AI in KYC: What’s in Store for the Digital Insurer and Customer

Know Your Customer or KYC is a crucial step towards ensuring that any financial malpractice, money laundering scams, terrorism financing, and other illegal corruption schemes are cut at their source, thus becoming a primary aspect for customer identification. It is also the first step in the client onboarding process. 

KYC procedures include ID card verification, face verification, document verification such as utility bills as proof of address, and biometric verification.

Banking institutions must strictly comply with KYC regulations and anti-money laundering regulations to curb fraudulent activities. KYC compliance responsibility rests with the banks, failing which they might also be heavily penalized. 

International regulations such as The Financial Action Task Force (FATF) are also now implemented in national laws encompassing strong directives namely, AML-4 and 5, and preventive measures such as KYC for accurate client identification.

Artificial Intelligence takes KYC and AML compliance to a new level by combining related technologies that offer the potential to automate workflows and analyze large volumes of varied data. 

The AI Future: 

AI ensures intelligent decision-making and overall monitoring that helps to battle risks and frauds associated with financial institutions. It’s programmed to comb through large mounds of data, process and thereafter verify client profiles, as well as, enhances due diligence in an organization. Machine Learning (ML) clubbed with AI augments the smooth running of operations, particularly in labor-intensive areas. 

With its innovative technological revolution, AI-based technologies are changing industries worldwide through automation and machine learning. Banks and other financial institutions have so far benefitted in terms of Workflow Automation, Link Analysis, Maintaining Compliance, and Regulatory Changes, among other processes. 

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KYC Automation, Benefits, and How It’s Better Than Manual KYC: 

KYC automation leverages advanced AI and machine learning technologies to ensure that all regulatory standards are met without a high dependency on internal resources. 

Even though end-to-end KYC processing still requires humans to make high-level decisions, a majority of the processes can be taken care of using automation, or Intelligent Process Automation. 

Intelligent Process Automation (IPA) includes Robotic Process Automation (RPA), Intelligent Document Processing (IDP), Intelligent Character Recognition (ICR), and Artificial Intelligence (AI). This collection of technologies combine the entire management, automation, and integration of digital processes. These are also now being used to automate workflows, extract data from documents and reduce the time taken for screening, identification, and verification. 

Why choose automation? 

From cost reduction, more efficiency, minimized risk, and more, KYC automation is more helpful than manual processes used in the past. Here’s a detailed look: 

Cost Reduction: Automated solutions enhance KYC processes and reduce onboarding costs by over 70%. By substantially eliminating data entry errors and any required rectification, hefty non-compliance fines, thereby delaying the onboarding cycle, banks and financial institutions can significantly reduce costs.

Increased Efficiency: A fully automated identity verification process enables customers to create a verified digital identity instantly. Automated solutions also have the added benefit of running round-the-clock with no downtime.

Low risk: Automation helps to minimize the risk of errors caused by any unfortunate data entry mistakes or oversights. The reduced manual intervention also significantly reduces security threats and data breaches, thereby keeping customers’ data safe and banks compliant.

Improved Customer Experience: A great customer experience is the key to a business’ success. Automated KYC provides clients with a smooth experience by eliminating any back-and-forth between customers and banks when new information may be required. 

According to a 2019 study by Forbes, a total of 302 senior executives were surveyed, out of which 92% said that employee satisfaction had risen as a result of intelligent automation initiatives. 

In the new normal, the customer experience landscape is being substantially redefined across industries. A number of companies have put ML-based chatbots to better use when it comes to reducing bot-to-human interaction rate, leading to increased operational efficiency and better workforce productivity.

With the recent nod from RBI and IRDAI to Video-based Customer Identification Process (V-CIP) for Banks and FIs, Video KYC solutions too are gaining fast traction amongst businesses.

State Bank of India (SBI), via its mobile banking app YONO, has introduced a Video KYC-based account opening feature. This will allow customers to open an account with SBI without having to visit a bank branch. 

“This digital initiative powered by Artificial Intelligence (AI) and Facial Recognition Technology is a contactless and paperless process,” said SBI.