eKYC is the gold standard for identity authentication in the digital age and helps organizations to efficiently and securely verify an account holder’s identity. Using automated technical signals to work in real-time, eKYC enables businesses to “know your customer” better than traditional methods.
Pair eKYC with Trustpair’s bank account ownership verification for an extra layer of security before sending payments to shareholders or insurance policy holders. Learn how to implement eKYC, why this solution is the most effective, and how to use ID verification to combat fraud. Contact us to learn more!
What is eKYC (Electronic Know Your Customer)?
Electronic Know Your Customer (eKYC) is an identity verification service. It helps regulated institutions like banks validate the identity of customers before they can open a personal account, and it is used on an ongoing basis to maintain ID verification.
eKYC maintains the same processes as the more traditional, manual Know Your Customer (KYC) checks, but the process works in a faster, more integrated manner. Instead of back-and-forth emails or paper documents, the experience happens seamlessly over a digital app.
eKYC can support a regulated business in complying with wider anti-money laundering regulations, across the globe.
What makes an eKYC solution effective?
As a solution to AML compliance, eKYC is significantly more effective than manual checks. It’s beneficial for both the company and the customer.
Company benefits:
- More accurate verification checks with a rules-based algorithm
- Faster onboarding of customers
- Improved conversion rate
- More efficient checks means resources can be reallocated elsewhere
Customer benefits:
- Improved customer experience
- Faster feedback loop for applications
- Contributes towards a higher net promoter score (NPS)
- High data security and consent mechanisms increase customer control
Learn the difference between KYC and AML compliance in this article!
What signals does eKYC verification use?
eKYC uses a number of technical signals to verify the identity of customers, including:
- Biometrics
- Multi-factor authentication
- Passive signals
Biometrics
Biometric signals use facial recognition and fingerprint technology to confirm the identity of a customer online. Biometric signals submitted by a customer can be compared to photos in government-issued documents such as passports, in order to validate an individual’s identity.
Biometrics are referred to in the Strong Customer Authentication (SCA) payment regulation for banks and financial institutions in the EU, and thanks to the widespread success of this regulation, this verification signal is growing in popularity throughout the US.
Multi-factor authentication
Multi-factor authentication, sometimes known as 2FA, requires companies to prompt the customer with a second form of authentication in order to validate their identity.
For example, even though a customer may have their login and password credentials, a one-time code will be sent directly to their phone before they can successfully log into their account.
Multi-factor authentication signals are strong because they help prevent fraud in real-time, even when cyber attackers are able to access login credentials.
Passive signals
While active signals refer to the data that individuals submit themselves, such as their name, date of birth, and address, passive signals use data from the device the customer is using.
Information like the IP address, VPN usage, location data, and browser fingerprint can all provide extra contextual clues. For example, if a person lists their address in New York, but they’re using a VPN, and their actual IP address is located in Arkansas, extra verification may be required to reduce risk.
How can eKYC help prevent fraud in the digital age?
eKYC is useful in preventing fraud through due diligence to recognize the suspicious signs that other verification methods cannot.
For example, the passive signals used in eKYC are able to reveal whether a user:
- is where they say they are
- logs in on a familiar device
- attempts to apply multiple times from a single device
Since eKYC relies on automated verification methods during the onboarding process, it works almost instantaneously without increasing the risk of error. In the digital age, this is a much stronger option for both accurate authentication and fraud prevention than manual methods.
Revolut is one of the largest digital banks relying on eKYC powered by Jumio, a third party. In 2023, the automated eKYC partnership processed ten times more bank account and loan applications through their office than the previous year, propelling Revolut into huge growth without increasing the rate of fraud.
How can companies implement eKYC?
Implementing eKYC is usually performed through a partnership with a third-party provider, which hosts an app for the customer to use.
Here’s how it works:
- The customer applies for a new account
- The company sets up eKYC mobile app protocol, sending a link to the customer
- The customer takes a photo of a government-issued ID card in-app
- eKYC app automatically checks the validity of the document (it’s real and accurate)
- The customer takes a selfie or verification video
- The app automatically performs facial recognition to match the selfie with an ID
- eKYC app automatically checks that the identity is not related to blacklists or other high-risk factors
- The customer passes eKYC checks and the company approves the account
When considering which third-party app provider to work with, it’s important to consider security, accuracy, usability, and cost.
To conclude
- eKYC stands for electronic Know Your Customer, which helps organizations verify the identity of their customers on an initial and ongoing basis.
- Perform eKYC through dedicated apps, which secure customer data and work automatically to match their identities.
- Trustpair works alongside eKYC by performing automated, ongoing identity verification throughout the supply chain. By ensuring that transactions are routed to their legitimate account owners, businesses eliminate the risk of vendor fraud and protect their payments.
