.
• Privacy-safe data retention: Today’s increasingly strict data privacy regulations are raising the bar for how organizations can collect and store personal data. Ensure your solution stores only the bare minimum and doesn’t retain selfies, personally identifiable information, and other identity data. Compliant algorithms: AI tools are valuable assets, but they must be used wisely. Your platform shouldn’t aggregate data from multiple customers to create decision-making algorithms. Ensure your choice of solution only focuses on individuals and not building aggregate models.
• Digital and physical card issuance: A great way to enrich the onboarding process is to issue your customer a physical or digital payment or ID card immediately after approval. In the case of a financial institution, you can easily provide payment credentials from your mobile app to the cardholder’s digital wallet.
• Mobile integration: Look for an eKYC vendor with tools that seamlessly integrate into your existing systems — especially your mobile app. Application programming interfaces (APIs) facilitate secure data exchanges and interoperability, reducing friction and uplifting the customer experience.

Lastly, in addition to these core capabilities, it’s important to choose an identity-proofing solution that works within a broader authentication platform. Combined with identity and access management (IAM), this approach gives you everything required to issue, verify, manage, and protect digital identities at scale. Moreover, it offers flexibility to add use cases and additional security features over time.

Whether it be for customers or employees, continuous monitoring and authentication are key to the user journey. This way, you can ensure authenticated identities aren’t compromised and that your enterprise isn’t under attack.

At Entrust, we know how important it is to strike the right balance between security and convenience. Your users expect a fast and frictionless onboarding experience, but you also have to protect their identity data from financial crime.

That’s why we’ve designed a portfolio of digital onboarding solutions that provide exactly what you need to succeed. With our technology suite, you can onboard customers anytime, anywhere — all thanks to the power of eKYC verification.

Access essential capabilities, including:

• Biometric authentication
• AI-powered document verification
• Device reputation analysis
• Physical and digital card issuance
• Identity and access management
• Digital signing

As part of a larger authentication platform, our digital account opening portfolio allows you to scale up as your needs change. That way, you’re always on the cutting edge of identity verification.